Section 187(1)(c) of the South African Labour Relations Act, 1995 (“LRA”) has always been controversial because of the interplay between the definition of automatically unfair dismissals, employers’ rights to terminate contracts of employment on the basis of operational requirements and the institution of collective bargaining.
At the centre of this controversy has been the question of whether an employer, if it fails to persuade its employees through negotiation to agree to change conditions of employment, can dismiss these employees on the grounds of its operational requirements so that it can employ employees who are prepared to accept these conditions. The most important hurdle that the employer has to overcome is the definition of an automatically unfair dismissal found in section 187(1)(c). In its original form, it read as follows: “a dismissal is automatically unfair if the reason for the dismissal was to compel the employee to accept a demand in respect of any matter of mutual interest between an employer and employee”.
We’ve previously looked at how section 187(1)(c) has been interpreted in case law. In Fry’s Metals (Pty) Ltd v NUMSA and subsequent decisions, the Labour Appeal Court accepted that a dismissal in these circumstances would not constitute an automatically unfair dismissal, provided the dismissal was final and not conditional (ie, the employer did not offer the employee their job back if they accepted the new terms and conditions of employment). We also looked at how NUMSA v Aveng Trident Steel (a division of Aveng Africa Proprietary Limited) & Another considered whether the Fry’s Metals decision remained good law in the light of an amendment to section 187(1)(c). The debate thus far has concentrated on dismissals in the collective context, ie, where the employer wishes to dismiss a number of employees.
However, in the recent decision in Jacobson, Merwyn Jack v Vitalab, the Labour Court considered a different issue, namely whether section 187(1)(c), as amended, applies to the dismissal of an individual employee who has refused to change a condition of employment.
Mr Jacobson (the “employee”) was a specialist medical practitioner and shareholder in Vitalab. He also held shares in Strawberry Bush 3 (Pty) Ltd, which owned the premises on which Vitalab was situated. The employee had reached and passed the agreed retirement age of 70 but it was agreed that he would continue working until he attained the age of 75 in terms of a series of fixed-term contracts.
Towards the completion of the employee’s first agreed fixed-term contract for the period of 1 July 2017 to 30 June 2018, Vitalab furnished the employee with two proposed agreements, in terms of which he would agree to retire from active practice, resign as an employee, sell all his shares for a stipulated price and be re-employed by Vitalab on a clean slate at a stipulated net salary. The employee refused to accept both offers and requested all financial information of Vitalab and Strawberry Bush.
He then received a letter recording that: he had been employed on a fixed-term contract that expired on 30 June 2018; that he had been permitted to continue his employment for the month of July without prejudice to Vitalab’s rights; and, that his employment would be terminated with effect from 31 August 2018.
The employee referred a dispute to the Commission for Conciliation, Mediation and Arbitration (“CCMA”) and, after conciliation failed to resolve the dispute, referred an automatically unfair dispute, based on the amended section 187(1)(c) to the Labour Court. The employee claimed that the reason he was dismissed was because he refused to accept a demand in respect of a matter of mutual interest between himself and Vitalab (ie, to sell his shares on the terms in the proposed agreements).
Vitalab raised an exception to the employee’s statement of claim on the basis that the claim failed to sustain a cause of action in that the demand on which the employee relied for the purposes of section 187(1)(c) did not concern a matter of mutual interest; it concerned the corporate relationship and not the employment relationship between the parties. The Labour Court narrowed down the issue and stated that the question was whether section 187(1)(c) finds any application in a dismissal dispute that concerns an individual employee.
In deciding the issue, the Labour Court explored the history of the wording of section 187(1)(c) of the LRA, the subsequent amendments to the section, and the explanatory memorandum that accompanied the Amendment Bill in 2014.
The court held that, from the wording of the amended section 187(1)(c) and its purpose, the application of the section is limited to the collective sphere. The purpose of the section is to protect the integrity of the collective bargaining process by precluding the use of dismissal as a legitimate instrument of coercion in the collective bargaining process. The process of collective bargaining, by definition, contemplates concerted action and the participation of more than one employee. Furthermore, the wording of the section fortifies the conclusion that the section is not intended to apply in individual dismissal disputes. It refers to “a refusal by employees to accept a demand in respect of any matter of mutual interest between them and their employer” (our emphasis included).
The court held that the reason for dismissal was not one contemplated by section 187(1)(c) since the dispute did not concern the integrity of collective bargaining, nor did it concern more than one employee. The exception was upheld and the applicant’s claim based on an automatically unfair dismissal was struck out.
The judgment is authority for the view that section 187(1)(c) does not apply to dismissal disputes involving individual employees. But the mere fact that this type of dismissal cannot, in terms of this section, amount to an automatically unfair dismissal does not release the employer from proving that there was a fair reason for dismissal, based on its operational requirements.