South Africa: Labour Court

Kynoch Feeds (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (J829/97) [1997] ZALC 15 (15 December 1997)

REVELAS J

[1] This is an application for a review of an arbitration award dated 25 August 1997 made by a commissioner (“the second respondent”) appointed by the Commission for Conciliation, Mediation and Arbitration ( hereafter “CCMA” or “the first respondent”) in favour of the third respondent. The application was brought in terms of section 158(1)(g) as well as section 145 of the Labour Relations Act 66 of 1995 (hereafter “the Act”).

[2] The facts which gave rise to the arbitration before the second respondent were

essentially the following:

[3] The third respondent had been employed by the applicant as an Engineering Foreman at its Kimberley plant. On 1 November 1997 the third respondent commenced employment with a company called Kynoch Fertilizer (Pty) Ltd (Kynoch Fertilizer) from which he resigned on 2 December 1997. It is common cause that the applicant and the company, Kynoch Fertilizer, are separate companies and subsidiaries of a company named AECI Ltd.

[4] During February 1996, the applicant embarked upon a rationalisation programme which involved several retrenchments. The third respondent’s employment position was also discussed during the rationalisation programme. During the discussions which took place between the applicant’s management and the third respondent, certain important points were made and the third respondent requested the applicant in a memorandum dated 23 February 1996 to confirm the points in question, in writing. The relevant part of the memorandum, where the third respondent sought confirmation, of the points discussed, reads as follows:

“(4) I was under no obligation to accept a transfer to another factory within the group.

In the event of my declining an offer for a transfer (as in 4), that I still qualify for the retrenchment package and pension (re-calculated to include from Feb 29^th to eventual termination of my employment in Kimberley ).”

[5] The applicant responded to the third respondent’s memorandum, confirming in a letter dated 8 March 1996, the points set out in the third respondent’s memorandum. The relevant part of this letter reads as follows:

“(3) If we are unsuccessful in your re(-)deployment you will receive the package.

(4) You will have the option of re(-)deployment vs package.

(5) You will be offered (if possible) a similar position ( Job Grade) or if not the Company will consult with you.”

[6] It is common cause that the third respondent assisted with the winding up of the applicant between February and June 1996. The Applicant stated that the third respondent assisted therewith until November 1996. On 19 June 1997 the applicant wrote a letter to the third respondent advising him that his position would become redundant with effect from 31 July 1996. The third respondent was advised in this letter of certain retrenchment benefits which would be applicable. He was informed that his services would terminate on 31 July 1996 unless efforts to re-deploy him were successful, in which event he would be advised in writing.

[7] On 2 July 1996, Kynoch Fertilizer sent the third respondent a letter in terms of which he was offered the position of “ Engineering Foreman/Electrician (Grade 6)” in the production department of its Umbogintwini Factory as from 1 November 1996 with an increased salary, which was further increased at a later stage. The letter set out some of the terms and conditions of employment and the third respondent was requested to confirm before 8 July 1996 whether he accepted the offer. He was also congratulated on his new appointment.

[8] In its offer, Kynoch Fertilizer informed the third respondent that it would provide initial board and lodging expenses until he secured his own accommodation in Umbogintwini. The company would provide these expenses for a period not exceeding one month from the date of his arrival. Prior to his accepting the offer, the third respondent, informed the applicant in a letter dated 19 August 1996, inter alia that his family would only leave Kimberley in December 1996 and in view thereof, wished to know from what point in time the offer in respect of initial board and lodging expenses would be effective. The aforesaid question, and other questions were answered by the applicant in a letter dated 10 August 1996. It appears that the third respondent finally accepted the offer of Kynoch Fertilizer on 30 August 1996 when he signed the letter containing the offer. A copy of this letter is found on page 50 of the record.

[9] On 2 December 1996 the applicant resigned from his employment at Kynoch Fertilizer “due to personal/domestics reasons”. His resignation was addressed to the applicant. In his letter he stated that he still qualified for a retrenchment package in terms of “company policy” as he applied for it within three months of a “re(-)deployment/transfer”.

[10] According to the third respondent, the main reason for his resignation was that he had difficulty in finding his wife a transfer from her employment position in Kimberley to a position in Durban or elsewhere, close to Umbogintwini. The third respondent contended that it was always his intention to accept the offer of new employment with Kynoch Fertilizer, subject to his wife finding new employment. The aforesaid submission was part of his case before the second respondent.

