Landmark ConCourt ruling on right to fair procedure during retrenchments

Image source: Mohd Khairil – 123RF.com

Regenesys Management, a business school providing advanced business education in South Africa and beyond, faced a legal challenge from former employees who were retrenched in 2015. The retrenchments led to the employees filing for reinstatement and procedural fairness under sections 191(5)(b)(ii) and 189A(13) of the LRA.

The Labour Court (LC) consolidated the employees’ applications and found the dismissals both substantively (for some) and procedurally unfair (for all), ordering their retrospective reinstatement. It was either common cause or undisputed that Regenesys had not followed a fair procedure.

Appeal

Regenesys appealed to the LAC, and challenged the conclusions reached by the Labour Court that the dismissals of certain specified employees were substantively unfair and that it had jurisdiction to determine whether the dismissals of the employees were procedurally unfair.

The LAC upheld the substantive unfairness of the dismissals but ruled that the LC lacked jurisdiction to adjudicate procedural fairness due to section 189A(18) of the LRA. However, in respect of substantive fairness, the LAC found no basis to overturn the LC’s decision.

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ConCourt

Regenesys applied to the Constitutional Court for leave to appeal against the LAC’s judgment, which upheld the LC's conclusions of substantive unfairness and ordered reinstatement and compensation. The cross-appeal applicants sought to challenge the LAC's ruling that the LC had no jurisdiction to determine procedural fairness.

The Constitutional Court granted leave to appeal and cross-appeal, affirming its jurisdiction and setting aside the LAC’s decision that the LC lacked jurisdiction in procedural fairness disputes.

A key aspect of the judgment dealt with the jurisdiction of the LC to determine the procedural fairness of a dismissal in terms of large scale retrenchments.

The Court traversed the historical case law that led to the law developing in a way that read section 189A(13) and section 189(18) to mean that the Labour Court did not have jurisdiction to determine procedural fairness in retrenchments outside of remedies designed to bring the retrenchment process back on track as specified in terms of section 189A(13).

The Court then went on to do an in depth analysis of the abovementioned sections and in arriving at its judgment, interpreted the limitation in 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 - as indicative of the special procedure and special remedies set out in section 189A(13).

The matter reaffirms employee’s rights to claim compensation for procedural unfairness during retrenchment processes and no doubt has a significant impact on retrenchment and the law associated therewith.

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Grant Wilkinson, director of Kirchmanns Inc, share some key takeaways from the Constitutional Court judgment.

• Retrospective reinstatement: The Constitutional Court upheld the LC’s decision to order retrospective reinstatement of the unfairly dismissed employees. This ruling confirms that employees subjected to procedural irregularities in retrenchment processes can be reinstated to their previous positions with backdated effect.
  
• Emphasis on fair procedures: The judgment underscores the necessity for employers to adhere strictly to fair procedures during retrenchments. This includes proper consultation processes, adequate notice, and meaningful engagement with affected employees. Employers failing to meet these standards risk procedural unfairness claims.
  
• Compensation for unfair dismissals: The decision also highlights that employees who suffer procedural unfairness are entitled to compensation, highlighting that employees should not be left without recourse when their rights are violated.
  
• Jurisdiction clarified: The judgment clearly deals with the balancing of s189A(18) and (13) and sets a precedent for future retrenchment proceedings as well as remedies should there be non-compliance.

According to Wilkinson: "The judgment sets a precedent for future cases involving procedural fairness and highlights the importance of fair procedures in employment disputes."