Constitutional Court’s Take on Retrenchment Procedures: What Employers Need to Know

Section 189A of The LRA Clarified or Not?

The Constitutional Court in Regenesys Management (Pty) Ltd t/a Regenesys v Ilunga and Others [2024] CC 8 discussed sub sections 189A(13) and 189A(18) of the LRA in a 125 page judgement.

Background Facts

Regenesys called its staff to a meeting on 17 June 2015, Regenesys mentioned a number of options which were considered and informed staff that there was a need for retrenchment as a result of Regenesys’ financial position.  Reference was made to follow up meetings.

On Thursday, 18 June 2015 another meeting took place, there management showed the staff a new structure of the organisation that it had prepared in an attempt to deal with its financial problems.  The employees were handed the proposed structure and invited to make proposals or recommendations on the structure.  Only two staff members made proposals to the management.  One of the proposals made was that a facilitator from the CCMA be secured to facilitate the consultation.  No such facilitation took place.

On Monday, 22 June 2015 Regenesys gave the employees the final structure reflecting various vacant positions.  Regenesys then invited the employees to apply for positions to which they wanted to be appointed in the new structure of the organisation.  The positions which some of the employees occupied were included in the new structure as positions in respect of which applications had to be made.  The employees were told that the selection criterion for filling the positions in the new structure was competence which was said to include knowledge, skills, and behaviour.  The employees applied for appointment to their respective positions and other similar positions.

On Wednesday, 24 June 2015 the employees were informed that their applications were unsuccessful and that they were being retrenched with effect from 31 July 2015.  They were informed that July would serve as their notice month.

After the employees had received their letters of dismissal and even before 31 July 2015 – which was the date from which the dismissals would take effect – the employees referred to the CCMA for conciliation an unfair dismissal dispute for being both procedurally and substantively unfair.  The dispute was not resolved at conciliation.

At the Labour Court the Applicants brought and urgent application with plea for an order reinstating them in Regenesys’ employment until Regenesys had complied with a fair procedure in terms of section 189A(13)(c) or alternatively for the award of compensation in terms of section 189A(13)(d).

Section 189A applies to employers with more than 50 employees and sub-section 189A(13) states:

If an employer does not comply with a fair procedure, a consulting party may approach the Labour Court by way of an application for an order —

• compelling the employer to comply with a fair procedure;
• interdicting or restraining the employer from dismissing an employee prior to complying with a fair procedure;
• directing the employer to reinstate an employee until it has complied with a fair procedure;
• make an award of compensation, if an order in terms of paragraphs (a)–(c) is not appropriate.

Labour Court

Prinsloo J found the dismissal of all the employees to have been procedurally unfair and the dismissal of some of the employees to have been substantively unfair.

How Did The Employer Not Comply In This Matter?

The Constitutional Court concurred with the Labour Court ruling in this matter and referred to the judgement of Prinsloo J with approval where she found that:

• this retrenchment fell squarely within the ambit of section 189 of the LRA and the employer has not complied with the provisions of the said section and terminated services within a few days after they were issued with a notice in terms of section 189(3) of the LRA, in total disregard for the period prescribed by section 189A.
• The letter issued to the employees on 18 June 2015 stated the reason for the contemplated retrenchment as ‘because the company is implementing a new business model and the organisational structure to improve operational efficiencies and effectiveness.’
• Accordingly, the Respondent’s affected employees were invited to make proposals and recommendations ‘regarding the proposed restructuring process and the proposed organisational structure’.
• No mention was made of the financial crisis the Respondent experienced and the employees were not invited to make any submissions on that.
• There was no consultation on any of the issues prescribed by section 189 of the LRA – measures to avoid dismissal, on minimising the dismissals, on the timing thereof or to mitigate the adverse effect of the dismissal, severance pay or selection criteria
• Not only were the Applicants deprived of an opportunity to consult, they were also not provided with information relating to the real reason behind the retrenchment.
• There was no meaningful joint consensus seeking process.
• There was no proper attempt to avoid retrenchment.
• The employees were given only one opportunity to make representations on very short notice.
• The process and time frames prescribed by section 189A had not been complied with.

