RGC Engineering (Pty) Limited formerly RGC Engineering (Sales Division) (Pty) Limited v Byrch and Others (JR1087/2008) [2014] ZALCJHB 270 (17 July 2014)

REPUBLIC OF SOUTH AFRICA

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

JUDGMENT

Reportable/Not Reportable

Case no: JR1087/2008

In the matter between:

RGC ENGINEERING (PTY) LIMITED FORMERLY

RGC ENGINEERING (SALES DIVISION) (PTY) LIMITED Applicant

and

BYRCH, M R First

Respondent

COMMISSIONER W STAPELBERG Second

Respondent

THE COMMISSION FOR CONCILIATION,

MEDIATION AND ARBITRATION Third

Respondent

Heard: 1 July 2014

Delivered: 17 July 2014

Summary:

SHORT, A J

Brief Introduction

[1] This is an application to review and set aside the arbitration award made by Commissioner W Stapelberg, the Second Respondent, on 4 April 2008 in terms of section 145 of the Labour Relations Act No. 66 of 1995 (hereinafter referred to as “the LRA”).

Background

[2] The First Respondent was employed by the Applicant as a sales person and the Applicant further contends that he was the most senior sales person as he held the title product manager and was paid more than the other sales people.

[3] The First Respondent contended that he did not have experience in the sale of the Applicant’s products.

[4] The First Respondent was dismissed on 1 August 2001 and notified of his dismissal in writing.

[5] It is common cause between the parties that the First Respondent’s dismissal was not preceded by any formal disciplinary proceedings or written warnings. The Applicant alleges that since the employee was a senior employee, he was able to judge his own performance and determine whether he was meeting the standard required by the Applicant.

[6] The Applicant alleges that the First Respondent failed to reach the sales targets set for him by the Applicant over the three year period of his employment and that the monthly income that he generated for the Applicant was less than his monthly remuneration.

[7] The Second Respondent, in his award of 4 April 2008, found that the First Respondent’s dismissal was both substantively and procedurally unfair.

[8] The Second Respondent awarded the First Respondent compensation in an amount equivalent to six months’ remuneration totalling the sum of R108,000.00.

[9] In addition to the compensation awarded to the First Respondent, the Second Respondent also made a punitive costs order against the Applicant in favour of the First Respondent when he awarded costs on an attorney client scale.

Grounds of review

[10] The Applicant raises numerous grounds of review in its founding affidavit.

[11] The Applicant alleges that the Second Respondent’s weighing of the evidence is twisted and that he arrived at an award which is not an award which a reasonable decision maker in his position could reach.

[12] The Applicant further alleges that the most telling ground for review is that the Second Respondent accepted that the employee’s lack of performance was of such a nature that his dismissal may have been substantively fair. The aforementioned statement was qualified by the Second Respondent when he held that there may have been substantive reasons to dismiss the employee and “if the correct procedures were followed”.

[13] The Applicant further alleges that the Second Respondent through the statement referred to above appears to have contended that the substantive fairness of a dismissal is dependent solely upon the procedural rights afforded to an employee prior to a dismissal.

[14] It is further alleged by the Applicant that the Second Respondent failed to have regard to the material evidence tendered at the arbitration proceedings by both parties and misconceived what was required of him.

[15] The Applicant further contends that the Second Respondent preferred the evidence of the First Respondent over that of the Applicant’s witness Mr Grech-Gumbo. The Applicant further contends that the Second Respondent lost sight of the fact that the employee changed his evidence consistently and was an unreliable witness.

[16] The Applicant further alleges that the Second Respondent by failing to have regard to material facts committed a gross irregularity.

[17] The Applicant further alleges that by finding that no process was followed in dismissing the employee, he erroneously applied the test normally reserved for misconduct dismissals.

[18] The Applicant also alleges that the Second Respondent disregarded the uncontested evidence that the employee was employed in a more senior position than other sales persons and that it was unnecessary to formally counsel and guide him.

