WBHO Construction Proprietary Limited v Masenye N.O and Others (JR1124.21) [2024] ZALCJHB 288 (30 July 2024)

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

Not Reportable

case No: JR1124/21

In the matter between:

WBHO CONSTRUCTION PROPRIETARY LIMITED Applicant

and

DIDA MASENYe N.O

First Respondent

THE BARGAINING COUNCIL FOR THE

CIVIL ENGINEERING INDUSTRY (BCCEI)

Second Respondent

MASANGWANDILE MDAYI

Third Respondent

Heard: 27 June 2024

Delivered: 30 July 2024

Summary: Review of arbitration award – whether the employee was unfairly dismissed given existence of a mutual separation agreement – whether an employer may circumvent the retrenchment procedure in section 189 of the LRA by signing a retrenchment document disguised as mutual separation agreement – employer must not circumvent procedure in section 189 of the LRA through retrenchment disguised as mutual separation agreement – review application dismissed – decision reached by the commissioner that the dismissal of the employee was substantively and procedurally unfair was one that a reasonable decision maker would arrive at.

JUDGMENT

TEBEILE, AJ

Introduction

[1] This is an application brought in terms of section 145 of the Labour Relations Act[1] (LRA), to review and set aside the first respondent’s arbitration award dated 28 May 2021 under the auspices of the second respondent.

[2] In the applicant’s notice of motion, as an alternative relief, the applicant seeks an order to review and correct the first respondent’s arbitration award which found that the termination of the third respondent’s employment constituted an unfair dismissal in terms of section 186(1)(a) of the LRA. The arbitration award directed that the third respondent be retrospectively

reinstated and/or be awarded maximum compensation plus all outstanding statutory money. The application is opposed only by the third respondent.

Background facts

[3] The third respondent commenced his employment with the applicant as a Final Level Grader on 18 April 2018. His gross monthly salary was R36 308.35.

[4] In about November 2020 (although the founding affidavit incorrectly stated December 2020), the third respondent was approached by the applicant’s Mr Peter Gray (Mr Gray) during a site visit on which Mr Gray had discussions with the third respondent regarding the applicant’s operational requirements.

[5] I wish to emphasise that it is not in dispute that Mr Gray had discussions with the third respondent concerning “the applicant’s operational requirements”. What is in dispute is whether a mutual settlement agreement entered between the parties following these discussions constituted the third respondent’s retrenchment.

[6] It appears that there was also a discussion concerning the possible transfer of the third respondent to another location in the Northern Cape because his skills/services were allegedly needed there. However, the third respondent did not agree to his possible transfer to the Northern Cape.

[7] Notwithstanding that the discussions between Mr Gray and the third respondent were concerning the applicant’s “operational requirements”, which obviously invoke section 189 of the LRA, the applicant and the third respondent signed a mutual separation agreement. The third respondent argued that he was misled to sign the mutual separation agreement. He further argued that the mutual separation agreement was signed under misrepresentation and duress.

[8] From the reading of the document purporting to be a mutual separation agreement intended to end the employment relationship, it appears that the document is more of a retrenchment document detailing the retrenchment package to be received by the third respondent rather than a mutual separation agreement. Hence, the third respondent lodged with the second respondent, an unfair dismissal dispute relating to retrenchment challenging the fairness of the termination of his employment with the applicant.

[9] The dispute was arbitrated by the first respondent who found that there was no retrenchment process followed and that the applicant’s actions were contrary to section 189 of the LRA. The first respondent further found that the third respondent was pushed or dismissed, that there were no procedures followed, and that there was no reason to terminate the third respondent’s services, and consequently, the third respondent’s dismissal was procedurally and substantively unfair.

[10] Aggrieved by the first respondent’s arbitration award, the applicant approached this Court seeking an order to review and set aside the first respondent’s arbitration award.