Labour Appeal Court

The Labour Appeal Court based their judgement on the Constitutional Court judgement in Steenkamp v Edcon Limited [2019] ZACC 17; 2019 (7) BCLR 826 (CC); [2019] 11 BLLR 1189 (CC); (2019) 40 ILJ 1731 (CC) and found that the Labour Court did not have jurisdiction to consider the procedural fairness of the retrenchments.

Jurisdiction of The Constitutional Court

At the Constitutional Court it was held that this matter relates to the interpretation and application of the LRA which is legislation enacted to give effect to section 23 of the Bill of Rights, therefore the Constitutional Court has jurisdiction to entertain this matter.  Further, it is of general public importance that deserves to be considered by this Court.

Criteria For Retrenchment

It was held at paragraph 37, with reference to South African Breweries (Pty) Ltd v Louw [2017] ZALAC 63; [2018] 1 BLLR 26 (LAC); (2018) 39 ILJ 189 (LAC), that skills, knowledge and behaviour could be criteria.

What Is The Effect of A Second Appeal

The Constitutional Court confirmed that when a party appeals to a second or further appeal court, it appeals against a judgment or order or conclusion of the first appeal court.  It does not appeal against the judgment and order of the court of first instance.  Therefore, a finding or conclusion or order of the court of first instance, that a party did not appeal against or challenge in its appeal to the first appeal court, cannot be appealed against or challenged by such a party in an appeal to a second or further appeal court – paragraph 44.

Interpretation of The Labour Relations Act

The Constitutional Court confirmed that it is now settled that the correct approach to the interpretation of the LRA is purposive interpretation – paragraph 63.  One component of the right not to be dismissed unfairly is that there must be a valid or fair reason before an employee may be dismissed.  When the Constitution proclaimed in section 23 that every worker was entitled to fair labour practices, an element of that right included the right not to be dismissed unfairly which in turn has two components, the one being every worker’s right not to be dismissed without being afforded an opportunity to be heard and, the other being the worker’s right not be dismissed without a fair reason – paragraph 66.

Does Sub-Section 189A(18) Override The Labour Court Jurisdiction Regarding Procedural Fairness As Stated At Sub-Section 189A(13)?

This question was raised in the cross-appeal and the Constitutional Court clarified it in detail.  The Labour Appeal Court held that given the provisions of section 189A(18), the Labour Court did not have jurisdiction to adjudicate a dispute about the procedural fairness of a dismissal for operational requirements.  The employees, in the cross-appeal relied on section 189A(13) to claim that the Labour Court does have jurisdiction in respect of disputes about the procedural fairness of dismissals for operational requirements – paragraph 55.

Sub-Section 189A(13)

In interpreting section 189A(13) the Constitutional Court held that:

Section 189A(13) has two purposes.  The one purpose, which may be called the primary purpose, relates to orders contemplated in paragraphs (a) to (c) but does not relate to an order contemplated in paragraph (d).  The purpose of orders contemplated in paragraphs (a) to (c) is to ensure that the employer complies with a fair procedure before it dismisses employees for operational requirements.  That is why the provisions of paragraphs (a) to (c) end with the phrase “with a fair procedure” and why the verb “comply” appears in different forms and shapes before that phrase in these paragraphs – paragraph 74.

This interpretation of section 189A(13) ensures that, when it comes to seeking compensation for procedural unfairness, the employee who uses the section 189A(13) route, is treated in the same way as the one who uses the section 191 route.  This is subject to the qualification that an employee who seeks compensation under section 189A(13)(d) is required to only seek it when an order under section 189A(13)(a) to (c) is inappropriate and must comply with the 30-day time limit imposed by section 189A(17) or obtain condonation for non-compliance with that time limit if he or she fails to comply with it.  A court considering an application for condonation would be entitled to consider that the 30-day time limit has been imposed because an order in terms of section 189A(13)(a) to (c) is the lawmaker’s preferred remedy to get the consultation process back on track – paragraph 93.

