Procedural unfairness in retrenchments: The Jurisdiction of the Labour Court

In this matter, the employer embarked on a retrenchment exercise that ended with the dismissal of nine employees based on the employer's operational requirements. The employees challenged the procedural and substantive fairness of their dismissals and referred it to the CCMA for conciliation. After an unsuccessful conciliation, the employees instituted an application in terms of section 189A(13) for an order reinstating them until the employer had complied with a fair procedure in terms of section 189A(13)(c) or alternatively for the award of compensation in terms of section 189A(13)(d). The employees also instituted an application in terms of section 191(5)(b)(ii) of the LRA challenging the fairness of their dismissals. These applications were consolidated by the Labour Court (LC). 

By the time the matter reached the CC, the employer was appealing the Labour Appeal Court's (LAC) order reinstating four employees whose termination of employment was determined to be substantively unfair. In respect of the other employees, the LAC set aside the LC's ruling that found these dismissals to be procedurally unfair and awarded compensation. The reason for this was that the LC lacks jurisdiction to adjudicate disputes regarding procedural fairness in large scale retrenchments in terms of section 189A(18) of the LRA.  The employees cross-appealed this part of the LAC's decision and the reversal of the costs order by the LAC in favour of the employees.

In this alert, we focus on the core component of the judgment which deals with the jurisdiction of the LC to determine the procedural fairness of a dismissal in terms of large scale retrenchments. Based on a series of cases, the law developed in a way that read section 189A(13) and section 189(18) to mean that the Labour Court is deprived of the jurisdiction to determine procedural fairness in retrenchments outside of early or immediate correction of procedural defects to get the retrenchment process back on track as specified in terms of section 189A(13), which provides the following:

189A (13) If an employer does not comply with a fair procedure, a consulting party may approach the Labour Court by way of an application for an order –

(a)          compelling the employer to comply with a fair procedure;

(b)          interdicting or restraining the employer from dismissing an employee prior to complying with a fair procedure;

(c)          directing the employer to reinstate an employee until it has complied with a fair procedure;

(d)          make an award of compensation, if an order in terms of paragraphs (a) to (c) is not appropriate.

The CC reasoned that section 189A(13) has two purposes. The primary purpose relates to orders contemplated in paragraphs (a) to (c) above. This is to ensure that a fair retrenchment process is afforded to the employees and would be granted at the start or during the retrenchment process or where dismissal is imminent or possibly very soon after a dismissal has been effected.

The secondary purpose of the section is to hold the employer accountable and to compensate the employees for the infringement by the employer of their rights not to be dismissed in a procedurally unfair manner in circumstances where the primary purpose of the section is no longer appropriate.

In short, the CC found that there is no fundamental difference in purpose between an order of compensation under section 189A(13)(d) and an order of compensation granted under the LRA for procedural unfairness in relation to dismissals that were not as a result of retrenchments. In this way, section 189A(13) is a standalone remedy with the following conditions: (1) the remedy of compensation is only valid where reinstatement in terms of 189A(a), (b), or (c) is not appropriate; and (2) employees must comply with the 30-day time limit imposed by section 189A(17) or obtain condonation for non-compliance with that time limit if they fail to comply with it.

The previous position which read section 189A(13)(d) as contingent upon section 189A(13)(a), (b), and (c), in a way where the option of compensation for procedural unfairness is not a remedy that is available well after dismissals have been effected, was rejected by the CC.

The CC resolved the tension between this standalone reading of section 189A(13)(d) and section 189A(18) – which states that the Labour Court has no jurisdiction to adjudicate a dispute about the procedural fairness of a dismissal for operational requirements to which section 189A applies – by interpreting this limitation as not categorical but rather as indicative of the special procedure and special remedies  set out in section 189A(13) for such disputes.

The Constitutional Court set aside the LAC's order and reinstated the Labour Court's order that ordered reinstatement of the employees whose dismissals were substantively unfair and compensation for those employees whose dismissals were procedurally unfair.

Click here to read the CC judgment.