Authors: Imraan Mahomed – Director and Member of the Management Board, Hedda Schensema – Director, Bongani Masuku – Director, Yuri Tangur – Candidate Attorney & Kabelo Komana – Candidate Attorney
A number of recent judgments in the Labour Court and Labour Appeal Court, including matters arising from employment arrangements and consultations under the Covid-19 lockdown and proposed retrenchments at SAA, highlight issues that are important for employers to consider irrespective of the current circumstances.
National Education Health and Allied Workers Union (NEHAWU) obo members providing essential services v Minister of Health and Others (J423/20) [2020] ZALCJHB 66; 2020 (6) BCLR 767 (LC) (11 April 2020)
On 11 April 2020, the Labour Court (LC) handed down its judgment with reasons in the above matter.
The background to the matter: NEHAWU brought an urgent application seeking an order declaring that the Minister of Health had breached his obligation to provide Personal Protective Equipment (PPE) to health workers involved in the fight against the Covid-19 pandemic; declaring that the Minister had failed to issue guidelines for the use of such PPE, and that the Minister had failed to meaningfully engage with NEHAWU on these issues. The union also sought an order directing the Minister of Labour to exercise his powers in terms of section 21 of the Occupational Health and Safety Act (OHSA) to prohibit the performance of those duties that endanger the health and safety of these employees. NEHAWU also sought to interdict and declare unlawful any disciplinary action to be taken against its members in relation to refusing to work in the absence of PPE.
The LC acknowledged the heroism of front-line healthcare workers and agreed that they were entitled to PPE so that the risk of exposure to infection was reduced. However, the LC found no legal or evidentiary basis for NEHAWU’s case. In short, NEHAWU had failed to establish that the Minister had failed to provide such PPE and the guidelines regarding its use. The LC found that, if anything, proof establishing the contrary had been provided by the Minister through comprehensive data and documentary evidence led.
Association of Mineworkers and Construction Union (AMCU) v Minister of Mineral Resources and Energy and Others (J427/2020) [2020] ZALCJHB 68 (4 May 2020)
On 4 May 2020, the LC handed down its judgment in the above matter relating to occupational health and safety.
The facts of the case are as follows: During the period of application of the Level 5 Regulations in the national state of disaster, essential services providers and some mines were permitted to operate, subject to compliance with certain strict precautions and requirements imposed by the Department of Labour through the regulations issued under the Disaster Management Act (DMA). These regulations were amended on 16 April 2020,[1] with the effect that all mines were exempted from the applicability of the lockdown regulations, subject to certain conditions relating to occupational health and safety. AMCU requested the Minister of Mineral Resources to issue guidelines in terms of sections 9(2), 9(3) and 49(6) of the Mine Health and Safety Act 29 of 1996 (MHSA) setting health and safety standards for mine workers.
Before the LC, AMCU argued that, despite the regulatory powers available to the Minister and the Chief Inspector, the measures that had been adopted and implemented were inadequate to ensure that mine workers returned to a safe working environment. AMCU demanded detailed national standards to protect the health and safety of its members through binding guidelines rather than broad voluntary regulatory measures by individual mining operations.
Ultimately, the LC held, albeit by consent in terms of a joint draft court order submitted by the parties, that the Chief Inspector’s decision not to act under section 9 of the MHSA was not reviewable in terms of the Promotion of Administrative Justice Act 3 of 2000 (PAJA). The decision was set aside. The parties agreed that in its place, the Chief Inspector would publish guidelines in terms of the MHSA, requiring employers to prepare and implement code(s) of practice to mitigate Covid-19-related health risks and in so doing, must follow a range of criteria stipulated by the court.
National Union of Metalworkers of South Africa obo Members and Another v South African Airways (SOC) Limited (In Business Rescue) and Others (J424/20) [2020] ZALCJHB 94 (8 May 2020)
On 8 May 2020, the LC handed down its judgment in the above matter, which highlights the need to proceed correctly and with caution in embarking on retrenchments in a company under business rescue.