At paragraph 96 the Constitutional Court caution by stating that employees to whom section 189A applies are generally expected to protect their right to procedural fairness by an application brought within the prescribed 30-day time limit.  If they lodge their application outside of the 30-day time period, they are obliged to apply for condonation and, among others, furnish an acceptable explanation for their delay.

At paragraph 99 the Constitutional Court found, with reference to existing case law:

Therefore, when some cases say that an order under paragraphs (a) or (b) or (c) cannot be granted when the consultation process can no longer be put back on track, they are correct.  However, when they say that even an order of compensation under paragraph (d) cannot be granted when the consultation process can no longer be put back on track, they are, with respect, not correct.  Actually, section 189A(13)(d) is quite clear that it is when an order under paragraphs (a) to (c) is inappropriate that an order for compensation may be granted.  An order under paragraphs (a) to (c) is inappropriate when the consultation process can no longer be put back on track.  An order for compensation is appropriate at that stage.

At paragraph 137 the Constitutional Court overturned its own ruling in Steenkamp v Edcon Limited [2019] ZACC 17; 2019 (7) BCLR 826 (CC); [2019] 11 BLLR 1189 (CC); (2019) 40 ILJ 1731 (CC) by stating:

Nevertheless, it is in the interests of justice that this error be corrected in order to prevent injustices from being visited upon many workers who may need to be granted a remedy under section 189A(13)(d) if their employer has failed to comply with a fair procedure in dismissing them.  If the erroneous interpretation of subsection (13) is allowed to continue, there are many workers whose rights not to be dismissed without compliance with a fair procedure will be violated by employers.  In such a case such employees will not be granted the remedy contemplated in paragraph (d) on the basis that the consultation process can no longer be put back on track.  Such employees could be awarded compensation under paragraph (d) because that remedy has nothing to do with putting the consultation process back on track.  The purpose of paragraph (d) of subsection (13) is to ensure accountability, the vindication of employees’ right not to be dismissed without compliance with a fair procedure and the granting of an effective remedy to the affected employees for the infringement of their rights by their employer.

The Constitutional Court concluded their analysis of section 189A(13) at paragraph 140:

In summary, therefore, the position is, in my view, that:

Subsection (13) has two purposes, not one.

• the primary purpose of subsection (13) is to enable the Labour Court to make an order to compel the employer to comply with a fair procedure before employees may be dismissed finally for operational requirements.
• orders of the Labour Court that are capable of achieving the primary purpose of subsection (13) as articulated in (i) above are the orders contemplated in paragraphs (a) to (c) of subsection (13).
• an order for the award of compensation contemplated in paragraph (d) of subsection (13) is not capable of achieving the primary purpose of subsection (13) as articulated in (i) above but serves a different purpose, namely, the secondary purpose of subsection (13) as articulated in (iv) below.
• the secondary purpose of subsection (13) is to hold an employer who has dismissed employees finally for operational requirements without compliance with a fair procedure accountable and ensure that the employees whose rights have been violated are granted appropriate relief without insisting on compliance with a fair procedure.
• the secondary purpose of subsection (13) relates to an order for the payment of compensation contemplated in paragraph (d).
• it is correct to say that an order contemplated in paragraphs (a) to (c) cannot be granted when the consultation process can no longer be put back on track because putting the consultation process back on track is the primary purpose of orders contemplated in paragraphs (a) to (c).
• an order for the payment of compensation contemplated in paragraph (d) cannot be refused on the basis that at that time the consultation process cannot be put back on track because that is not the purpose served by an order for the payment of compensation. The purpose served by an order of compensation is the secondary purpose.
• the orders contemplated in paragraphs (a) to (c) are the primary or preferred orders under subsection (13).
• the order contemplated in paragraph (d) is an order that is granted only when an order contemplated in paragraphs (a) to (c) is not appropriate.
• there is a limited time during which orders contemplated in paragraphs (a) to (c) may appropriately be granted but, once that limited period has expired, only an order of compensation contemplated in paragraph (d) can appropriately be granted because at that stage no order contemplated in paragraphs (a) to (c) is appropriate.
• while an order under paragraphs (a) to (c) may not be granted years after the dismissal of the employees, an order for an award of compensation as contemplated in paragraph (d) may be granted appropriately even years after the dismissal.
• whereas the orders contemplated in paragraphs (a) to (c) are granted on the basis of a rejection of the employer’s failure to comply with a fair procedure, an order of compensation contemplated under paragraph (d) is granted on the basis of an acceptance that the employer has failed to comply with a fair procedure and there is no insistence that the employer complies with a fair procedure.
• although compensation would normally not be claimable soon after the dismissal of the employees, there are few instances where it would be claimable soon after the dismissal; in each one of those instances an order under paragraphs (a) to (c) in section 189A(13) would not be appropriate.
• although an order for the payment of compensation would normally not be claimable or cannot be granted as a standalone remedy, there are circumstances in which it can be granted as a standalone remedy.

