month, we discuss a number of important judgments by the Labour Courts.
The first deals with procedural fairness in dismissals, the second is
concerned with substantive fairness in the form of a dismissal that was
alleged to have been effected for a reason related to a Section 197 business
transfer. The third judgment, handed down by the Labour Appeal Court,
deals with the retrospectivity of reinstatement awards. The first two
judgments are unreported, and we draw them to your attention because of
their significance for industrial relations practice. The LAC judgment,
CWIU and others v Latex Products (Pty) Ltd, has been reported at 
2 BLLR 142 (LAC) and will be of particular interest to IR managers and
The Labour Court examined the history of the procedural fairness requirement in unfair dismissal. It traced the development of the 'criminal justice' model, developed by the industrial court in the 1980's. This model required a workplace enquiry along the lines of a criminal trial, with charges of misconduct, evidence, the application of the rules of evidence, rules in relation to bias and the like. The Court noted that the new LRA had introduced an entirely different model. This model, which finds reflection in the Code of Good Practice: Dismissal, requires only an investigation by the employer, the formulation of any allegation that may flow from that enquiry, an opportunity for the employee to state a case in response to the allegation with assistance if required, a decision, and notice to the employee that he or she was free to pursue any dispute in the CCMA. The balance struck, said the Court, was one that lessened the procedural burden on employers while establishing a right to expeditious arbitration, on the merits and in the form of a rehearing, if the fairness of a dismissal was disputed. This meant that the 'criminal justice' model had no place under the LRA, unless employers continued to apply it in terms of their own procedures, or in the public sector, where administrative law requirements might demand it. But as a general rule, there was no need for employers to hold formal hearings before dismissal. This conclusion was fortified by the Code of Good Practice (the Code states that a 'formal hearing' is not required and makes no mention of a right to an appeal) and by international labour standards.
rule against bias applied by the Commissioner was held to be part of the
'criminal justice' model, and out of line with the new conception of procedural
fairness that the LRA introduced. The Commissioner's decision was therefore
The second judgment of interest this month is Van der Velde v Business Design Systems and another. In this case, an employee dismissed a week before the business that employed him was transferred as part of a management buy-out, claimed that he had been dismissed because of the transfer, alternatively, for a reason related to it. The employer alleged that the employee had been retrenched on account of a necessary restructuring, and that it had complied with its obligations in terms of Section 189.
The difference, of course, is both profound and potentially expensive. A dismissal for a reason related to a Section 197 transfer of a business is automatically unfair, and subject to a compensatory award of a maximum of 2 years remuneration. An unfair retrenchment carries a potential penalty of 1 years' pay.
The Court dealt at some length with the way in which the line between a dismissal related to a transfer on the one hand, and a retrenchment on the other, might be drawn. This is always a difficult exercise, because as the Court observed, if the Act were to be applied literally, there would be very few dismissals either pre- or post transfer that wouldn't in some way be 'related to' the transfer, which is exactly what Section 187 prohibits. A balance had to be sought that recognised that restructuring, particularly after a transfer, was almost inevitable but also that Section 197 conferred important rights of job security on employees when businesses were transferred.
An additional problem that the Court addressed was the onus of proof in dismissal disputes where the employee alleges that he or she was dismissed for a reason that is automatically unfair. The Act is silent on this issue- where dismissal is effected for a potentially unfair reason (misconduct, incapacity or operational requirement), the onus is on the employer. But if an employee alleges an automatically unfair dismissal, where does the onus lie?
The Court formulated the following test:
Applying this test
to the facts of the case, the Court found that the employee had been dismissed
by reason of the transfer and awarded him 12 months' remuneration as compensation.
Finally, CWIU v Latex Products deals with the situation where an order of reinstatement is made following a finding of unfair dismissal, and the retrospectivity of that order is considered. Section 193 permits reinstatement with effect from a date not earlier than the date of dismissal. Section 194 though fixes limits on compensation. In cases where the dismissal is not automatically unfair, the maximum is 12 months' compensation. Where it is automatically unfair, the maximum is 24 months. When a reinstatement order is to be made in circumstances where the dismissal took place within 12 months (using the example of a dismissal that is not automatically unfair) there is generally no difficulty. A discretion is exercised, and the order can be made retrospective, provided that it doesn't operate from a date prior to the date of the dismissal.
When the dispute is heard more than 12 months after the date of dismissal, a potential difficulty arises. Can a reinstatement order in these circumstances be made retrospective to the date of dismissal i.e. for a period longer than 12 months?
SA Latex Products establishes the rule that when a court or an arbitrator orders the reinstatement of an employee, that the order can operate retrospectively, but only for a period of not more than 12 months from the date on which the order was made. This decision settles the uncertainty created by the split decision of the LAC in Kroukam v SA Airlink, where views were expressed either way. In that case, Judge Dennis Davis held that there was no reason why order of reinstatement should not be capable of being made retrospective, even if the dismissal took place 12 months (or in the case of an automatically unfair dismissal 24 months) before the date on the order of reinstatement was made.
The Court in SA Latex Products referred to the Explanatory Memorandum that accompanied the LRA, and in particular, to provisions dealing with delays in finalising dismissal disputes and the prejudice caused when reinstatement orders are made years after a dismissal. The Court concluded that it was not competent to order the retrospective operation of a reinstatement order which "is in excess of 12 months in an ordinary unfair dismissal case." In other words, a reinstatement order can operate retrospectively from the date on which the order is made for 12 months or any lesser period that the court or the arbitrator considers appropriate. If the employee was dismissed on a date more than 12 months before the date of the order, that is of no consequence.
The judgment is a welcome clarification of the application of the LRA when reinstatement is ordered. This is particularly so when delays in finalising matters in both the CCMA and the Labour Court seem particularly acute. But delays are what ultimately cause prejudice to employers and employees in dismissal disputes. If all dismissal disputes were finalised within 12 months of the date of dismissal (the model introduced by the LRA envisaged a far shorter period) retrospective reinstatement is feasible and workable. Where orders are being made (as they are, particularly in the Labour Court) 3 or more years after the date of dismissal, retrospective reinstatement, even on the basis that it is to be applied following SA Latex Products, can be cold comfort for an employee and unduly onerous on an employer.
Electronic copies of the unreported judgments can be obtained from Su at email@example.com