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May an employer retrench when employees refuse to accept a change in conditions – Section 187(1) (c) of the LRA?

  • Written by Amos Tshabalala
  • Published in Articles

May an employer dismiss employees because they refuse to agree to a change to their terms and conditions of employment? An initial answer may be, “yes”.

Section 187(1)(c) of the South African Labour Relations Act, 1995 (the “LRA”) as amended provides that a dismissal will be automatically unfair if the reason for the dismissal is “a refusal by employees to accept a demand in respect of any matter of mutual interest between them and their employer.”

In terms of the law, prior to the amendment of section 187(1)(c) of the LRA, an employer who wished to implement changes to terms and conditions of employment could, if its proposed changes were rejected by employees, justify dismissing these employees on the basis of its operational requirements, provided the retrenchment was final and irrevocable and the requirements of section 189 of the LRA were met.

Whether an employer was entitled to adopt this course of action after the amendment to section 187(1)(c) was considered by the Labour Appeal Court (the “LAC”) in National Union of Metalworkers of South Africa (NUMSA) obo members and Aveng Trident Steel (A division of Aveng Africa (Pty) Ltd) (2019) (Aveng).

In this case, the courts were tasked with determining the application of the amended provision of s187(1)(c) of the LRA.
The Labour Appeal Court (LAC) was required to determine the fairness of the dismissal of employees who had been dismissed by Aveng pursuant to a retrenchment process. The retrenchments came about as a last resort during an organisational restructure which was necessitated by the need for cost-saving exercises in order to remain profitable and viable.

The dispute was referred by NUMSA on the basis that the dismissals of their members were automatically unfair by virtue of the provisions of the amended section 187(1)(c). NUMSA argued that the dismissals were automatically unfair because the reason for the dismissals was the refusal by the employees to accept Aveng’s demands in respect of the redesigned job descriptions, a matter of mutual interest. Aveng denied that the dismissals were automatically unfair and argued that the reason for the dismissals was based on its operational requirements. The Labour Court found that the dismissals were not automatically unfair.

The Appeal court in Aveng in considering the matter further, implemented a two-stage enquiry to determine whether or not the dismissals were automatically unfair. The first determination that the court sought to make was that of factual causation. The first question to be asked is whether the dismissal would have occurred, but for the refusal of the demand. If the answer is yes, then the dismissal is not automatically unfair. If the answer is no, as it was in this case, one would need to move into the second leg of the enquiry; that of legal causation.

In determining legal causation, the court held that even where there is evidence suggesting a credible possibility that dismissal occurred because the employees refused to accept a demand, the employer can still show that the dismissal was for a different, more dominant and proximate reason that is fair.

Considering this, the LAC held that the dominant cause for the dismissals was Aveng’s operational requirements, which had reinforced the entire process, and which had informed all of the consultations regarding the changes to terms and conditions of employment.

The employees' dismissals consequently fell within a zone of permissible dismissals for operational requirements and did not fall foul of s187(1)(c) of the LRA.

After considering the facts, the Court found that the purpose of Aveng making the proposal was not to gain any advantage in wage bargaining, but was rather to restructure for operational reasons to ensure Aveng’s long-term survival. The employee’s rejection of the proposal necessitated the dismissal due to operational requirements. The dominant cause for the dismissals therefore was Aveng’s operational requirements.

What is clear from the judgment is that an employer, in the context of a retrenchment exercise at least, may dismiss employees for refusing to accept a change to terms and conditions of employment, provided of course that the employer can demonstrate that there is a genuine operational need to change terms and conditions of employment; that there is no reasonable alternative to dismissal; and that a fair consultation process has been followed.

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