[11] On 18 December 1996 the applicant wrote to the third respondent stating that a retrenchment package was not applicable to him and he was to review his decision to resign from the employment of Kynoch Fertilizer. In its letter the applicant also made a few suggestions as to how the third respondent could be assisted with his relocation problems.

[12] The dispute between the applicant and the third respondent was originally referred to a Conciliation Board which lapsed as a result of the fact that the parties failed to meet and that no application for an extension of time had been made in terms of the relevant provisions of the Labour Relations Act 28 of 1956 ( hereafter “the 1956 Act”). The third respondent then referred the dispute to the first respondent in terms of section 196(6) of the Act. At the arbitration hearing the applicant did not object to the jurisdiction of the first respondent.

[13] Since conciliation failed, the matter was referred to arbitration before the second respondent. The arbitration hearing took place on 12 August 1997 at the offices of the first respondent in Kimberley. The third respondent was represented by an attorney and the applicant was represented by its Human Resources Manager, who was assisted by another member of management. The issue in dispute which the second respondent had to decide, was whether the third respondent was entitled to the retrenchment benefits, as computed and agreed upon by the parties, being the amount of R70 470,48. The decision was to be based on the oral and documentary evidence to be led and the arguments to be presented before the him. The third respondent handed up a statement of case and also gave oral evidence. However, part of his case was explained by his attorney and upon a proper reading of the arbitration award, it appears that his attorney also gave evidence. The applicant did not lead any witnesses under oath but explained certain aspects arising from the documents handed up by the parties which were not in dispute. The third respondent also handed up a statement of case. It was the third respondent’s contention that the applicant had misled him into believing that he was merely being transferred and would still be employed by the applicant. He stated that he only realised that the applicant and Kynoch Fertilizer were two separate companies when his attorney pointed it out to him. He had always believed that he was dealing with the same company. He contended that the applicant retained his services on the one hand and transferred him to Kynoch Fertilizer on the other hand, in an attempt to avoid paying him a retrenchment package. He also submitted that he became legally entitled to a retrenchment package on 31 July 1996 which was the date alleged by him, to be the date upon which his services were terminated.

[14] The findings of the second respondent

The second respondent found the following;

(a) He had the necessary jurisdiction to arbitrate the dispute since it only arose after 2 December 1996, when section 196(9) of the Act was in force,

(b) No offer of alternative employment was made to and accepted by the

third respondent on or before 31 July 1996,

100. A new offer of employment was only made with effect from 1 November 1996, five months later,

(d)The third respondent’s employment with the applicant terminated on 31 July 1996,

(e) The third respondent was retained to assist in the winding up operations and the status of his employment became informal and limited to assistance in the winding up,

(f) The third respondent was appointed de novo as from 1 November 1996,

(g) There was no transfer of the third respondent’s employment,

(h) The AECI operations manual setting out the retrenchment guidelines and the AECI company policy was ever put before the second respondent although it was central as to whether the third respondent was entitled to retrenchment benefits,

(i) The agreed severance benefits were due and owing when the third respondent’s employment was terminated on 31 July 1996,

(j) The applicant’s refusal to pay severance benefits to the third respondent was an unfair labour practice.

[15] Jurisdiction

The first ground of review was that the second respondent had no jurisdiction to arbitrate the dispute referred to the first respondent.

[16] It was submitted on behalf of the applicant that the dispute to establish a Conciliation Board was not lawfully set aside and therefore the dispute forming the basis thereof, had to be dealt within the terms of the 1956 Act. It was argued that the fact that the applicant did not object to the jurisdiction of the first respondent, was not relevant since the first and second respondents had to establish for themselves mero motu that they have jurisdiction to entertain any dispute referred to them, either for conciliation or arbitration. It was further contended in this regard, that in the event of the 1956 Act not being applicable then the third respondent failed to refer his alleged dispute to the first respondent within the 30-day time limit provided for in terms of section 191 of the Act. It was also argued that the second respondent was not empowered to consider the dispute while the previous dispute on the same issue remained current and pending.