Issues to be decided

[11] It is important that I mention that the applicant’s grounds for review set out in the founding affidavit differ materially from the grounds set out in its heads of argument filed with this Court. At the hearing of the application, it transpired that the Court was invited to decide the following issues:

11.1 Whether the first respondent’s finding that there was no procedure followed for the third respondent’s retrenchment was reasonable;

11.2 Whether, given the existence of a mutual separation agreement, the first respondent’s decision that the third respondent had been unfairly retrenched was irregular; and

11.3 Whether an employer may circumvent the retrenchment procedure in section 189 of the LRA by signing retrenchment document disguised as a mutual separation agreement.

Whether the first respondent’s finding that there was no procedure followed for retrenchment was reasonable

[12] Two issues are common cause in this case. First, the applicant’s Mr Gray visited the site at which the third respondent was working and there were discussions concerning “the applicant’s operational requirements”. Second, a mutual separation agreement was concluded and signed between the applicant and the third respondent in December 2020 in terms of which the third respondent received a severance pay.

[13] If it is common cause that there was a discussion concerning “the applicant’s operational requirements” but the parties consequently signed a mutual separation agreement to end their employment relationship, then the most important question is whether the LRA provides for any procedure to be followed concerning retrenchment based on operational requirements.

[14] It cannot be gainsaid that section 189 of the LRA provides for a procedure to be followed when the employer contemplates dismissals of the employees based on operational requirements.

[15] In this case, although it is apparent from the applicant’s founding affidavit in this Court that the applicant and the third respondent had a discussion concerning “the applicant’s operational requirements”, there was no evidence before the first respondent during the arbitration proceedings to suggest that the applicant followed the procedure set out in section 189 relating to contemplated dismissals based on operation requirements.

[16] Notwithstanding the fact that the applicant correctly stated in its founding affidavit in this Court that there was a discussion

concerning “the applicant’s operational requirements”, there was no retrenchment process which took place. Instead, the parties signed a mutual separation agreement indicating that the third respondent was retrenched. In the absence of compliance with a procedure set out in section 189 of the LRA, the first respondent correctly found that the applicant was pushed or dismissed. The first respondent’s decision is that which a reasonable commissioner would have come to.

[17] During the arbitration proceedings and the review application in this Court, the applicant relied on a mutual separation agreement and argued that the third respondent agreed to a voluntary termination of his employment. This is clearly contrary to the applicant’s assertions in this Court that the applicant and the third respondent had a discussion concerning “inter alia, the applicant’s operational requirements”. If indeed there was a discussion concerning the applicant’s operational requirements and the fact that the third respondent was asked to be moved to the Northern Cape, it is my view that the first respondent correctly found that there was no retrenchment process followed.

[18] The applicant, instead of complying with section 189 of the LRA, chose a convenient way of circumventing the provisions of section 189 of the LRA by signing a retrenchment document disguised as a mutual separation agreement with the third respondent and which agreement clearly indicates that the third respondent was retrenched.

[19] In the circumstances, the first respondent’s decision that there was no procedure followed for the retrenchment of the third respondent is one that a reasonable decision maker would arrive at.

Whether, given the existence of a mutual separation agreement, the first respondent’s decision that the third respondent had been unfairly retrenched was irregular

[20] The applicant submits that the first respondent committed a gross irregularity in the conduct of the arbitration proceedings by failing to determine whether the third respondent’s retrenchment was substantively fair.

[21] In determining the above issue, this Court should consider the arbitration award handed down by the first respondent dated 28 May 2021.

[22] In the arbitration award, the first respondent recorded the following:

‘[Mr Gray] testified that they then agreed to end their employment relationship by way of a mutual separation agreement and not through a retrenchment process. However, the document which both parties signed to confirm the end of their employment relationship, was more of retrenchment letter detailing the retrenchment package the Applicant would receive rather than a mutual separation agreement.