[19] The Applicant further alleges that the Second Respondent failed to have regard to the fact that the First Respondent should not benefit from his poor work performance.

[20] The Applicant further alleges that the Second Respondent failed to stipulate how he arrived at his finding that the Second Respondent should be awarded compensation equivalent to six months’ remuneration totalling an amount of R108,000.00.

[21] The Applicant further alleges that there is no basis offered by the Second Respondent for the costs order made in favour of the First Respondent on an attorney and client scale which in itself amounts to a gross irregularity.

Evaluation/Analysis

[22] A reading of the Second Respondent’s award reveals that the Second Respondent has comprehensively summarised the evidence given by both Mr Aurelio Grech-Gumbo of the Applicant as well as the Second Respondent.

[23] The summary of the evidence given at the arbitration proceedings and as summarised by the Second Respondent in his award was not criticised by the Applicant during these review proceedings. In Carr v Fisons Pharmaceuticals,[1] the Industrial Court held that:

‘The purpose of a fair procedure is inextricably enmeshed with the fairness of the dismissal to dismiss; the process of assessment,

advice, counselling, guidance and ultimately warning are all integral parts of the fairness of the dismissal.’

[24] Item 8 of the Code of Good Practice contained in the LRA provides that:

‘(3) The procedure leading to dismissal should include an investigation to establish the reasons for the unsatisfactory performance and employers should consider other ways, short of dismissal, to remedy the matter.

(4) In the process, the employee should have the right to be heard and to be assisted by a trade union representative or fellow employee.’

[25] In Somyo v Ross Poultry Breeders (Pty) Ltd,[2] the Labour Appeal Court held that the normal requirements for a dismissal for poor work performance may not apply in the case of a manager or senior employee whose knowledge and experience qualify him to judge for himself whether he is meeting the standards set by the employer or where the degree of professional skill required is so high and the potential consequences of the smallest departure from that high standard are so serious, that one failure to perform in accordance with those high standards is enough to justify dismissal.

[26] In New Forest Farming CC v Cachalia and Others,[3] the court interpreted the judgment in Somyo v Ross Poultry Breeders (Pty) Ltd strictly and held that only if it is found that a manager has knowledge and experience such that he was aware of the employer’s

standards and fails to satisfy them, can he be dismissed without being given an opportunity to improve.

[27] On the evidence before the Second Respondent, it appeared that the First Respondent was not a skilled sales person as his background was mainly of a technical nature. It was also conceded by the Applicant’s witness Aurelio Grech-Gumbo that all the sales people were to be converted to the position of product managers. According to him, the only difference between general sales people and product managers was that general sales people sold the entire range of products, whereas product managers specialised in specific product sales.

[28] From the transcript of the proceedings and more particularly at page 90 and 91, it appears that the First Respondent denied that he had in fact been employed as a product manager. Whether the First Respondent was employed as a product manager does not take the matter any further as there seems to be no material difference between the two roles.

[29] It is, therefore, my view that the First Respondent in the current matter cannot be said to have fallen within any one of the exceptions contemplated in the Somyo v Ross Poultry Breeders (Pty) Ltd case with the result that there was no basis upon which the Applicant could have dispensed with the pre-dismissal procedure attendant to a dismissal for poor performance.

[30] From a reading of the record it appears that whilst there were various sales meetings at which the performance of the sales persons was discussed, there was never any counselling in respect of the First Respondent. The discussions regarding sales performance in the sales meetings was of a general nature and not specific and, in my view, cannot amount to counselling as contemplated in Schedule 8 of the Code of Good Practice contained in the LRA.

