When sales had decreased while costs had increased, Aveng – a large steel manufacturer – had no choice but to restructure in order to save costs, and to ensure its continued viability. This meant that certain functions were combined in what was described as “redesigned job descriptions”.
Following extensive consultations, Aveng presented the employees with new contracts of permanent employment which set out their new terms and conditions of employment, but at exactly the same rate of pay.
When the employees were offered posts in the new structure, they were informed that if they rejected the new contracts, Aveng would have no option but to terminate their services by retrenching them.
When it came to accepting the new terms and conditions:
 … all the employees refused to accept the new terms and conditions of employment. On 24 April 2015, they were dismissed.
In essence they refused to accept the alternative positions offered to them.
The issue before the Court
NUMSA referred an unfair dismissal dispute on the basis that the dismissals of their members were automatically unfair.
Aveng argued that the dismissals related to genuine operational requirements and were therefore not automatically unfair as envisaged in the amended provision of section 187 (1)(c) of the LRA which reads as follows:
(1) A dismissal is automatically unfair if … the reason for the dismissal is –
(c) a refusal by employees to accept a demand in respect of any matter of mutual interest between them and their employer.
When the Labour Court held that the dismissals in the matter of National Union of Metalworkers of South Africa (NUMSA) obo members and Aveng Trident Steel were not automatically unfair, NUMSA took the judgment on appeal.
The Labour Appeal Court (“the LAC”) had to determine whether the employer had terminated the services of some of its employees for operational reasons or whether it did so to compel them to accept new terms and conditions, that is, to force them to accept a demand of mutual interest.
If they were retrenched for operational reasons, their dismissals would not have been unfair. If, however, they were dismissed for refusing to accede to a demand of mutual interest, their dismissals would have resulted in automatically unfair dismissals.
In essence the Labour Appeal Court was faced with the question as to whether employees could be dismissed for refusing to accept new terms and conditions of employment when an employer restructured the business and had properly consulted with the employees.
When the LAC handed down its judgment on 13 June 2019, it held that the dismissals were not automatically unfair after asking two key questions in order to establish what the true reason for the dismissals was:
- Did the employer dismiss them because of “a refusal by employees to accept a demand”?
- Was the refusal to accede to the demand the most likely reason for the dismissal?
The evidence showed that the employer did not force the employees to accept a demand. Consultations over a period from approximately a year preceded the instance where the employees were offered new contracts which, if they accepted the alternative positions, would have prevented the necessity for retrenchments. The employees could either accept or reject the offer. They chose to reject it. The only remaining option was therefore to retrench them.
The LAC asked, firstly if the reason for the dismissal was as a result of “a refusal by employees to accept a demand”. The answer to this question was in the negative because Aveng had not simply made a demand – it had consulted with the employees regarding reasonable alternatives to the retrenchments. The employees had rejected the regrading of the envisaged positions, and only when they did so, were their services terminated.
Having established what the true reason for the dismissals was, the court held that the dismissals were for operational reasons and consequently did not invoke the provisions of section 187 (1)(e) which, in turn, meant that the dismissals were not automatically unfair. Put differently, the dismissals were fair. The LAC phrased it thus:
“ Hence, the essential inquiry under section 187(1)(c) of the LRA is whether the reason for the dismissal is the refusal to accept the proposed changes to employment. The test for determining the true reason is that laid down in SA Chemical Workers Union v Afrox Ltd. The court must determine factual causation by asking whether the dismissal would have occurred if the employees had not refused the demand. If the answer is yes, then the dismissal is not automatically unfair. If the answer is no, as in this case, that does not immediately render the dismissal automatically unfair; the next issue is one of legal causation, namely whether such refusal was the main, dominant, proximate or most likely cause of the dismissal.”
The importance of this Judgment
This judgment confirms, firstly, that the true reason for a dismissal must be determined and, secondly, that an employer may dismiss employees who, after a fair consultation process, refuse to accept alternative positions which come with new terms and conditions in circumstances where the organisation has restructured for operational reasons.