February 2006
Edition 1

The end of the last Court term of 2005 saw a number of important judgments handed down by the Labour Courts. Some of the key judgments are noted here. All of the cases are currently unreported.

Section 197 of the LRA provides for the automatic transfer of employment contracts when a business is transferred in whole or in part as a going concern. But when does the business transfer? Is it the date of signature of the agreement, the date on which et new owner takes control or the effective date as defined by the contract?

In EC Van der Velde v Business and Design Software (PTY) Ltd and another this question assumed some significance, because the contract provided that employees would be transferred on the effective date (1 January) as defined by the contract. However, the agreement was only signed on 3 April, and was subject to conditions that were to be fulfilled by 4 April.

In essence, the Labour Court had to decide whether the parties to a sale agreement could provide for a retrospective transfer of the employment contracts. The answer to that question was significant for the applicant, who had been retrenched on 31 March. It was also significant for the seller, which argued that it should not be before the Court since it could not have dismissed the Applicant on 31 March, 3 months after the sale of the business. The date on which the transfer of his employment contract took place determined which of the employer parties had dismissed him- the purchaser (if his contract had transferred on 1 January) or the seller (if all employment contracts transferred only on 4 April). Although section 197 provides that the purchaser takes over all employment related liabilities and obligations (meaning that either way, the purchaser could be sued), the claim was one based on an automatically unfair reason for dismissal (a reason related to a section 197 transfer) and for that purpose, it became necessary to decide which employer had effected the dismissal.

The Court held that it was not bound by the intention of the seller and the purchaser, even if there was no fraudulent intent. To allow the employer parties to fix an arbitrary date as the effective date of the sale could lead to abuse. For the purposes of section 197, the date of transfer was the date on which the sale became unconditional and the date on which the purchaser assumed full control of the of the business bundle that was the subject of the transfer. On the facts of the case, that date as 4 April, when the sale became unconditional. Both employer parties were properly before the Court, and the case was adjourned for a hearing on the merits.

Effective dates are often inserted into contracts, mostly for reasons unrelated to labour issues. This decision illustrates the importance of properly considering and regulating the labour implications of any transaction, and not to leave these to the commercial and tax lawyers.

Section 189(3) requires employers who contemplate retrenchment to issue an invitation to consult. This notice, which must be issued to defined consulting partners, must contain the information that is prescribed relating to the reasons for the proposed retrenchment, the numbers of employees likely to be affected, measures adopted to avoid retrenchment, etc. Is this section to be applied literally? In other words, is the retrenchment procedurally unfair simply because the employer fails to include all of the information envisaged by that section. In Chester Wholesale Meats) Pty) Ltd v National Industrial Workers Union of SA and 30 others, the Labour Court found against the employer on the basis that it had not strictly complied with section 189 because it had failed timeously to put all of the required matters in writing. The Labour Appeal Court took a different view. The Court held that the Labour Court had applied an overly technical approach, and that there was nothing in section 189 or 189A that required the initial notice of consultation to contain all of the required information. To hold otherwise would impose an 'impractical regime' on parties who are expected to embark on a joint consensus seeking exercise. In fact, to insist on commitment to undue detail may actually inhibit worthwhile consultation rather than promote it.

The judgment is certainly not a licence to err on the side of inadequacy when issuing a section 189(3) notice. But it does adopt a realistic view of the world- consultation is a dynamic process and information demands will reflect that. The judgment also emphasises that section 189 should not be technically interpreted- the courts will primacy to the purpose of the section, which is to ensure genuine consensus seeking on alternatives when redundancies are contemplated.

Still on the topic of section 189- when must an employer issue a section 189(3) notice? How far down the track of 'contemplation' can the employer go before issuing the notice?

In NEHAWU v University of Pretoria, the Labour Appeal Court had to determine whether the union had been presented with a fait accompli when it was notified of a proposed outsourcing of certain services. The union accused the employer of deciding to outsource before the consultation process had started. On the facts, the Court rejected this argument and found for the employer. The Court confirmed that what the employer could not do was arrive at a final decision to retrench before commencing consultation. An employer was entitled to come to the consultation table 'with a predisposition towards a particular method of solving the problem which has given rise to the contemplation of dismissal of employees for operational requirements. What is critical is that the employer should nevertheless be open to change its mind if persuasive argument is presented to it that that method is wrong or is not the best or that there is or may be another one that can address the problem equally well or even in a better way.'

This is a reaffirmation of the view that in the real world, employers will think through a number of solutions to business problems before retrenchments become possible or even inevitable, and that they are entitled to form preliminary or even preferred views before initiating a section 189 consultation process. What employers may not do is enter the consultation process with a closed mind. The section is geared to a joint exploration of alternatives, and has as its goal consensus on measures that would avoid retrenchment or ameliorate its consequences.

