Case update from the Labour Appeal Court

New cases on retirement age and operational requirement dismissals

By the very nature of things, some of the controversial decisions of the Labour Court gradually make their way to the Labour Appeal Court, and often, by the time the Labour Appeal Court finalises the appeal, the controversy is long forgotten. But it is usually in decisions such as these that the Labour Appeal Court sets out principles and clarifies issues (or muddles the waters even more, of course).
Retirement age
Close to the end of 2002, the Labour Court held that an employer who had dismissed employees on the ground of their age (60) constituted an automatically unfair dismissal in terms of section 187(1)(f) of the Labour Relations Act. These employees had been transferred from one employer to another, and the new employer had set a new retirement age at 60. In the Labour Court, the issue was whether 60 was indeed the normal age of retirement, because the old employer did not have a retirement policy in place. The Labour Court’s decision (SACTWU Sportswear & others v Rubin Sportswear (2002) LC 6.12.5) was discussed in the editorial of 18 December 2002.
The Labour Appeal Court has now handed down its decision in Rubin Sportswear v SACTWU & others (2004) 13 LAC 1.11.14. For the Labour Appeal Court, the fundamental question in this case whether the employer could unilaterally fix the employees’ retirement age.
Just what is ‘normal’?
Section 187(2) of the Labour Relations Act provides that a dismissal based on age may be fair if the employee has ‘reached the normal or agreed’ retirement age. The union, on behalf of the employees, argued that the dismissal of the employees by the new employer constituted an automatically unfair dismissal and that the new employer, by fixing the age of retirement, had unilaterally changed the terms and conditions of employees — something the new employer had no right to do. The employer’s argument was that the employees in question had reached the ‘normal’ retirement age of 60 when they were dismissed, and, by virtue of the exception set out in section 187(2) of the LRA, the dismissal was not automatically unfair. This meant that the Labour Appeal Court had to find out whether there was a ‘normal’ retirement age of 60 applicable to the employees who had been dismissed.
The Court rejected the employer’s argument that by unilaterally fixing the retirement age at 60, that age had become the ‘normal’ retirement age. What is a normal retirement age, the Court held, depends on the meaning of the word ‘normal’ as used in section 187(2) of the LRA.
And here the stage is set for an excruciatingly detailed judicial analysis of the word ‘normal’. After wading through a number of dictionaries and trawling through cases decided by the High Court, the Labour Appeal Court comes to the conclusion ‘that the word “normal” as used in section 187(2) really means what is says’ (at paragraph [19]). It would also be conceivable that one employer could have different ‘normal’ retirement ages for different categories of employees within its workforce (for example, there could be different retirement ages for professionals and artisans).
On the facts of the case, the Labour Appeal Court held that the new employer had no right to unilaterally impose a new condition of employment on the employees concerned because their terms and conditions of employment did not include a ‘normal’ retirement age — the new employer was attempting to unilaterally introduce a new condition of employment:
‘In my view a certain age cannot suddenly become a normal retirement age for employees or for a certain category of employees simply because the employer wakes up one morning and decides that he wants a certain age as the normal retirement age for his employees or for a certain category of his employees.’ (paragraph [22])
The employer had some options: it could either have engaged in a consensus-seeking process with the employees to establish an agreed retirement age, or, as a result of long practice, a certain age becomes the ‘normal’ retirement age. The employer could have instituted a lock-out, the Court added, to force the employees to agree to 60 as the retirement age.
The Labour Appeal Court dismissed the appeal, agreeing with the Labour Court that the dismissal of these employees were automatically unfair because the dismissals were based on their age.
The return of FAWU and General Food Industries
One of the first editorials I ever wrote for IR Network at the end of 2002 was a discussion of the Labour Court’s decision in FAWU v General Food Industries Ltd (2002) 11 LC 5.2.12. The most important facts were that the employer and the union had reached agreement on a wage increase of 6% — a short while later the employer tried to engage with the union about possible retrenchments (the employer was contemplating outsourcing), stating that the retrenchment discussions had nothing to do with the wage settlement. The union thought otherwise, namely that the employer was trying to undermine the collective agreement — to ‘save’ itself what it had agreed to pay by retrenching workers. This, the union argued, meant that the retrenchments were unfair because of section 187(1)(c) of the Labour Relations Act (unfair for an employer to dismiss an employee because the employee failed to agree to the employer’s demand in respect of any matter of mutual interest between the parties).