[17] The relevant part of section 191 of the Act provides that where there is a dispute about the “fairness of a dismissal”, the dismissed employee may refer the dispute in writing within 30 days of the date of dismissal to a council, if the parties to the dispute fall within the registered scope of that council or to the CCMA if no council has jurisdiction. This section further stipulates that if the employee can show good cause, the council or Commission may permit the employee to refer the dispute after the 30-day time limit has expired.

[18] It was contended by the applicant that the dispute regarding the applicant’s entitlement to severance pay constituted a dispute about the fairness of a dismissal for operational requirements. Therefore, in terms of the provisions of section 191 of the Act, it had to be referred in writing within 30 days of the date of dismissal, which was not done. Further, it was common cause that no application or demonstration of good cause was made as required by the aforesaid section. The dispute was referred to the CCMA more than seven months after the dismissal. It was argued that there had therefore been a fatal non-compliance with the provisions of section 191 of the Act and the first and second respondents exceeded their powers under the Act by assuming jurisdiction in respect of this matter and in doing so also committed a gross irregularity.

[19] In opposing the argument raised by the applicant in respect of the jurisdictional issue, it was argued by the third respondent, that the provisions of sections 196(6)(b), 196(7) and 196(8) of the Act govern the referral of a dispute concerning entitlement to severance pay and that none of these provisions impose a time limit upon such a referral. It was argued that although the provisions of section 191 of the Act do require referrals to be made within 30 days of the date of dismissal, the time limit stipulated in the aforesaid section is only applicable to dismissal disputes and not to disputes about severance pay. Accordingly, it was argued, that the third respondent’s referral was made under section 196 of the Act and the provisions of section 191 of the Act did not apply. It was also contended that the establishment of a Conciliation Board under the 1956 Act was irrelevant if the dispute in question was governed by the Act and the referral of that dispute in fact complied with section 196 of the Act.

[20] Section 196(6) of the Act provides:

“if there is a dispute only about the entitlement to severance pay in terms of this section, the employee may refer the dispute in writing to:

(a) a council, if the parties to the dispute fall within the registered scope of that council; or

(b) the Commission, if no council has jurisdiction”

[21] It appears from this section that there is no time limit as to when a dispute such as the one in question should be referred to a Commission or council.

[22] The dispute in question is not about a dismissal as envisaged by section 191 of the Act. It is an issue governed by section 196 of the Act, as it relates to the entitlement to severance pay. Therefore, the failure to adhere to the time limit stipulated in section 191 of the Act, cannot be relied upon as a ground for review.

[23] The second respondent was correct in accepting that the dispute between the parties arose on 2 December 1996 when the Act was in force. This was the first time that the third respondent, in my view, gave an indication that he was in dispute with the applicant about matters surrounding his employment position and raised the question of a retrenchment package.

[24] It is irrelevant in my view, that a Conciliation Board was established under the 1956 Act. The Conciliation Board was abandoned. Since the actual dispute between the parties arose on 2 December 1996, there was no obligation to have the dispute arbitrated under the 1956 Act. I therefore agree with counsel for the respondent that there is no basis upon which the second respondent committed an irregularity of any nature in assuming jurisdiction to arbitrate the matter.

[25] Other Grounds of Review

Apart from the objections raised to jurisdiction it was also argued by the applicant that the second respondent erred and committed a gross irregularity in failing to find that the provisions of section 196(3) of the act applied and that the third respondent was not entitled to severance pay because he was successfully re-deployed.

[26] The applicant also contended that the findings of the second respondent were unsupported by the evidence and indicated a failure on the part of the second respondent to take into account relevant considerations and to apply his mind in accordance with the behests of the Act and that the second respondent arrived at a decision which was grossly unreasonable and further, that the process used in arriving at his conclusions was grossly irregular.

[27] The third respondent’s representative opposed the above grounds in the application to review the arbitration award on the following grounds:

[28] Section 158 (1)(g) of the Act did not apply to the review of arbitration awards and does not provide for grounds, additional to those specified in section 145 of the Act, upon which arbitration awards may be reviewed. The intention, purpose and effect of section 158(1)(g) read in the context of the Act, particularly read with section 145 thereof had to be, to give the Labour Court the equivalent of common law powers of review in respect of administrative acts or functions performed by persons under the act and that arbitration does not constitute an administrative function under the Act. If the intention and purpose behind section 158(1)(g) of the Act was to give the Labour Court the equivalent of common law powers of review in respect of arbitration awards, then the promulgation of section 145 of the Act which expressly provides for review of arbitration awards, made no sense. The award made by the second respondent does not fall foul of the grounds of review provided for in section 145 of the Act, nor of the grounds in section 158(1)(g) of the Act, if found applicable.

