Procedural Fairness In Large Scale Retrenchments: Key Takeaways From Regenesys Management v Ilunga

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The Labour Relations Act ("LRA") distinguishes between what can be termed "large scale retrenchments," regulated by sections 189 and 189A of the LRA...
South Africa Employment and HR
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The Labour Relations Act (“LRA”) distinguishes between what can be termed “large scale retrenchments,” regulated by sections 189 and 189A of the LRA, and other retrenchments termed “small scale retrenchments,” regulated by section 189. In the case of small-scale retrenchments, employees arguing that their dismissals were unfair may, in terms of section 191(5) of the LRA, refer a dispute to the CCMA or the relevant bargaining council for conciliation. If conciliation fails to resolve the dispute, the matter can be referred to the Labour Court for adjudication or, in certain circumstances, to arbitration at the CCMA. Both allegations of procedural and substantive fairness can be dealt with in this process.

In the case of large-scale retrenchments, section 189A(13) of the LRA provides employees with specific remedies should they allege that their dismissals were procedurally unfair. Employees can approach the Labour Court for an order in terms of the following:

  • Section 189A(13)(a), compelling the employer to follow a fair procedure;
  • Section 189A(13)(b), interdicting and restraining an employer from dismissing an employee prior to following a fair procedure;
  • Section 189A(13)(c), directing an employer to reinstate an employee until it has complied with a fair procedure; or
  • Section 189A(13)(d), awarding the payment of compensation if an order in terms of subsections (a) to (c) would not be appropriate.

Section 189A(17) of the LRA imposes a 30-day time limit within which an application in terms of section 189A(13) must be brought. However, the Labour Court may, on good cause shown, condone a failure to comply with the time limit.

Disputes regarding the substantive fairness of large-scale retrenchments may, in terms of section 191(5) of the LRA, be referred to conciliation and, if the dispute remains unresolved, referred to adjudication or arbitration in the same way as disputes concerning small-scale retrenchments. Section 189A therefore provides for different procedures for dealing with allegations of procedural fairness and substantive fairness in the case of large-scale retrenchments.

Finally, section 189A(18) provides that:

“ The Labour Court may not adjudicate a dispute about the procedural fairness of a dismissal based on the employer's operational requirements in any dispute referred to it in terms of section 191(5)(b)(ii).

The application of the above provisions, and in particular section 189A(18), was recently considered by the Constitutional Court in Regenesys Management v Ilunga and Others

In June 2015, Regenesys (the employer) embarked on a retrenchment exercise. In September 2015, after unsuccessful conciliation at the CCMA, the retrenched employees referred the matter to the Labour Court challenging both the substantive and procedural fairness of their dismissals. They also brought an application to the Labour Court in terms of section 189A(13)(c) seeking their reinstatement until such time as the employer had followed a fair consultation process, alternatively seeking an order for compensation in terms of s189A(13)(d). The Labour Court awarded compensation to the employees whose dismissals it found to have been procedurally unfair.

The matter progressed to the Labour Appeal Court (“LAC”). Of importance here was its finding that the Labour Court had erred in adjudicating the dispute related to the procedural fairness of the employees' retrenchment, given that its jurisdiction to do so has been ousted by section 189A(18) of the LRA.

On appeal, the Constitutional Court considered two important questions of law. The first was whether compensation under section 189A(13)(d) could be granted as a stand-alone remedy long after the conclusion of a large-scale retrenchment exercise and the dismissal of employees (“the first issue”). The second was whether section 189A(18) deprives the Labour Court of jurisdiction to adjudicate procedural fairness disputes (“the second issue”).

In considering the first issue, the majority decision distinguished between the primary and secondary purpose of section 189A(13) of the LRA. The primary purpose is achieved through sections 189A13(a) to (c). They vest the Labour Court with the power to oversee or supervise a large-scale retrenchment consultation process and to make orders that compel employers to follow a fair process, essentially empowering it to bring any unfair process “back on track.” The secondary purpose is served through section 189A(13)(d) and is relevant when it is too late for the retrenchment process to be brought back on track and to ensure procedural fairness. In these circumstances, the Labour Court is empowered to order the payment of compensation to employees. The purpose of such an order is to provide employees with some redress for procedural unfairness and to hold employers accountable for procedural unfairness. The majority decision confirmed that, despite the 30-day time limit prescribed in section 189A(17), compensatory relief in terms of section 189(13)(d) can be awarded to employees even after some time has passed after their dismissal, provided that condonation is granted. This is unlike the relief envisaged in sections 189A(a) to (c) which are to be sought early enough to allow the retrenchment process to be brought back on track and to compel employers to follow a fair process.

The majority decision also found that section 189A(13)(d) ought not to be interpreted as being subject to the availability of other remedies under sections 189A(13)(a), (b), or (c), but that it must rather be interpreted as being a possible stand-alone remedy when the other three remedies would not be appropriate. This is to be determined with reference to the particular factual matrix at hand. During the course of its judgment, the majority decision criticised various prior judgments of the LAC for interpreting section 189A(13) as if it had only one purpose – the primary purpose articulated above. It held that these judgments erroneously failed to identify the secondary purpose of section 189A(13) which is linked to subsection (d) thereof.

In considering the second issue, the majority judgment considered and criticised various decisions of the Labour Court, the LAC and even its own decisions on the basis that it was of the view that these decisions had interpreted section 189A(18) as ousting the Labour Court's jurisdiction to determine procedural unfairness disputes, irrespective of whether the retrenchment is that of a small or large scale. It held that the proper interpretation of section 189A(18) when read with section 189A(13) and section 191(5)(b)(ii), is that the Labour Court does have jurisdiction to adjudicate such disputes concerning procedural unfairness in large scale retrenchments when brought by way of an application in terms of section 189A(13). However, by virtue of section 189A(18), the Labour Court does not have jurisdiction to do so where an unfair dismissal dispute concerning the substantive fairness of a large-scale retrenchment is referred to the Labour Court, after conciliation, in terms of section 191(5)(b)(ii) of the LRA. This is because the LRA carves out a designated procedure and special remedies, in terms of section 189A(13), for the purposes of challenging procedural fairness in large-scale retrenchments. The majority decision also confirmed that the Labour Court has jurisdiction to consider both allegations of procedural and substantive fairness when dealing with disputes concerning small-scale retrenchments referred to it in terms of section 191(5).

Comment

The majority decision's view that the Labour Court and the LAC had accepted that the Labour Court does not have jurisdiction to deal with procedural fairness is perhaps contentious and it is interesting to note that the minority decision refused to endorse this view. However, the majority decision's clarification seems correct.

Perhaps of more importance is the distinction drawn between the primary and secondary purpose of section 189A(13) of the LRA. Employers embarking on large-scale retrenchments must consider that an order for compensation under section 189A(13)(d) can be appropriately granted by the Labour Court sometime after dismissals have taken effect, provided that non-compliance with the 30-day time period is condoned.

Reviewed by Peter le Roux, an Executive Consultant in ENS' Employment practice.

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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