Date of hearing: Tuesday, 8 September 2015
Issue: Whether an employer’s failure to wait the 30 days required by section 189A of the Labour Relations Act before retrenching its employees renders those dismissals invalid
Background: Edcon, the retail company that trades through Edgars, CNA and Jet, has been facing severe financial difficulty. And so, between April 2013 and mid-2014, it retrenched around 3 000 of its 40 000 employees, as part of an effort to down-size.
Large-scale retrenchments should comply with section 189A of the Labour Relations Act (“LRA”). Section 189A(8) says that, if the parties do not opt for a facilitation process, the employer must wait for a set number of days before it can give its employees notice of termination. Once the employer has given notice, the employees’ right to embark on a protected strike or litigation is triggered, so that employees can try to discourage their employer from retrenching or engage it in consultation. In De Beers Group Services (Pty) Ltd v NUM, the Labour Appeal Court (“LAC”) found that an employer’s failure to comply with these timeframes would make any dismissal invalid and of no effect. If the employer did not follow the timeframes, in other words, there has been no dismissal at all.
When Edcon retrenched its employees, it did not wait the required number of days before dismissing them. The employees took their case to the Labour Court, arguing that their dismissals were invalid for this reason and that they should be reinstated, with back-pay. Edcon then launched an application directly to the LAC. It argued that the De Beers principle is wrong and should be overturned — the LRA should instead be interpreted to mean that non-compliance with these timeframes alone does not make the dismissal invalid.
Murphy AJA, in a unanimous judgment, found for Edcon and overruled De Beers. Even if the termination notices did not comply with the statutory timeframes, Murphy AJA said, it did not necessarily follow that the dismissals were invalid. Although section 189A uses peremptory language — saying employers “must” comply with the timeframes — it is silent about the consequences for an employer who does not comply. So courts must look to the full context of the legislation to decide whether the dismissals should be invalid, including whether there are other remedies available to help the employees; and whether declaring the dismissals invalid would have “capricious, disproportionate or inequitable consequences” on the employer, especially when the dismissal was probably substantively fair. Here, the employees did have other available remedies, and scrubbing out the entire retrenchment process by reinstating them would direly impact the employer. Murphy AJA noted the time-frame’s important purpose of “enhance[ing] the effectiveness of consultation in large-scale retrenchments”, but ultimately found that the importance of consultation was not determinative. Edcon should not be disproportionately punished, he found, for a procedural misstep where the parties had not, in any event, opted for facilitation.
Things to watch: The employees and their union, NUMSA, now challenge the LAC’s finding at the Constitutional Court. The employees argue that the use of “must” provides a clear textual indication that favours their interpretation. Any deviation from this, then — just like certain other failures by employers to comply with proper procedures — makes those dismissals invalid. After all, section 189A was part of a number of amendments to curb employer power. An employer cannot cry foul over the bad effects it suffers as a result of its own unlawful conduct.
Should Edcon’s failure to abide by the statutory timeframes scupper its case? While the Constitutional Court has held that procedural requirements are important in their own right, this alone, however, does not mean that a procedural lapse results in invalidity. The question is not whether there has been exact compliance, but rather whether the provision’s purpose has been vindicated (as the Court held here). The Court may want to reassert this approach so it can steer a sensible course, avoiding the straits of procedural stringency.
Some might quibble that this is exactly what the LAC did. And, although it found for the employer, this does not leave employees without recourse. Immediately after the premature dismissal, employees can initiate strike action or expedited litigation at the Labour Court. More generally, employees whose contracts are terminated prematurely can also sue for breach of contract; claim for a procedurally or substantively unfair dismissal under the LRA; or even seek to review the decision for being unlawful.
But there are compelling reasons for the Constitutional Court to hear the matter. The Court is often eager to intervene in lower courts’ decisions that seem not to give enough weight to employees’ interests. It is likely that at least some of the Justices of the Constitutional Court will think that Murphy AJA’s take on section 189A is unconvincing. If its purpose, as Murphy AJA himself cast it, is to encourage consultation – affording the employees a chance to engage their employer to try to be retained – then failing to abide by its timeframes could be fatal to Edcon’s case. Edcon’s lack of compliance also narrowed the employees’ window for organising their lives and seeking alternative jobs: notice, the Court has said, “ultimately signifies respect for the human dignity of the employees”. And just two weeks ago, the Court in a short and cogent unanimous judgment affirmed that where multiple interpretations of a statute are possible, the interpretation that is less restrictive of the employees’ rights should be preferred. Perhaps it will do so again here.