[29] The two sections in the Act which are applicable to reviews, namely, section 158 (1)(g) and section 145 of the Act, are confusing in their applicability to review of arbitration awards and have to be interpreted by the Court. The Labour Appeal Court has so far, not pronounced on this difficult question.

[30] In terms of section 145 of the Act, to review an arbitration award, a party has to show a defect in the proceedings such as, that the commissioner committed a misconduct in relation to his/her duties as an arbitrator, or committed a gross irregularity during the proceedings, or exceeded his/her powers. This strict test contained in section 145 narrows the scope for the review of arbitration awards of commissioners under the auspices of the CCMA considerably.

[31] On the other hand, section 158(1)(g) states clearly that “despite section 145” the court may review the performance or purported performance of any function provided for in the Act or any act or omission of that person or body in terms of the Act on any grounds that are permissible in law. This would include the inherent powers of review, equal to the common law powers of review of the High Court.

[32] Common Law Review

The review of proceedings of quasi-judicial bodies (review under common law) is based on the fact that it is not necessary for administrative bodies to conduct their proceedings in the strict legal manner required by an inferior Court, but they must necessarily do so in a manner which will be just to all parties. If they do not, superior Courts will intervene and ensure that natural justice is done. This is a right inherent in a superior Court which has jurisdiction to entertain all causes arising within its area of jurisdiction. It is not dependant upon the creation of a review procedure by the legislature. (Section 19(1)(a) read with section 19(2)(b) of the Supreme Court Act 59 of 1959 (hereafter “the Supreme Court Act”).Harms: Civil Procedure in the Supreme Court (13^h Issue) page 479; Johannesburg Consolidated Investment Co v Johannesburg Town Council 1903 T S 111 ). The Labour Court has exclusive review jurisdiction relating to labour matters in terms of section 157 of the Act read with section 151 thereof. In my view the Labour Court in exercising its review jurisdiction should adopt principles similar to those set down by the High Court. These principles are set out herein below (paragraphs 33-38).

[33] “Gross unreasonableness” has been held to constitute a ground for review by the Court where it amounts to proof that the person on whom the discretion was conferred did not apply his/her mind to the matter. (Union Government (Minister of Mines & Industries) v Union Steel Corporation 1928 SA at 220; Clan Transport Co (Pty) Ltd v Rhodesia Railways & Another 1956(3) SA 480 (FFC) at 488A - 489G; Administrator Transvaal & The Firs Investments (Pty) Ltd v Johannesburg City Council 1971 (1) SA 57 (A) at 80).

[34] “Unreasonableness” and “gross unreasonableness” were until recently considered not to be grounds for review. ( Jorge v Minister van Ekonomiese Sake & Tegnologie & ‘n Ander 1991(1) SA 4549 (T) at

552 B - D ).

[35] In the case of Paper Printing Wood & Allied Workers Union v Pienaar NO & Others at 638 G - 639 B Botha JA, in considering the powers of review of the Supreme Court under the common law and under section 24(1) of the Supreme Court Act, held at 638 H : “Can this be brought home under paragraph (c) of section 24 (1)- ‘gross irregularity in the proceedings ’ ? That expression is not confined to the defects in te procedure as such. It covers the case where the decision-maker through an error of law misconceives the nature of is functions and thus fails to apply his mind to the true issues in the matter required by statute, with the result that the aggrieved party is in that respect denied a fair hearing (see, for example, Goldfields Investments Ltd and Another v City Council of Johannesburg and Another 1938 TPD 551; Visser v Estate Collins 1952 (2) SA 546(C)). That being a reviewable irregularity under section 24(1)(c), it may be argued ( I put it no higher) that a failure properly to apply the mind to the issues due to a reason other than an error of law, but found to have occurred by way of inference from the gross unreasonableness of the decision, could also be brought home under the section. Then take another example: where the decision itself cannot be categorised as grossly unreasonable, but where it appears that the decision-maker took into account irrelevant considerations or ignored relevant ones, and it is shown that in this respect he failed properly to apply his mind to the matter. The decision can be set aside under the court’s common-law power of review (see, for example, Jacobs en ‘n Ander v Waks en Andere [1991] ZASCA 152; 1992 (1) SA 521 (A) at 549 H - 551C).”