Following the imposition of the national lockdown to curb the spread of the Covid-19 pandemic, SAA went into business rescue and a business rescue practitioner (BRP) was appointed to manage that process. The BRP issued notices in terms of s189 of the Labour Relations Act (LRA) contemplating the retrenchment of a number of SAA’s employees. At that point in time, no business plan had been developed through which the practitioners would roadmap the turnaround strategy for the business.
In response, the unions launched an urgent application before the LC. Relying on s136(1)(b) of the Companies Act 71 of 2008, they argued that the notice of commencement of consultations in terms of s189(3) of the LRA was invalid unless and until a business plan had been prepared and presented by the business rescue practitioner. In its defence, SAA argued that the LC lacked the jurisdiction to consider the lawfulness or otherwise of a party's failure to comply with the provisions of the Companies Act and that the LC's jurisdiction is limited to disputes arising within the scope of application of the LRA where the LC is empowered to determine only the fairness of an employer’s conduct, as opposed to its validity.
The LC held that the question for determination was whether the unions were entitled to the relief in terms of s189A(13) of the LRA. In determining that issue, the LC held that s136 of the Companies Act must be interpreted so as to provide continuity of employment in business rescue proceedings and to create a right to retrench employees only if done in terms of a business plan. For these reasons, the court declared the notice contemplating the retrenchment of SAA employees procedurally unfair in terms of s189A(13) of the LRA as it was issued prior to the development of a business plan in terms of s136(1)(b) of the Companies Act.
This judgment is of particular importance. It underscores the delineation of the powers that the Labour Court is given in terms of s189A to only interfere in a retrenchment process that is still underway if the challenge is procedural in nature, while emphasising the preservation of employment, a consideration on which the LRA places a premium. Employers are therefore, warned to proceed with caution when seeking to commence retrenchment consultations in the context of a business under business rescue.
National Union of Metalworkers of South Africa obo Members and Another v South African Airways (SOC) Limited (In Business Rescue) and Others (JA32/20) [2020] ZALAC (09 July 2020) This matter was heard as a result of the SAA business rescue practitioners appealing the judgment handed down in May at the LC (discussed above) – ultimately the LAC dismissed the appeal on 9 July 2020.
The LAC acknowledged that the BRPs had since published their business rescue plan. However, while the appeal may have no practical effect, it was still in the interest of justice to settle the legal question, especially considering differing decisions of the LC in interpreting s136 of the Companies Act.
The question that was before the LAC was in respect of when a BRP may commence retrenchment proceedings under s189 of the LRA in light of s136(1)(b) of the Companies Act.
The main appeal: s136(1)(b) of the Companies Act
The main appeal concerned the interpretation of s136(1)(b) of the Companies Act which concerns the effect of business rescue on employees and contracts:
‘Despite any provision of an agreement to the contrary…any retrenchment of any such employees contemplated in the company’s business rescue plan is subject to section 189 and 189A of the Labour Relations Act, 1995 (Act No. 66 of 1995), and other applicable employment related legislation.’
The LAC explained that the language of the legislation is the starting point of the interpretative enquiry and where the language allows for more than one plausible interpretation, the purpose of the legislation will be the deciding factor.
A key purpose of the Companies Act is to ‘provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders’. The business rescue procedure, the LAC explained, further aims to rescue the whole corporate entity which includes the preservation of jobs, and the LAC interpreted s136(b) with that purpose in mind.
According to the LAC, the words ‘contemplated in the company's business rescue plan’ signifies the ‘existence of such a plan’ and the most important reason for the enactment of s136(1)(b) was to protect employees from being retrenched in the absence of a business rescue plan. Further, s150 of the Companies Act, especially Part C, makes it clear that the plan is a precondition to retrenchment since the plan must include the effect on employees and their terms and conditions of employment.
The LAC stated that the retrenchment process is subject to s189 and 189A of the LRA and other applicable employment-related legislation. That where the rescue plan which contemplates retrenchments has been approved, the envisaged retrenchment would have to be conducted as prescribed in the LRA and that this would be done in the same way as in any solvent company.
