Retrenchments: selection criteria must be fair and objective!

Dec 8, 2009


Screenex Wire Weaving Manufacturing (Pty) Ltd v Ngema & Others (Labour Appeal Court
JA49/07, 2 September 2009 per Zondo JP, Jappie JA and Leeuw JA concurred) was an
appeal from the labour court in which the labour court concluded that the dismissal of the
respondents (‘the employees’) was both substantively and procedurally unfair and ordered
their reinstatement retrospectively to date of dismissal. The employees in this application
were all members of UPUSA.

It was common cause that the appellant (‘the employer’) had dismissed the employees for
operational requirements during September 2005. During July 2005 the employer sent a
notice of intention to rationalize operations to all trade unions operating within the
employer. During the consultation meetings that followed, the employer decided to use
age and FIFO as selection criteria, although FIFO would only be applied in one section of
the employer. At a meeting held on 17 August 2005 UPASA indicated that it would not
continue meeting until the employer provided financial statements as requested, where
after UPASA then left the meeting. NUMSA also called upon the employer to provide the
financial documents. UPUSA did not attend the last meeting on 29 August 2005 as this
date was arranged at the meeting of the 17th after UPUSA had already left that meeting.
The employer failed to inform UPUSA of the meeting of the 29th and the fact that the
financial statements would be available at this meeting. The LAC held that whether or not
the dismissal was procedurally fair or not depended upon whether UPUSA was entitled or
justified in walking out of the meeting of the 17th. It was common cause that although the
employer knew that UPUSA indicated that it wanted to see the financial documents before
it could continue to participate in the consultation process, and despite knowing that the
documents would be available at the meeting of the 29th, the employer failed to inform
UPUSA of this fact or to provide the financial statements to UPUSA. UPUSA was entitled
to take the stance it did in that it would not participate in further consultations until the
employer furnished the financial documents. Once the financial statements were available
the employer had a duty to inform UPUSA of this fact. Its failure to do so, and in
dismissing UPUSA’s members, without proper consultation, infringe d UPUSA’s right in
terms of s 189 of the LRA. The labour court’s finding in this respect was thus correct.

As to substantive fairness the LAC held that since UPUSA had not agreed to FIFO as a
selection criterion, the employer could only use FIFO if FIFO was a fair and objective

The court held, based on examples that it referred to, that FIFO could not be said to be a
fair and objective criterion as it was easily open to abuse. The LAC further held that FIFO
was a very strange way to “reward” those employees who had shown loyalty to the
employer over many years. As such the dismissal of the employees was substantively
unfair as well. As to the labour court’s order of reinstatement the LAC held that once the
employees were back at work the employer might be justified in embarking upon a
retrenchment exercise afresh, if a need therefore still existed, which might then result in
other employees being dismissed. This was necessary in order to secure the reversal of
the injustice which occurred when long serving employees were selected for retrenchment.
The employer also pointed out that since the labour court handed down its judgment there
had been a change of ownership of the business.

The LAC held that when it had to decide an appeal it was required to decide the matter in
the same way as the labour court ought to have decided it at the time it did and on the
basis of what was before the labour court at the time. Generally, in appeal proceedings
the LAC could not take into account events that occurred after the labour court had given
its judgment.

In the result, the appeal was dismissed, with costs.

December 2009

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