[36] It has also been held that where a decision-maker takes a decision unsupported by any evidence or by evidence which is insufficient to reasonably justify the decision arrived at, or where the decision-maker ignores uncontradicted evidence which he was obliged to reflect on, the decisions arrived at would be set aside. (See W C Greyling & Erasmus (Pty) Ltd v Johannesburg Local Road Transportation Board & Others 1982 (4) SA 427 (A) and SA Freight Consolidators (Pty) Ltd v Chairman National Transport Commission & Another 1988 (3) SA 45(W) at 518 A - E).

[37] The judgements in Standard Bank of Bophuthatswana Ltd v Reyolds NO and Others 1995 (3) BCLR 305 (B) and Hira and Another v Booysen and Another 1992 (4) SA 69 (A) have settled the issue where the interpretation of a statutory test or principle is not left to the sole jurisdiction of the decision-maker, and the decision is reviewable due to a lack of facts that reasonably justify the decision. In the Standard Bank matter the Court referred to the decision of the Appellate Division of the Supreme Court in the case of Theron v Ring van Wellington van die NG Sendingkerk in Suid-Afrika 1976 (2) SA 1(A) and described how, since that judgement, the ambit of the common law power of judicial review had been widened. “ Having regard to certain of the aforegoing decisions, there is some authority that where the decision of a decision-maker is supported by no evidence, or where undisputed evidence which he/she is bound to consider, is ignored, the decision taken, can be set aside as invalid” (at p 323A-B). The Court also referred to tests rights by Courts under the (interim) Constitution Act 200 of 1993 and rejected the more narrow “gross unreasonableness test” in favour of the “modern approach to judicial review” or the less restrictive test of “unreasonableness” (at 325C-H).

[38] Our Courts have, as seen above, recently been adopting the less stringent test of “unreasonableness”. ( See also Johannesburg Stock Exchange & Another v Witwatersrand Nigel Ltd & Another 1988 (3) SA 132 (A) at 152 A - E, Hira & Another v Booysen & Another 1992 (4) SA 69 (A) at 84 F - J).

[39] In a recent decision of the Labour Court in the matter of Edgars Stores Ltd v Director for Commission for Conciliation, Mediation and Arbitration & Others under case number P64/97 (dated 1 December 1997), I adopted the approach that section 158(1)(g) of the Act was only applicable to administrative acts (in terms of the Act), other than arbitrators’ awards. I found that only section 145 of the Act would apply to awards made by commissioners appointed by the CCMA. In that matter I accepted that acts, other than arbitration awards, could be reviewed on the wider basis of unreasonableness in accordance with the latest approach of the High Court and the Constitutional Court. In other words, I found that section 158(1)(g) of the Act does not apply to arbitration. I subsequently found that the review of arbitration awards of the CCMA should be on the narrow grounds provided for in section 145 of the Act which should constitute the only grounds of review in terms of which the Labour Court could set aside arbitration awards of commissioners appointed by the CCMA. I adopted an approach similar to that argued by the respondent’s counsel in this matter.

[40] I was to a great extent led in the Edgars Stores matter, by the decision of Goldstone J in the matter of Amalgamated Clothing and Textile Workers Union v Veldspun Ltd 1994(1) SA 162 (A). The Appellate Division in reviewing arbitration proceedings in terms of the Arbitration Act 42 of 1965 (“the Arbitration Act”), held that where parties agree to refer a matter to arbitration, they implicitly, if not explicitly, abandon the right to litigate in Courts of law and they accept that they will be finally bound by the decision of the arbitrator. A very strict test to review such awards was endorsed. There are sound reasons for following that view, particularly in the field of labour where it is advantageous to all parties and in the interests of good labour relations to have a binding decision made finally and expeditiously. In addition I took into account that Labour Court Judges are required to interpret the Act in order to give effect to the primary objects of the Act (section 3(a)) of the Act. Section 1(d)(iv) of the Act stipulates that it is the purpose of the Act “to promote the effective resolution of labour disputes.”

