In National Union of Metalworkers of South Africa (NUMSA) obo members and Aveng Trident Steel (A division of Aveng Africa (Pty) Ltd) (2019) (Aveng) the Labour Appeal Court (“LAC”) recently had to determine whether dismissals, following a rejected proposal for a change in terms and conditions of employment, are automatically unfair in terms of section 187(1)(c) of the Labour Relations Act (“LRA”).

Due to a decline in the steel industry, Aveng decided to embark on a restructuring exercise in order to reduce costs so as to maintain its profit margins. As part of the restructuring exercise, Aveng offered voluntary separation packages to permanent employees and terminated the contracts of fixed term employees. A significant number of employees accepted voluntary separation packages and others did not. Consultations about proposed new job descriptions for the remaining employees continued.

Aveng proposed to group jobs in line with the applicable sectoral collective agreement and at the rate prescribed in the main agreement for performing work in such positions. By combining functions previously performed separately into a single job, Aveng would achieve a cost saving model which would preserve jobs.

An interim agreement was reached between Aveng and NUMSA in mid-2014 in terms of which the employees would work in accordance with the new job descriptions until the consultation process was concluded. However, prior to the expiry of the interim agreement, NUMSA declared that its members would no longer continue working in terms of the job descriptions. Following this, Aveng gave notice that the employees would face retrenchment unless they accepted the offers of alternative employment, being the positions with redesigned job descriptions. However, none of the employees accepted the new terms and conditions of employment. These employees were retrenched and NUMSA challenged the fairness of the dismissals.

Section 187(1)(c) of the LRA provides that a dismissal is 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”.

NUMSA contended that the employees’ dismissals were automatically unfair in terms of section 187(1) (c) of the LRA as they were dismissed for refusing to accept Aveng’s demands in respect of altered job descriptions and grade structure. Aveng maintained that the dismissals were based on its operational requirements.

The Labour Appeal Court held that the offers of alternative employment were aimed at avoiding or minimising the number of dismissals and that the reasons for the dismissals were fair.

The Court held that the rationale for the change to terms and conditions of employment was proposed as a means to save jobs during the retrenchment process. This was distinguishable from a collective bargaining process where the employer was simply flexing its muscles.

Furthermore, the Labour Court held that a proposal for a change in terms and conditions of employment is not unfair if this is done as part of restructuring process. The court held that of utmost importance is the purpose for that change in terms and conditions of employment and in this instance, where it was for cost saving and the preservations of jobs, it was not unreasonable.

In deciding the case, the Labour Appeal Court applied a two stage enquiry to causation in establishing whether or not the dismissals were automatically unfair.

  1. The court looked at the factual causation and stated that the question to be asked was whether the dismissal would have ensued but for the refusal of the proposal/demand. If the answer thereto is yes, then dismissal is not automatically unfair as the dismissal would have inevitably ensued. However if the answer is no, the court held that such does not automatically imply that the dismissals are automatically unfair but this leads to the second stage of the enquiry.
  2. 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/proposal, the employer can still show that the dismissal was for a different, more dominant and proximate reason which was based on legitimate operational requirements.

The LAC held that the dominant or proximate cause for the dismissals was Aveng’s operational requirements, which triggered the restructuring process and the proposed changes to terms and conditions of employment. The employees’ dismissals were substantively fair and based on Aveng’s operational requirements and did not fall within section 187(1)(c) of the LRA.

Accordingly, while an employer may not ordinarily dismiss employees for refusing to accept a demand regarding terms and conditions of employment, it is not unfair to dismiss employees who refuse to accept a change in terms and conditions of employment during a section 189 process if the proposed changes are aimed at preserving employees’ jobs.