Sub-Section 189A(18)

At paragraph 143 the Constitutional Court turns to sub-section 189A(18).  It reads:

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 Constitutional Court admits that various courts, including the Constitutional Court have wrongly been led to believe that the by virtue of section 189A(18) the Labour Court has no jurisdiction at all to adjudicate disputes about the procedural fairness of dismissals based on the employer’s operational requirements or that it has no jurisdiction to adjudicate such matters under section 191 or that the Labour Court has no jurisdiction to adjudicate such matters under section 189A(13) even when the dismissal relates to employees to whose employer section 189A applies.

The Constitutional Court gives interpretation to Section 189A(18) at paragraph 146:

In my view, the following points must be emphasised about subsection (18), read with section 191(5)(b)(ii) and subsection (13):

• The Labour Court has jurisdiction to adjudicate disputes about the procedural fairness of dismissals for operational requirements to which section 189A applies and which are brought to the Labour Court by way of applications in terms of subsection (13).
• By virtue of subsection (18), the Labour Court has no jurisdiction to adjudicate in terms of section 191(5)(b)(ii) a dispute about the procedural fairness of a dismissal for operational requirements to which section 189A applies because the LRA provides a special procedure and special remedies in subsection (13) for such disputes. In other words, such disputes cannot competently be referred to the Labour Court in terms of section 191(5)(b)(ii) for adjudication because the LRA has a special procedure and special remedies for such disputes in subsection (13) in terms of which they can be adjudicated by the Labour Court.
• The Labour Court’s jurisdiction to adjudicate disputes about the procedural fairness of dismissals for operational requirements to which section 189A does not apply and which are referred to it for adjudication in terms of section 191(5)(b)(ii) is not ousted by subsection (18). That jurisdiction remains intact and the Labour Court has jurisdiction to adjudicate such disputes.

At paragraph 219, the Constitutional Court states that the effect of this judgment in regard to section 189A(18) is that:

• section 189A(18) does not take away the jurisdiction of the Labour Court to:
• adjudicate under section 191 a dispute about the procedural fairness of a dismissal for the employer’s operational requirements of employees to whose employer section 189A does not apply.
• adjudicate under section 189A(13) disputes about the procedural fairness of dismissals for operational requirements of employees to whose employer section 189A applies.
• section 189A(18) takes away the jurisdiction of the Labour Court to adjudicate under section 191(5)(b)(ii) a dispute about the procedural fairness of a dismissal for operational requirements of employees to whose employer section 189A applies.
• there is nothing wrong with the consolidation of a dispute about procedural fairness brought in the Labour Court in terms of section 189A(13) with a dispute about the substantive fairness of a dismissal for operational requirements referred to the Labour Court for adjudication in terms of section 191(5)(b)(ii) where an order under section 189A(13)(a) to (c) is not appropriate and the remedy being pursued by the employees at the time is compensation in terms of section 189A(13)(d). Indeed, in such a case a consolidation of the two matters makes sense.