South Africa: Large-Scale Retrenchments: Compensation As A Remedy For Procedural Unfairness

Last Updated: 13 June 2019
Article by Boris Mnyandu

Most Read Contributor in South Africa, July 2019

The general requirements for a fair dismissal based on an employer's operational requirements are found in section 189 of the South African Labour Relations Act, 1995 ("LRA"). However, section 189A provides for specific procedures and remedies, should an employer embark on a large-scale retrenchment.

Various consequences flow from the fact that a proposed retrenchment falls within the scope of section 189A. The most important, for the purposes of this article, are the remedies that are available to employees who are retrenched or have been retrenched. Employees who allege that their dismissals were substantively unfair have the election of embarking on a protected strike, or referring a dispute to the Labour Court for adjudication.

However, this election is not available to employees who allege that their dismissals were procedurally unfair. Section 189A(13) provides for a specific remedy in this situation. It states that an employee who alleges procedural unfairness may approach the Labour Court for an order:

  • compelling the employer to comply with a fair procedure (section 189A(13)(a));
  • interdicting or restraining an employer from dismissing an employee prior to complying with a fair procedure (section 189A(13)(b));
  • directing an employer to reinstate an employee until it has complied with a fair procedure (section 189A(13)(c)); or
  • to make an order of compensation if the remedies described above are not appropriate (section 189A(13)(d)).

In its recent decision in Karin Steenkamp and 1817 Others v Edcon Limited the Constitutional Court had the opportunity to consider section 189A(13).

Background

Edcon initially employed approximately 40 000 staff in 1 300 outlets across the country. When the company fell on hard times and in April 2013, it commenced a process of restructuring its business.

Because of the large number of employees who potentially faced retrenchment, section 189A applied to the consultation process. This section provides for the appointment of a facilitator, at the request of an employer or majority unions, to assist the parties to participate in a "meaningful joint consensus-seeking process" with regard to the issues that must be the subject of consultation in terms of section 189(2) of the LRA. If a facilitator has been appointed, the employer is precluded from giving notice to terminate contracts of employment until a 60-day period, calculated from the date on which notice of possible retrenchments was given in terms of section 189(3), has lapsed.

There was initially some uncertainty as to when an employer could give notice of termination of employment if facilitation was not invoked. This issue was eventually resolved in decisions that indicated that, in effect, the employer had to wait for the expiry of a 60-day period in these circumstances as well.

Edcon eventually retrenched approximately 1 818 employees. A group of these employees then sought to challenge their dismissals. They argued that the dismissals were in breach of section 189A and that the dismissals were therefore invalid. This argument was based on earlier decisions of the Labour Court and the Labour Appeal Court ("LAC") that had accepted this view. Following these earlier decisions, the Labour Court found that their dismissals were indeed invalid. This decision was taken on appeal to the LAC and from there to the Constitutional Court. The Constitutional Court came to the conclusion that a failure to comply with section 189A did not result in a dismissal being invalid. The employees' cause of action remained one based on the alleged unfairness of the dismissal. The retrenched employees' case was therefore dismissed.

Following this setback, and within 30 days of the Constitutional Court decision, the retrenched employees reformulated their cause of action. They approached the Labour Court in terms of section 189A(13) and argued that their dismissals were procedurally unfair because they were in breach of the procedures set out in section 189A. They claimed 12-months' compensation in terms of section 189A(13)(d) referred to above, but they had another hurdle to overcome. Section 189A(17) provides that an application in terms of section 189A(13) must be brought within 30 days of the employer giving notice of dismissal. Because of the legal strategy they had adopted (ie, claiming that their dismissals were invalid rather than unfair) the application in terms of section 189A(13) was far out of time. They therefore had to apply for condonation of the failure to comply with the 30-day time limit.

The Labour Court granted condonation and argued that it would be unfair not to grant condonation in circumstances where the delay had been occasioned by the employees seeking a remedy that they were entitled to seek at the time that they instituted proceedings, but was later found to be an incompetent remedy. In addition, should the applicants be successful in their procedural unfairness claim, they would at least be entitled to relief in the form of the payment of compensation in terms of section 189A(13)(d), if relief in terms of paragraphs (a)-(c) was not appropriate. Aggrieved by this outcome, Edcon approached the LAC which upheld the appeal, stating that the application by the applicants was "fatally flawed and the judgment a quo in error", principally on the basis that the Labour Court misconceived the purpose and functioning of section 189A(13).

The Constitutional Court decision

After the LAC overturned the Labour Court's decision, the employees appealed to the Constitutional Court. One of the issues that the court had to decide was whether compensation for procedural unfairness can be claimed as a self-standing remedy in terms of section 189A(13)(d) in the context of large-scale retrenchments. The court came to the conclusion that it could not.

It pointed out that the primary purpose of section 189A(13) is to allow for early corrective action in order to get the retrenchment consultation process back on track. The section does not allow for the option of claiming compensation for procedural unfairness long after the retrenchment. It does not contemplate a procedure claiming compensation "at some future remote time". Paragraphs (a) to (d) establish a hierarchy of appropriate relief. Only where it is not appropriate to grant an order in terms of paragraphs (a) to (c) may an order be granted in terms of paragraph (d) for procedural unfairness. Paragraph (d) provides for an exceptional remedy that is granted only where the primary remedies provided for in paragraphs (a)-(c) are inappropriate. On this basis, the court upheld the LAC decision not to grant condonation.

Practical implications

In this decision, the Constitutional Court has emphasised that the remedies granted in section 189A(13) should be sought as a matter of urgency, either during the consultation process or shortly thereafter. Employees who fail to comply with this requirement cannot expected to be granted condonation easily or to be granted compensation as an independent remedy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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