On the facts, the Labour Court agreed with the union, holding that the company used the retrenchment and labour outsourcing as an instrument for undermining the status of the collective agreement and as an instrument to undermine the status of the union as the exclusive recognised collective bargaining agent of its members.
Much discussion ensued — the correctness (or otherwise) of this case was discussed in journals and conferences, and here on IR Network the view was that the Labour Court had left out some important considerations. One of the most important issues raised here and elsewhere was the relationship or link between the wage agreement and the retrenchment — was there any causal connection between the fact that the employer had agreed to a 6% increase and the outsourcing?
But some things had happened in the meantime, of course, and these events changed the playing field somewhat. The Labour Appeal Court, in two important judgments, clarified the relationship between retrenchments, on the one hand, and automatically unfair dismissals because of the employees’ refusal to accept a demand (section 187(1)(c)) on the other hand. This meant that when the Labour Appeal Court now heard General Food Industries Ltd v FAWU (2004) 13 LAC 5.3.3 (also reported in [2004] 7 BLLR 667 (LAC)) the union could no longer argue that the employer’s act of dismissing the employees, in the context of the wage agreement, amounted to an automatically unfair dismissal.
Substantive fairness
However, the question remained as to whether the retrenchment of the employees as part of the outsourcing process was substantively fair. The Labour Court had come to the conclusion that the commercial rationale presented by the employer did not provide a reasonable basis for the retrenchment of some 58 employees. The union argued, for instance, that it was inappropriate for the employer to retrench employees in order to reduce its wage bill or to increase profits.
On this point, the Labour Appeal Court confirmed the view it seems to hold at present, namely that the LRA recognises dismissal for operational reasons of the employer, but it does not distinguish between the survival of the business which is under threat and a business which is profitable and wanting to make even more profit:
“I am of the judgment that a natural consequence of the Fry’s Metals judgment is that, all things being equal, a company is entitled to insist by economic restructuring that a profitable centre becomes even more profitable. It is also clear from the evidence that the appellant [the employer] required flexibility on the part of the employees’ terms and conditions of employment in order to be competitive. The respondent [union] did not offer such flexibility. In my view that need of the appellant also provided a fair reason to dismiss the employees when they were not able to prepared to offer such flexibility to the appellant. Accordingly, I am of the view that the dismissal of the employees concerned was substantively fair.’ (at paragraph [62] of the judgment)
Procedural issues: where should labour consultation take place?
The second important issue raised in this appeal relates to the consultation process and whether it should have taken place at a national level or a plant-level (or even a regional level). In this regard, the Labour Appeal Court held that the real question is not at which level the consultations should have taken place, but whether there was a fair consultation process before the dismissals. Did the fact that the consultation process took place at the local level mean that the consultation process was unfair? The Court’s view here was that if the union’s local team was incapable of dealing with the issues, the team could have been increased (by including senior officials and national office-bearers, for instance). The union did not do this. The union’s case, the Labour Appeal Court concluded, was based on its view that it would have been more convenient (to the union) to hold the consultations at a national level instead of at a plant level. This, the Court held, clearly correctly, would never be sufficient for deciding whether the dismissal that followed these consultations were procedurally fair or not.
Some other interesting points also arise in the context of this case, such as disclosure of information. The Labour Court held that the dismissals were procedurally unfair because the employer had not disclosed sufficient information about the fact that the contractor was offering the dismissed employees employment. On the facts, the Labour Appeal Court held that the union did not do what was asked to do if it wanted information and that the employer was not to blame if FAWU did not have certain pieces of information.
The value of appeal
One of the most striking aspects of these appeal decisions is the fact that they deal, in detail, and in close and careful analysis, with the issues raised, and that no-one could possibly claim that the Labour Appeal Court merely rubberstamps decisions of the Labour Court. The Labour Appeal Court appears very balanced in its examination of the issues and the way in which it considers real and practical issues facing employers (such as increased competition, a wish to increase profits, restructuring and dealing with the implications of restructuring). This is not to say that the Labour Appeal Court is overly employer-friendly (as some may have thought and claimed after the Fry’s Metals case), but in recent judgments the quality of the reasoning and the care of the analyses have been nothing short of impressive.
Will the High Court, once it has swallowed the Labour Court and Labour Appeal Court, be able to do the same?