Furthermore, the LAC explained that the business rescue plan is the central task of the business rescue practitioner. Therefore, because the business rescue plan must be published within a short period of time, retrenchments would be an integral part of that plan as opposed to a piecemeal reconstruction of the company.
In dismissing the appeal, the LAC found no fault with the LC’s decision that the issuing of s189 notices by the BRPs without the business rescue plan in place was premature, procedurally unfair, and had to be withdrawn. In closing remarks, the LAC dismissed the cross-appeal from the unions and clarified that there was no reason that the BRPs could not offer voluntary severance packages to the employees.
Food and Allied Workers Union (FAWU) v South African Breweries (Pty) Ltd (SAB) and Solidarity (J435/20) (20 May 2020)
Judgment handed down by the LC on 28 May 2020 has implications for the ‘platform’ used for consultations with employees and unions.
SA Breweries (SAB) issued notices to its employees contemplating retrenchments in terms of s189A of the LRA. Thereafter, a number of consultation meetings were held between the parties before these were suddenly interrupted by the declaration of a national state of disaster and the ensuing implementation of a national lockdown. As a result, SAB envisaged continuing with the already-commenced retrenchment consultation meetings via a video-conferencing platform (Zoom). FAWU rejected that approach, arguing that such a consultation process would be procedurally unfair in terms of s189A(13) of the LRA. SAB decided to continue consulting with other relevant parties via video-conferencing and completed the s189A process in the absence of FAWU, and ultimately issued notices of termination to the relevant employees.
FAWU then approached the LC contending that the continuation of the consultation process through video-conferencing in its absence was procedurally unfair.
The LC held that the LRA does not prescribe the form in which consultation in terms of s189A must take place, and that video-conferencing was an acceptable method of consultation under the present circumstances. The LC acknowledged the problems associated with conducting consultation processes through the use of technology, but held that such problems were not to be elevated to instances of procedural unfairness, especially when the union party had voluntarily abandoned the consultation process.
Macsteel Service Centres SA (Pty) Ltd v National Union of Metalworkers of SA (NUMSA) and others (J483/20) LCJHB (03/06/2020)
The LC handed down judgment in this matter relating to salary reductions imposed by employers due to Covid-19 and lockdown on 3 June 2020.
This matter arose as a result of the severe impact on many employers’ businesses that the Covid-19 pandemic has caused across the globe.
The facts of the matter were as follows: the national lockdown forced Macsteel to shut down its entire operations for two months from March 2020. Macsteel was eventually allowed to resume its operations, albeit at only 50% capacity, when the application of the Level 3 regulations commenced on 1 June 2020. Employees were paid their full salaries in April and May despite the closure. When Macsteel reopened its operations, it decided to cut its employees’ salaries by 20% in an attempt to avoid retrenchments. NUMSA and the employees objected to the proposed salary reduction, and then referred a dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA), alleging a unilateral change to terms and conditions of employment. When the dispute could not be resolved at conciliation, the employees embarked on a strike, in response to which Macsteel launched an urgent application to interdict the strike.
The LC acknowledged that Macsteel had good intentions – to ensure that everyone is treated equally and to ensure that everyone received salaries. However, the LC found that, on the facts, the 20% reduction in salary amounted to a unilateral change to terms and conditions of employment as contemplated in sections 64(1), 64(4) and (5) of the LRA, which is per se unlawful.
Employers are, accordingly, warned to act with caution when considering decisions intended to alter the terms of employment of their employees, no matter the circumstances giving rise to such contemplated changes.
[1] Later repealed in part through the Regulations issued on 29 April 2020 in which the Minister issued directions on measures to address, prevent and combat the spread of Covid-19.
[2] Implemented in terms of the Level 5 Lockdown Regulations, Level 4 Lockdown Regulations and Level 3 Lockdown Regulations, issued under the Disaster Management Act 57 of 2002 (DMA).
Lawtons Africa is a South African law firm. With roots that grew out of seeds sown in down-town Johannesburg in 1892, our history features various changes and different names. Our team of lawyers, including directors, consultants, associates and candidate attorneys is highly qualified, market-recognised and skilled. For further information, visit www.lawtonsafrica.com