[31] It is common cause between the parties that there was no pre-dismissal enquiry held in respect of the First Respondent. In JDG Trading (Pty) Ltd t/a Price and Pride v Brunsdon,[4] Zondo, AJP as he then was writing for the majority of the court observed as follows:

‘Some argument was advanced by the Appellant’s counsel that the Respondent was employed as a senior manager and that he knew what his shortcomings were. That an employee is a senior manager does not, in my view, give the employer licence to dispense with the observance of the audi alteram partem rule. Such an employee is also entitled to the observance of the audi alteram partem rule. What may have been relaxed in the case of a senior manager may be the form which the observance of the rule may take…

The opportunity which is given to a senior employee must still meet at least two basic requirements of the audi alteram partem rule namely, that he must be given notice of the contemplated action and a proper opportunity to be heard. The reference to the notice of the contemplated action necessarily implies that the action has not been decided upon finally as yet, but it is one which may or may not be taken depending on the representations which the affected person may give. In this case the opportunity to be heard which the Appellant purported to give to the Respondent did not meet any of the two basic requirements….’

[32] It is my view that the First Respondent was not afforded any opportunity to state why he should not be dismissed as no pre-dismissal enquiry was held. The audi alteram partem rule was therefore not observed by the Applicant prior to dismissing the First Respondent for poor work performance.

[33] I am accordingly of the view that the Second Respondent’s finding that the First Respondent’s dismissal was procedurally unfair is reasonable and is not an award which a reasonable arbitrator could not have reached.

[34] The Applicant alleges in its founding affidavit that the First Respondent admitted that during most of his employment with the Applicant, he did not meet the required standard. This admission by the Applicant is also recorded in the summary of the evidence contained in the Second Respondent’s award. The Second Respondent, however, appears not to have taken this important admission into account in his analysis of the evidence. When coming to his finding that the targets set by the Applicant were arbitrary, the Second Respondent makes a broad sweeping statement. There is no evidence supporting this statement and it appears to have been arrived at by conjecture on the part of the Second Respondent. On this basis, the Second Respondent’s finding that the dismissal of the First Respondent was substantively unfair is not one which a reasonable arbitrator could reach.

[35] The Applicant’s contention that the credibility findings made by the Second Respondent are not reasonable and indicate bias on his part are not capable of consideration by this court as the entire record of the proceedings is not based on a verbatim recording but a significant portion of it has been reconstructed and as a result the entire verbatim testimonies of the witnesses are not before this court.

[36] The Labour Appeal Court in Boxer Super Stores v Zuma and Others[5] stated that section 193(2) of the LRA mandates an arbitrator or the courts to examine the facts as set out in the section in order to craft a remedy. It was held that an award is manifestly irrational when a Commissioner gives no reasons for awarding compensation.

[37] In Transnet Limited v CCMA and Others,[6] the Honourable Justice Basson held as follows:

‘Compensation must be considered in the light of a totality of the evidence and in light of requirements of fairness.’

[38] In awarding six months’ compensation and costs on an attorney and client scale against the Applicant without furnishing any reasons or showing in any way how he arrived at such findings; and where the reasons cannot readily be established from the evidence, the award of the Second Respondent is manifestly unreasonable.

[39] In light of my finding with regard to substantive fairness and the fact that the costs and compensation need to be considered on the totality of the evidence, I believe that there are grounds enough for the reviewing and setting aside of the Second Respondent’s award.

[40] I have taken cognisance of the long history of this matter and do not believe that it is appropriate to award costs in this matter.

Order

1. The Second Respondent’s award is hereby reviewed and set aside.

2. The matter regarding the employee’s alleged unfair dismissal is referred back to the Third Respondent for hearing by a Senior Commissioner other than the Second Respondent.

3. There is no order as to costs.

______________

Short, AJ

Acting Judge of the Labour Court of South Africa

Appearances:

For the Applicant: Mr. W. Bekker (Nothnagel Attorneys)

For the First Respondent: Ms. R. Anderson (Riki Anderson Attorneys)

[1] [1995] 16 ILJ 179 (IC).

[2] [1997] 7 BLLR 862 (LAC) at 866D.

[3] (2003) 24 ILJ 1995 (LC) at paras 9 and 10.

[4] (2000) 21 ILJ 501 (LAC) at paras 61-62,

[5] (2008) 29 ILJ 2680 (LAC) at para 9.

[6] [2008] 29 ILJ 1289 (LAC) at para 28,