[41] One of the strongest arguments in favour of the approach adopted in the Veldspun matter (supra paragraph 40), was that the review of arbitration awards on a generous basis, such as set out in section 158 (1) (g) of the Act, would have the effect that the Labour Court would ultimately decide the disputes referred to the CCMA and do away with all of the advantages of those arbitration proceedings, such as the expeditious resolution of disputes. That was also the case for the third respondent in this matter. These considerations I believe, are essentially policy considerations which were considered by the drafters of the Act when section 145 of the Act was introduced.

[42] Whereas the considerations expressed in the Veldspun matter (supra paragraph 40) are with respect very valid, it must be bourne in mind that those views were expressed in favour of arbitrations under the Arbitration Act, where parties agree upon the arbitrator and the arbitration process itself. The arbitration process is not imposed on parties by statute as in the case of arbitration in terms of the Act. In my view that is an extremely important consideration in favour of the review of arbitrations on a wider, rather than narrower basis.

[43] Since the decision in the Edgars Stores matter (supra paragraph 39), I have now had the opportunity in this matter to listen to further argument on the subject of review of arbitrators awards, and upon serious reflection I believe that I was wrong in adopting the approach that section 145 of the Act was the only basis upon which party could rely on, in bringing or opposing an application for review in the Labour Court.

[44] Section 3 of the Act calls upon any person applying the Act, (and this would include a Judge of the Labour Court), to interpret its provisions “in compliance with the Constitution”. Section 39(2) of the Constitution, Act 108 of 1996 (“the Constitution”) states that when “interpreting any legislation, and when developing the common law...every Court (this would include the Labour Court)... must promote the spirit, purport and objects of the Bill of Rights. ”

[45] Section 33(1) of the Constitution ensures the right to administrative action that is reasonable and procedurally fair. Item 23(2)(b)(d) of Schedule 6 to the Constitution (part of the Bill of Rights) expressly protects persons’ right to “administrative action which is justifiable in relation to the reasons given for it where any of their rights is affected or threatened.”

[46] Arbitrations under the auspices of the CCMA constitute administrative action. Although, judicial in nature, they are not functions performed by a Court. They originate from the CCMA, which is an administrative body. The CCMA is not an inferior court as defined by section 1 of the Supreme Court Act. It is rather a body or tribunal vested with specific statutory powers. Therefore its arbitrations are covered by section 158(1)(g) of the Act. This view of course has the result that section 145 of the Act has no application, since the Act, as shown above, clearly requires it to be interpreted in favour of the Constitution which specifically provides for a more generous basis upon which arbitration awards may be reviewed.

[47] An interpretation of the Act, as to the applicability of sections 145 and 158(1)(g), has to be, in my view, in favour of the Constitution. In this matter I wish to follow that approach because the Act requires me to interpret its provisions in terms of the Constitution and that seems to be the route followed by the High Court. The importance of the Constitution can never be outweighed by the policy considerations which lend support to the arguments in favour of a stricter test for review.

[48] In so far as these policy considerations are concerned,(in favour of the strict test in section 145 of the Act), there are also cogent arguments, also based on policy considerations, as to why section 158(1)(g) of the Act should be applicable to review rather than section 145 of the Act. One of these arguments is that, although when permitting for a wider basis for the review of arbitration awards, it may result in more interference with the awards of commissioners, it would be very beneficial for all interested parties if there were to develop a strong body of guidelines and principles to be followed by commissioners of the CCMA. This could also serve the purpose of an educational process.

[49] Conclusion

The second respondent in this matter found that the third respondent’s services were terminated on 31 July 1996 and that the applicant did not make an offer of alternative employment to the third respondent and he did not accept such an offer on 31 July 1996. He also found that a new offer of employment was only made as from 1 November 1996 and on this day the third respondent was appointed de novo.

