Last week our Constitutional Court, in the case of Numsa V Aveng Trident Steel,  appears to have given employers  the nod, whose operational requirements are genuine, to change their employees’ employment conditions, if the future sustainability and functioning of the company requires this; and where the employees’ refuse unreasonably they may be dismissed without severance.

This is an important decision for companies whose business(es) have been adversely affected by currently economic climate and/or consequent to the fallout of the Covid pandemic, as many are faced with the reality of having to downsize or restructure in order to survive.

Previously, employers could not unilaterally change employees’ terms and conditions of employment such as their salary/wage and positions and associated duties etc.

The difference now, consequent to this judgment, is that in effect an employer can force employees to accept such changes, with the threat of dismissal (possibly without severance); BUT this is only within the context of the retrenchment process, as contemplated in section 189 of the LRA.  This is not to be confused with the collective bargaining process.

During 2014 Aveng initiated a section 189 retrenchment process due to its operational requirements, due to declining profits. During the retrenchment consultations, it was agreed, between Aveng and Numsa, that its employees would be given new job descriptions with a flatter pay structure to be implemented by March 2015.

Some six months after concluding this agreement, Numsa informed Aveng that that its members would no longer tender services in these newly agreed positions purportedly, it alleged, because Aveng failed to implement the proposed pay structure.

Aveng gave Numsa notice during April 2015 that, unless its members accepted their newly agreed employment conditions, they would be retrenched. Some 733 members refused and were subsequently dismissed based on Aveng’s operational requirements.

Subsequently Numsa referred an automatically unfair dismissal dispute to the labour court on the basis that it argued that the reason for the dismissal was to compel the employees “to accept a demand in respect of any matter of mutual interest between the employer and employee”.

Aveng opposed the referral on the basis it argued that the dismissals were based on the company’s operational requirements, in accordance with section 189 of the LRA, and thus were not automatically unfair on the grounds as alleged by Numsa. 

Both the Labour Court and subsequently the Labour Appeal Court upheld Aveng’s argument accepting that the previous “jobs” performed by the dismissed employees were indeed redundant, and the retrenchments were thus substantively fair.

In dismissing the appeal, the LAC concluded that, on the facts, the members’ dismissals would not have occurred without their refusal of Aveng’s offer of alternative employment (new positions and associated pay structure). In these circumstances the LAC upheld Aveng’s contention that the true reason for the dismissal was the employer’s operational requirements

The Constitutional Court agreed with the LAC although it rendered three different approaches in coming to this conclusion.

In the first of the three judgment’s, acting justice Rammaka Mathopo held that, when parties are engaged in collective bargaining “one of them should not lightly be allowed to threaten to pull the plug on the process resulting in the demise of the other if it does not get its way. This is exactly what Numsa did.” 

He went further giving recognition to the principle that it is in the best interests of society that an employer remains economically viable. “In an ever-changing economic climate characterised by increasing global competition, operational reasons not only relate to the downsizing of the workforce, but also to restructuring the manner in which an existing workforce carries out its work,”

He concluded that “it cannot be suggested that the section (187) should not be interpreted in a manner that permits dismissal for operational requirements”.

This does not mean that employers can dismiss its employees with impunity relying on this argument.  

The Constitutional Court warns that “Courts must guard against disguised retrenchments that take place where collective bargaining prevails. Courts can police opportunistic or disingenuous employers by determining the true reason for the dismissals.”

NB: Please note that this article is for informational purposes only and not for the purpose of providing legal advice. Should you require more information on this topic or any issue arising out of this please contact Allardyce & Partners on 011-234 2125 or enquiries@allardyce.co.za