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JOHNSON & JOHNSON (PTY) LTD v CHEMICAL WORKERS INDUSTRIAL UNION

Retrenchment: fairness of dismissal

Tue, 06 Nov 2007 08:40

Issue:

The Employer informed that union that it was contemplating retrenchments, and proceeded to retrench a number of employees. The LAC held that an employer was entitled to retrench if it complied with the formal requirements in s 189. The retrenchment was procedurally unfair, but when it tried to cure the unfairness, the union unreasonably refused to engage in the process. As a result the employees were not entitled to compensation.

Summary of Facts:

The employer informed the union that it was contemplating retrenchment of 20 employees. The parties agreed that an independent 3rd party would report on the financial status of the employer.

After this report became available, the union contended that there was no need for retrenchment. The employer decided to proceed with the retrenchments nevertheless.

After a referral to the CCMA, the employer invited the union to offer alternatives to the dismissals which it would consider, but the union did not respond to this invitation and neither did any of the employees.

The LC held that the retrenchments were substantively fair, but procedurally unfair as there had been no consultation on the selection criteria to be applied or the severance package offered to the retrenched employees.

The employer claimed in the LAC that the union unreasonably refused to take part in the consultation process.

Summary of Judgement:

The LAC held that the ultimate purpose of s 189 was to achieve a joint consensus seeking process. The section implicitly recognised the employer's right to dismiss for operational reasons, but only if a fair process aimed at achieving consensus had failed.

The court held that where there was procedural unfairness in a retrenchment, the court had a discretion to award compensation or not, and if it did award compensation, it had to follow the formula as set out in s 194(1), which made provision for an amount equal to the lost earnings of the employee from the date of dismissal to the date of the final adjudication of the matter, making allowances for any delays caused in the referral of the matter by the employee. The final date would be date when the hearing was finalised and not the date on which judgement/the award was handed down.

In this matter there was no consultation regarding the selection criteria or the severance packages payable to the employees. However, when the union referred the matter to the CCMA, the employer indicated that it was prepared to reconsider the retrenchment of the female employees if they were prepared to accept positions that had been allocated to male employees and if they could demonstrate that they were capable of performing the duties associated with these positions.

The union and employees failed to respond to this offer and as a result the court held that there was a novus actus intervieniens (intervening action) which interrupted the causality between the selection criteria and the unfairness of the dismissals.

The wrong done to the employees, namely the loss of a right to proper procedure, lasted for about four days. In addition the employees received a generous retrenchment package.

The effect in this case of awarding compensation under s 194(1) would be to reward the union and the employees for their unreasonable obstinacy, echoing their earlier refusal to discuss anything except the need to retrench.

As a result the court elected not to award any compensation to the employees. The appeal was upheld with costs.