This is a discussion of the award in National Education Health and Allied Worker's Union ("NEHAWU") on behalf of Lucas and the Department of Health (Western Cape [2004] 25 ILJ 2091 (BCA).

In this matter the Applicant had been employed as a general worker in the nursing department of the hospital operated by the Department of Health. After being injured on duty she could no longer be able to bend or lift heavy objects and was transferred to the clerical department while she was being assessed. She did not cope well there the other employers were unhappy that her work output was low and that she received special treatment. After an unsuccessful application for a more senior administrative post her superintendent applied for her discharge for incapacity in terms of the Public Service Act 1994 but the department required that she be assessed by a specialist and by an occupational therapist.

She was "advised" by her union and refused to be seen by the occupational therapist. Subsequent thereto her employment was terminated for incapacity due to ill health or injury. The Department's code incorporated the Labour Relations Act Code of Good Practice and the employer purported to have complied with the terms of items 10 and 11 thereof.

In determining the fairness of the dismissal the arbitrator noted that the Code of Good Practice in the Employment Equity Act 55 of 1998 was far broader than the Labour Relations Act Code in respect of impairments that amounted to a disability. In that, where impairment amounted to a disability under the Employment Equity Act the employer was entitled to reasonable accommodation. The arbitrator adopted a purposive approach that the general objective of the statutory arrangements in both the LRA and the Employment Equity Act was to promote procedural and substantive fairness in relation to people with disabilities and to encourage employers to keep people with disabilities in employment if there is good reason to be accommodated. The arbitrator was of the view that the general concept of fairness required an employer to consider whether a particular employee was a person with disabilities under the Employment Equities Act in determining whether there was a sufficient, valid and fair reason to terminate employment. The arbitrator's view was that even in circumstances where the employee had not specifically sought special treatment with reference to the Employment Equity Act and claimed the status of the person with a disability, The above ought to be taken into consideration. The Arbitrator made a point that disability status is not to be considered only as a weapon to claim special treatment under the affirmative action provisions in chapter 2 of the EEA but that it should also be considered as a shield to protect the person who has a disability from being dismissed from employment for a reason related to that disability.

In this case it was common cause that the employee lived with incapacity on the grounds of ill health or injury within the meaning of item 10 of the Labour Relations Code. After considering the evidence the arbitrator however found that she also fell within the definition of people with disabilities as defined in the Employment Equity Act. On perusal of the evidence it was found that the employer had attempted to accommodate the employees disability in terms of Section 10 in terms of the Labour Relations Act rather than as an employee with a disability in terms of the Employment Equity Act. The arbitrator considered which procedure would have produced a substantively fairer outcome for the Applicant and concluded had the parties followed the Employment Equity Act Code and the Technical Assistance Guidelines on the employment of people with disabilities at an early stage they all would have informed themselves, worked together and identified possible accommodation.

Having considered the extent of the employer's duty to make reasonable accommodation for the employee, the arbitrator found insufficient evidence that the employer had considered any reasonable accommodation in relation to this rule or the nursing department but all in relation to a clerical job for which she was in any event not qualified. What this means is that more than only looking at alternatives, the employer must also try and "create " a suitable role for the ill employee.

What this award raises is that compliance with the Labour Relations Act Code may not be sufficient in instances where ill health leads to disability. The LRA Code requires employers to look for suitable alternatives adapt the employee's current role where possible to accommodate the employee's circumstances. With the general notion being that if the employer complied, the termination is viewed as being fair both substantively and procedurally. Under the Employment Equity Act Code however and in particular item 11 which is a guideline on retaining people who became disabled during employment, employers are required to assess if the disability can be reasonably accommodated and the employer is enjoined to explore the possibility of alternative reduced work or flexible work arrangements.

The technical assistance guidelines on the employment of people with disabilities have been published and require the employer to engage in the various steps viz. clarification of work limitations; development of job modification; return to work options etc.

This requires that there should be consultation with employees and that supervisors must feel comfortable and ensure that they understand the nature of the employee's work limitations and that both parties must have a stake in the success of any job modification and all return to work plans.

What this entails is that the employer together with the affected employee need to look and investigate the ways of modifying the work environment and investigate whether or not there are any other ways in which the work can be done moving away from the traditional ways in which specific work had been done. It is submitted that this imposes a much more onerous duty and has the effect of broadening the employer's requirements for fairness in circumstances of ill-health terminations.

It is suggested that employers should familiarise themselves with the Employment Equity Act Code and indeed the technical assistance guidelines when dealing with and indeed managing ill-health incapacity. It is also advised that even when the process has been followed to the latter, it is important to hold "that last meeting " to hear the employee out before a notice of termination is given.

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