This document (signed by both parties) is titled mutual separation agreement however, its contents are all about retrenchment and the benefits of a retrenchment package … Even at the last page of the document, it is confirmed that the Applicant was retrenched. It was signed by someone else who did not seem to be Mr Gray.’ (Own emphasis)

[23] The first respondent found that it was common cause that no retrenchment process took place and yet the parties signed documents

indicating that the third respondent was retrenched.

[24] The first respondent further found that the third respondent “was pushed to leave” his employment. It was found that the third respondent was dismissed and there was no retrenchment process which took place.

[25] The first respondent proceeded to determine whether the retrenchment was fair and found that the actions of the applicant were contrary to section 189 of the LRA.

[26] In finding that the third respondent was unfairly retrenched, the first respondent recorded the following:

‘Mr Gray was a very senior person and he could have handled this situation better through the assistance of the human resources department. The Applicant was pushed or dismissed. No procedures were followed and there was no reason to terminate his services.

Therefore, the dismissal of the Applicant was procedurally and substantively unfair.’

[27] It is clear from the arbitration award that the first respondent found that there was no involvement of the human resources department and that the third respondent was pushed or dismissed.

[28] In my view, the fact that it is common cause that there was a discussion concerning the applicant’s operational requirements

prior to the parties signing a mutual separation agreement, the first respondent did not commit any misconduct or irregularity in his decision that there was no retrenchment process followed and the applicant’s actions were contrary to section 189 of the LRA.

Whether an employer may circumvent the retrenchment procedure in section 189 of the LRA by signing a retrenchment document disguised as a mutual separation agreement

[29] The applicant relies on the existence of a mutual separation agreement and contends that the third respondent consented to the mutual termination of the employment relationship.

[30] The third respondent submits that the terms of the mutual separation agreement are similar to that of the retrenchment although the proper procedure regarding procedural and substantive fairness was not followed.

[31] Even if this Court were to accept that the parties entered into a mutual separation agreement, what appears to be a mutual separation agreement, provides for the terms of a “retrenchment package”. This confirms that the applicant intended to retrench the third respondent but signed a mutual separation agreement to circumvent section 189 process.

[32] The mutual separation agreement bizarrely recorded that:

‘We confirm recent consultations held and wish to inform you that your retrenchment dated will be on December 1, 2020.’ (Own emphasis)

[33] Notwithstanding that the mutual separation agreement recorded that there were consultations held, it is common cause that other than the meeting between Mr Gray and the third respondent, there were no other meetings or consultations between the parties in furtherance of the section 189 process. In my view, a mutual separation agreement is more of a retrenchment document than what it intended to be, and it was signed to circumvent the retrenchment process entrenched in section 189.

[34] Furthermore, a mutual separation agreement recorded that the third respondent “do hereby acknowledge and accept the above retrenchment in full and final settlement of all or any claims that I as the employee may have”. It is apparent that the applicant had an intention to retrench the third respondent prior to signing the mutual separation agreement. Hence, the applicant asserts in its founding affidavit that the meeting between Mr Gray and the third respondent related to discussions concerning “inter alia, the applicant’s operational requirements”. This cannot be ignored when considering the intention of the applicant when signing a mutual separation agreement. It is my view that the applicant’s intention to sign a mutual separation agreement was to retrench the third respondent but circumventing the retrenchment process. The third respondent’s intention was not to sign a retrenchment document.

[35] The Labour Appeal Court in Universal Church of the Kingdom of God v Myeni and Others[2] restated the essential aspects of a valid and enforceable agreement under common law as follows:

‘It is settled law that the intention of the parties in any agreement - express or tacit - is determined from the language used by the parties in the agreement or from their conduct in relation thereto. Further, that not every agreement constitutes a contract. For a valid contract to exist, each party needs to have a serious and deliberate intention to contract or to be legally bound by the agreement, the animus contrahendi. The parties must also be ad idem (or have the meeting of the minds) as to the terms of the agreement. Obviously, absent the animus contrahendi between the parties or from either of them, no contractual obligations can be said to exist and be capable of legal enforcement.’

