IN THE LABOUR COURT OF SOUTH AFRICA
HELD IN JOHANNESBURG
CASE NOJS694/07

In the matter between:

SANDRA VISSER						APPLICANT

and

ATRONIC INTERNATIONAL Gmbh			RESPONDENT

JUDGEMENT

AC BASSON, J

[1]	 The Applicant (Ms. Sandra Visser) in this matter was a sales manager of the Respondent prior to her retrenchment which became effective at the end of July 2007.  The Respondent is Atronic International GmbH. The Respondent was a subsidiary of a German Company and carried on business in the gaming industry. It was common cause that the head office of the Respondent was in Germany. It was further not disputed that the Respondent only seized its operations in April 2008 merely a few months before these proceedings but almost a year after the Applicant was retrenched. The business of the Respondent was taken over by a certain Mr. Steward (“Steward”) who now operates the business as an independent distributor of the Atronic products. Steward was only able to take over the business in April 2008 as it was necessary to have obtained a license first. The Respondent thus continued to operate for more than a year after the Applicant was retrenched. It was further common cause that only the Applicant was retrenched in July 2007, although it was the case of the Respondent that all other employees were eventually retrenched. The Applicant was, however, the only one who was retrenched in July 2007.

The dispute
[2]	On 24 May 2007 the Respondent issued a notice of contemplated retrenchment to all employees in which it was stated that, due to international developments, the Board of Atronic International decided to close the South African office and appoint an independent distributor of the Atronic products in South Africa. It was stated that the Respondent therefore had no choice but to retrench the staff in South Africa. The Applicant was handed a letter of retrenchment effective 1 July 2007.

[3]	It was in dispute whether or not the Respondent had a valid reason for the dismissal of the Applicant and that there was a meaningful consultation process. 

Brief exposition of the facts
[4]	Two witnesses gave evidence on behalf of the Respondent. The first witness was Mr. Beckman (the managing director who is based in Germany). The second witness was Mr. Kruger a labour law attorney who essentially drove the retrenchment exercise on behalf of the Respondent. It was common cause that Beckman had no role to play in the actual retrenchment exercise. 
 
[5]	As Beckman was not involved in the actual retrenchment process he could only testify about the considerations that were taken into account by (the international) head office when the decision to close down the South African operations was taken. He could therefore not comment on the procedural fairness of the retrenchment. In brief, it was the evidence of Beckman that the company suffered a financial loss and save for 2004 and 2007 never broke even. In order to support the contention of financial losses, the Respondent introduced the financial statements for the years 2003 – 2006 all of which confirm that the Respondent operated at a loss. These statements were, however, never disclosed to the Applicant either prior to her retrenchment or during the meetings held with the Applicant prior to her retrenchment. It was also not disputed that the Applicant has never seen the financial statements. It was also not disputed that the Applicant only became aware of these statements when it was served on the Applicant’s attorney as part of the Respondent’s bundle. It is thus clear from the evidence that the Applicant was never privy to any of the information that prompted the Respondent to take a decision to retrench her.

[6]	 It was clear from the evidence of Beckman and from the cross examination of the Applicant that the Respondent tried to justify the operational rationale for the retrenchment ex post facto. In fact, it was common cause that the Applicant was confronted on 24 May 2007 with a final decision to the effect that head office had taken a decision to close down the business. The Applicant confirmed this in her evidence. Kruger, who was, as already pointed out, mandated to drive the retrenchment process on behalf of the Respondent, confirmed in his evidence that the decision to retrench had already been taken and that he merely had to inform the staff that the Respondent would close at the end of December 2007 (although it was common cause that the Respondent only closed in April 2008). In fact, Kruger was adamant that the decision to close was final when the meetings with the Applicant took place and also confirmed that the consultations on the closure would not have altered this decision that has already been taken. Kruger further expressly testified that the only issue up for discussion was the effect of the retrenchment and that of the retrenchment package. No other issue was therefore up for discussion. It was only the retrenchment package and nothing else. 

[7]	 The contemporaneous notes taken by the Applicant of the meeting of 31 May 2007 also confirm the Applicant’s version namely that retrenchment was a fait a complit and that severance was the only issue up for discussion. 

[8]	Extensive evidence was led about what was said at the three meetings that were held. The contemporaneous notes of the Applicant (two of which were taken during the meeting itself) was also disputed to some extent by Kruger. I do not intend to repeat the evidence in great detail as it is in my view not strictly necessary to do so simply because it was common cause that the only issue for discussion was the severance package. 

[9]	 This was a classic example of a retrenchment where the employee was confronted with a fait a complit.. The impression gained from the evidence was that the Respondent tried to justify the retrenchment ex post facto hence the evidence of Beckman. This is not fair. The Applicant was as a result of this decision afforded no opportunity to influence the actual decision to retrench her. She was thus not afforded an opportunity to consult over the need to retrench her.