[50] It is clear from the documentation which was before the second respondent, that both the applicant and the third respondent put it in writing that, in the event of the third respondent being “successfully” re-deployed, he would not be paid a retrenchment package. The third respondent was in fact re-deployed when he accepted the offer made to him by Kynoch Fertilizer. In order to accept the offer he was required to sign the letter containing the offer in duplicate before 8 July 1996. He did so on 30 August 1996, after making enquiries in writing which were answered. According to the evidence, the third respondent and the applicant negotiated the terms and conditions of his new employment. He visited Umbogintwini to investigate the situation before he accepted the offer. Because of the negotiations, he didn’t accept the position before 8 July 1996. These facts were before the second respondent and were ignored. Not once during his queries which he put into writing did the third respondent make mention of a condition that if his wife did not find alternative employment the offer would not be accepted by him. Where an employer finds alternative employment for an employee to avoid retrenchment,(which he is required to do by section 189 of the Act), no agreement between them regarding such employment could be subject to the employee’s wife finding employment as well, where it was not expressly agreed to.

[51] The second respondent’s finding that the third respondent was only offered new employment with Kynoch Fertilizer on 1 November 1996 is incorrect. The third respondent accepted the position on 30 August 1996, by signing a copy of the written offer to him. That was the evidence.

[52] The fact that the actual offer was made on 2 July, two days after the effective date of retrenchment, if one was to occur, does not alter the fact that the third respondent was not dismissed. He took up new employment, by an agreement

which he negotiated with the applicant. I therefore accept the argument that the parties tacitly agreed to suspend termination of employment until the offer was accepted or rejected.

[53] Section 196(3) reads as follows:

“An employee who unreasonably refuses to accept the employers offer of alternative employment with that employer or any other employer is not entitled to severance pay in terms of subsection (1).”

[54] Section 196(3), in my view does not mean that where alternative employment is accepted by the employee, that the employee automatically becomes entitled to severance pay in the absence of an unreasonable refusal. The third respondent was re-deployed by agreement, to avoid the situation of being retrenched.

[55] The Act also provides that where an employee is “dismissed for reasons based on the employers operational requirements,” the employer is obliged to pay the employee severance pay in terms of section 196(1). The Act defines the word “dismissal”. It means the termination of a contract of employment by the employer as set out in section 186(a). I therefore agree with counsel for the applicant, that an agreement between an employer and an employee to terminate a contract of employment, is not a “dismissal” as defined by section 186 (a) or in any other sense. The right to severance pay created by section 196(1) is not absolute. This view was also held by the Labour Appeal Court in Young v Lifegro 1991 (12) ILJ 1256 (LAC). Where the employer offers the employee alternative employment with “that employer or any other employer”(section 196(3) of the Act) and that offer is refused, the employee is not entitled to severance pay. In other words, there is no right to severance pay simply because an employee is dismissed for operational requirements. That right only exists if no reasonable alternative employment with that employer or another employee is offered. In this matter such an offer was indeed made and accepted. By accepting the new position, the third respondent was, no longer entitled to a retrenchment package. If retrenchment is avoided by the employee’s acceptance of a new position of employment, the employer is not obliged to pay the employee a retrenchment package.

[56] It was common cause that the third respondent remained with the applicant after 31 July 1996 on precisely the same pay benefits as were current prior to that date. There was therefore nothing in the evidence before the second respondent to support a suggestion that the status of the third respondent’s job had become informal and limited, as found by the second respondent.

[57] The second respondent should have found that the parties reached an agreement on the on the third respondent’s re-deployment which had the result that the applicant was no longer obliged to pay the third respondent a retrenchment package. The Act does not require the applicant to pay a severance or retrenchment package in such circumstances. There is simply no evidence to support the second respondent’s finding that the severance benefits were due and owing on 31 July 1996. In view of the agreement which they entered into it is irrelevant whether the AECI manual was part of the evidence. The parties made their own arrangement to avoid retrenchment, therefore the AECI retrenchment guidelines were not “central” to the question of retrenchment benefits as was found by the second respondent.

[58] The second respondent’s findings were in my view unsupported by substantial evidence. They are based on erroneous inferences of fact and are not reasonably justifiable in terms of the evidence produced. The second respondent also did not take proper account of the relevant provisions of the Act.

[59] Consequently the award of the second respondent warrants interference in terms of section 158 (1)(g) of the Act and needs to be set aside in its entirety.

[60] For all the aforesaid reasons the arbitration award dated 25 August 1997 was set aside and the third respondent was ordered to pay the costs of the application.

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E REVELAS