[36] The intentions of the parties are significant in determining whether a mutual separation agreement should not be ignored. In this case, the document signed as a mutual separation agreement has terms of retrenchment than a mutual separation agreement. The words “wish to inform you that your retrenchment dated will be on December 1, 2020” clearly reflect retrenchment rather than a mutual separation agreement. Given the third respondent’s argument that he was misled and that there was a misrepresentation, the parties were not at ad idem as to the terms of the agreement. While the applicant presented a retrenchment document, the document was signed as a mutual separation agreement. The language used in the mutual separation agreement is that of a retrenchment document rather than a mutual separation agreement.

[37] Once the words “applicant’s operational requirements” feature in the conversations between the employer and the employee, it cannot be gainsaid that the employer contemplates dismissals based on operational requirements and has the intention to retrench.

[38] The third respondent argued that he was misled and ended up signing a mutual separation agreement and that he signed under

misrepresentation and duress. Even if it may not be determined by this Court whether there was duress or cohesion on the part of the applicant towards the third respondent, it is important to note that the third respondent never wanted retrenchment and when he signed a mutual separation agreement, he did so without intentions of getting retrenched. The intention of the third respondent was not to be retrenched. Once the applicant had a discussion with the third respondent concerning the applicant’s operational requirements, the applicant was obliged to follow the procedure set out in section 189 of the LRA. The words “the employer must” entrenched in section 189(1) of the LRA are peremptory, and therefore, the applicant ought to have invoked the procedure in section 189 of the LRA. Resorting to signing a retrenchment document disguised as a mutual separation agreement cannot not assist the applicant. Otherwise, employers will resort to signing retrenchment documents disguised as a mutual separation agreement to circumvent section 189 process.

[39] In my view, the applicant cannot use a mutual separation agreement to circumvent the procedure set out in section 189 of the LRA, and therefore, the first respondent’s decision, that the procedure for retrenchment was not followed and that the dismissal was procedurally and substantively unfair, is one that a reasonable decision maker would have arrived at.

[40] The fact that the applicant and the third respondent signed a mutual separation agreement with the terms of retrenchment notwithstanding

that there was a discussion concerning the applicant’s operational requirements, the applicant attempted to circumvent the

procedure set out in section 189 of the LRA by signing a mutual separation agreement. The applicant defeated the objects of section

189 of the LRA by disregarding its discussion concerning its operational requirements and signing a mutual separation agreement containing the terms of retrenchment.

[41] Even if I were to agree with the applicant that there was a mutual separation agreement, that does not automatically debar the third respondent from challenging the substantive fairness of the terms of the mutual separation agreement which terms are in my view that of retrenchment, should the third respondent discover at a later stage that that which he signed was not his intention.

Costs

[42] It is trite that in this Court the costs do not follow the result, and the general rule regarding the awarding of costs in labour matters is guided by the fact that this Court is a court of equity and fairness. However, that general rule is not absolute. In my view, this case presents an exception.

[43] I have the discretion to award costs where it is appropriate to do so. But similarly, I am obliged to exercise such discretion

judicially.

[44] This case is one in which deviation from the general rule relating to costs in this Court is justifiable.

[45] It is trite that when making an adverse costs order in this Court, it is required of a presiding officer to consider the principle of fairness and the conduct of the parties.

[46] In relation to the issue of costs, something needs to be said about the conduct of the applicant which led to the dispute arbitrated by the first respondent in May 2021.

[47] It is plain that, according to the applicant’s assertions, the applicant and the third respondent had a discussion concerning the applicant’s operational requirements. The applicant is an experienced construction company which previously retrenched the third respondent in 2015 during which proper retrenchment processes were followed. Despite this history, the applicant chose to follow a shortcut approach to the retrenchment and signed a mutual separation agreement, which agreement clearly had the intention to circumvent the retrenchment process set out in section 189 of the LRA. The aforesaid circumvention of the process in section 189 of the LRA is apparent from the face of a mutual separation agreement which recorded that “wish to inform you that your retrenchment dated will be on December 1, 2020”.