[10]	 It is trite that a dismissal on the basis of operational requirements is a no fault dismissal hence the greater need for strict adherence to fairness requirements. It is accepted that employers are frequently compelled to downsize their employees as a result of economic or operational reasons. It is, however, also accepted that a retrenchment, due to the no fault component, may have a particularly harmful economic, social and psychological effect on an employee. For these reasons the legislature has, as already pointed out, decided to codify the fairness requirements that must be adhered to in section 189 of the Labour Relations Act 66 of 1995 (hereinafter referred to as “the LRA”). Although most of the requirements laid down in section 189 of the LRA are procedural,   there is no doubt that this Court will investigate the substantive fairness of a decision to retrench on the basis of operational requirements. It is not necessary for purposes of this judgment to discuss how far this Court will be prepared to scrutinize a business decision of an employer. Suffice to point out that the employer must place sufficient evidence before this Court to justify a reason to retrench an employee. Although the employer may approach the consultations with a certain prima facie view (namely to retrench), it certainly was not fair in these circumstances to approach the consultations with such a firm decision to retrench. The Applicant was given no information which could have enabled her to make meaningful suggestions. That much is also clear from her contemporaneous notes. The only issue up for discussion was severance and nothing else. Although circumstances may exist where the facts clearly show that an employer only has but one option and that is to retrench, this is not one of those instances. The Applicant was the only one to be retrenched. Moreover, the Respondent continued to operate for almost a year after her retrenchment. 

[11]	 As far as the procedural requirements of the retrenchment are concerned it is trite that this Court will not follow a checklist approach when evaluating the procedural fairness of the retrenchment. The ultimate question is whether or not the employer has approached the consultation process with a genuine and bona fide intention to engage in a joint solving exercise. In essence section 189 requires the employer to consult with the employees (or their representatives) before embarking on a retrenchment process. The retrenchment process is not merely a procedural step. In Broll Property Group (Pty) Ltd v Du Pont & Others (2006) 27 ILJ 269 (LAC) the Labour Appeal Court concluded that the consultation process was so woefully defective that it rendered the dismissal substantively unfair. Consultation will, in my view be woefully deficient if an employee is confronted with a fait a compli. A retrenchment process cannot (expect in very limited instances) be fair if an employee was not given a fair opportunity to suggest alternatives which may influence the decision to retrench and which may result in an avoidance of a job loss. Where an employee is confronted with a fait a compli the employee is denied the right to influence the decision to retrench. It is patently clear that the Applicant has been denied this right in the present case. What makes matters worse for the Respondent is the fact that Kruger (on behalf of the Respondent) conceded that he did not even advise the Respondent’s head office in Germany that in terms of South African Law, an employer may not confront and employee with a fait a compli. I am therefore of the view that the dismissal of the Applicant was substantively unfair. 

[12]	 In respect of the procedural fairness of the dismissal I am likewise of the view that the dismissal was also procedurally unfair. The procedural unfairness (which had a fundamental impact also on the substantive fairness of the dismissal) commenced on 24 May 2007 when the Respondent called the Applicant to a meeting. The Applicant had no idea what the meeting was about and was extremely surprised when informed that she was being retrenched. In cross-examination the legal representative on behalf of the Respondent tried to wrench a concession from the Applicant that she could not have been surprised because she as the sales person was aware of the financial position of the Respondent. Her evidence was, and it is evidence which I accept as no evidence to the contrary was placed before this Court apart from mere speculation on the part of Beckman, that the Applicant was not privy to any financial information and that she was only privy to information which related to the sales she did. The Applicant prepared a budget which forecasted anticipated sales. This budget was regularly updated and was sent through to Mr. McVeigh in London (England). She was never given any other financial information. Her evidence that Chairman (the accounted) was not mandated to give her any financial information and the fact that Mr. McVeigh had to her that she the financial conformation of the company is confidential was not disputed. The Applicant also confirmed in her evidence that she was not even privy to the cost price of the machines that she sold and that she only knew what the sales price was. She also did not know what the expenses of the company were. All she knew was the apart from two years, the target budget was not always reached in respect of sales. She, however, did not even know what happened to the rental income of machines especially in Africa and how that affected the profitability as a whole of the company. I am thus persuaded that the Applicant was not privy to the actual financial health of the Respondent. What makes matters worse for the Respondent is the fact that the Respondent never discussed its financial position with the Applicant. It was not the case of the Respondent that it had explained to the Applicant at the so-called consultation meetings what the financial position of the Respondent was. In fact, if proper regard is had to the letter of 24 May 2007 the reason for the retrenchment was merely given as “international developments” and “the current market for Atronic products”. The Applicant’s evidence further was that the South African position was not even discussed or mentioned at the first meeting held on 24 May 2007. What was mentioned was the fact that the loss of the Russian market had an impact worldwide on the Respondent. In short, the Applicant was completely left in the dark about the reasons for the retrenchment and it is clear that no effort was made to discuss it with the Applicant nor was she, as already pointed out, afforded an opportunity to influence the outcome of the decision. 

[13]	Lastly, the consultation process must, according to the law, commence once an employer contemplates dismissing an employee. It is clear that although the notice of 24 May states notice of contemplated retrenchment, in fact the decision has already been taken. This is manifestly unfair. What is further required by the LRA is that the notice must contain certain information. The information must be sufficiently detailed in order to allow the employee to consult. Apart from generalised reason for the retrenchment, the so-called notice is silent on any of the other aspects. This is unfair. The Applicant was not only kept in the dark about the financial situation of the Respondent, it was also left completely in the dark about matters which could have assisted her to take part in meaningful consultation. What makes matters worse for the Respondent is the fact that the consultation process was limited to the retrenchment package.

[14]	In light of the aforegoing I find that the dismissal of the Applicant was substantively and procedurally unfair. I award the Applicant compensation equivalent to 12 months’ salary. I can find no reason why she should not be entitled to maximum compensation. The Respondent is also ordered to pay the costs.

……………..
AC BASSON, J

Date of judgment: 11 August 2009

For the Applicant: SB Hardie of Stephan Hardie Attorney
For the Respondent: DC Carls of D.C. Carls Inc.