Changing Terms and Conditions – An Automatically Unfair Dismissal?

By Michael Maeso, Head of Employment Law

Employers often want to change the way they run their businesses and this often requires employees to accept a change to terms and conditions of employment. When agreement cannot be reached on the proposed change, employers face a dilemma on how to persuade employees to accept the change.

Section 187(1) (c) of the Labour Relations Act 66 of 1995 (“LRA”) deals with automatically unfair dismissals. When introduced, this section originally defined a dismissal as 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 them and their employer”.

This section has been carefully analysed by the courts. A well-known case, Frys Metals (Pty) Ltd v Numsa and others dealt with Frys need to amend its shift system to remain efficient. It consulted its workforce and unions and argued that the need to change the shifts was an operational requirement.  Those employees who did not accept the revised shift system were eventually dismissed. The union argued that the dismissals were contrary to the provisions of section 187(1) (c) as the dismissals were instituted to compel the employees to agree to Frys proposed shift change.

The court had to decide whether, in dismissing employees, Frys was exercising its right to dismiss for operational requirements or, if Frys was dismissing the employees to compel them to agree to a demand or a matter of mutual interest, in this case the proposed shift change. If the latter, the dismissals would violate the section and be automatically unfair.

If the purpose of a dismissal for operational requirements is to dismiss employees who do not meet business requirements and to hire new employees who do. The dismissal is final and the old employees are replaced. If the old employees had the option of having their dismissals withdrawn once they accepted the new shift system, then the dismissal is not final and must be for the purpose of compelling employees to accept the new shift system. These dismissals would be automatically unfair

The court concluded on the facts that purpose of the dismissals in the Frys matter was based on its operational requirements arising from the need to change the shift system. The dismissals were not unfair and did not violate section 187(1) (c) of the LRA.

Section 187(1) (c) was amended and an automatically unfair dismissal was re-defined as one that resulted due to:

“…a refusal by employees to accept a demand in respect of any matter of mutual interest
Between them and their employer”.

Once again, the section caught the attention of lawyers and unions. The question was whether the substitution of the word “compel” with “refusal”  in the section would prevent employers from changing terms and conditions of employment without reaching agreement and whether it changed the legal precedent set by Frys.

Recently, this question came before the court in NUMSA v Aveng Trident Steel (Pty) Ltd and Others. Aveng had experienced a decline in profitability and was required to restructure its operations in order to survive. Redrafted job descriptions and organisational structures were proposed to the workforce and the unions. Consultations with the trade union did not go well. Consensus could not be reached, and employees were retrenched. The unions argued that the alleged retrenchment was not the true reason for the dismissal as the jobs vacated by those retrenched were now performed by new employees. They argued that the true reason for the dismissal was because the employees refused to accept the new contracts of employment and, as a result, the dismissal was automatically unfair.

The court accepted that if the dismissal was due to the refusal to accept a demand then the dismissal would be automatically unfair. Following Frys Metals, the court had to determine the true reason for the dismissal and whether it was fair. This enquiry remains intact even after the amendments to section 187(1)(c). On the facts before the court, it was decided that the dismissals were for operational reasons and therefore not precluded by 187(1)(c).

The court concluded that the amendment to section 187(1)(c) was introduced to avoid the situation where an employer flexes the right to dismiss in a collective bargaining situation, for example during wage negotiations. If a change to terms and conditions is offered as an alternative to avoid retrenchment, the dominant reason for the dismissal is operational requirements. Any dismissal that follows cannot, as a result, be automatically unfair.

For Section 187(1)(c) to apply, there must be evidence of a demand, a refusal and the ensuing dismissal, objectively viewed, must be as a result of the refusal. In the retrenchment scenario where the restructured employment is offered as an alternative to retrenchment, it is an offer and not a demand.

The process that must be followed by employers to ensure that any proposal does not fall foul of section 187(1) (c) must be carefully considered and expert advice must be sought before engaging employees.

For more information on the above, please contact:

Michael Maeso, Head of Employment Law
maeso@wylie.co.za
+27 31 575 7207