[48] The mutual separation agreement also recorded the “retrenchment package” of the third respondent and which package included the severance pay.

[49] The contents of the agreement indicate that the third respondent was retrenched, and it was found that his retrenchment was carried out under the disguise of a mutual separation agreement. The applicant’s conduct is not without reproach in that the applicant discussed with the third respondent the issues concerning its “operational requirements” and instead of following section 189 of the LRA, the applicant ended up signing a mutual settlement agreement containing the term of retrenchment. For this reason, a cost order against the applicant is justifiable.

[50] In Long v South African Breweries (Pty) Ltd and Others[3], the Constitutional Court explained that:

‘…when making an adverse costs order in a labour matter, a presiding officer is required to consider the principle of fairness and have due regard to the conduct of the parties. This, the Labour Court failed to do. There is no reasoning on the question of costs order beyond an indication that costs are to follow the result. This is a misdirection of law and it follows that the Labour Court’s

discretion in respect of costs was not judicially exercised and must be set aside.’

[51] In Bester v Small Enterprise Finance Agency SOC Ltd and Others[4], in determining the issue of costs, the Labour Appeal Court held:

‘[16] The appellant seeks a costs order. The question falls to be decided with reference to law and equity. As an individual, bearing her own costs without the help of a trade union, it is appropriate to give consideration thereto, even though the usual approach is that costs do not simply follow the result. It seems to us that fairness dictates that she be granted costs in the review and in the appeal because of the burden such costs would be on an individual. Moreover, the appellant is a single parent with three children.

[17] In defending the award in the review proceedings and in prosecuting the appeal, the appellant has represented herself. To the extent that she has incurred legal costs, she can recover them, including, in principle, the value of her own legal expertise, as a legal practitioner, devoted to the case. It is unnecessary to specify what these costs might include. Thus, the appropriate costs order is one that is subject to taxation in the absence of an agreement between the parties about a sum.’ (Footnotes omitted)

[52] The third respondent did not rely on a trade union for representation in this Court, but rather solicited the services of attorneys who later withdrew from the matter and the third respondent proceeded to represent himself at the hearing of the review application citing financial challenges to pay legal costs.

[53] During the meeting between Mr Gray and the third respondent relating to discussions concerning the applicant’s operational requirements, the third respondent indicated his financial challenges to Mr Gray. It seems that instead of the applicant following the procedure concerning dismissals based on operational requirements, Mr Gray took advantage of the third respondent’s financial challenges and lured him to enter into a mutual separation agreement.

[54] The burden of costs already incurred by the third respondent is apparent from the withdrawal of his erstwhile attorneys and his proceeding to appear in person on the date of the hearing of the review application citing financial difficulties in paying for his legal fees. In my view, fairness warrants that the third respondent’s incurred costs and reasonable disbursements be paid by the applicant. In view of this, I am inclined to award a costs order against the applicant.

[55] It is significant to record that my discretion to award costs in favour of the third respondent, in this case, was exercised having considered the

applicant’s constitutional right to have its disputes resolved by the application of the law “in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum” as enshrined in section 34 of the Constitution.

[56] I have also considered that there exists a need to promote the right of access to the statutory dispute resolution mechanisms within the prescripts of the LRA that in order to guarantee the peaceful resolution of labour disputes.

[57] Having applied my mind to the dictates of the fairness standard envisaged in section 162 of the LRA, and also having considered the constitutional and statutory imperatives that underpin the very standard in section 162, it is my considered view that a departure from the general rule on costs in labour matters is justifiable in this case.

Conclusion

[58] Having considered the documents and evidence presented before the first respondent, it is concluded that the applicant failed to make out any competent ground for the review application of the arbitration award dated 28 May 2021, and consequently, the application falls to be dismissed with costs.

[59] In my view, the first respondent’s decision that the dismissal of the third respondent by the applicant was substantively and procedurally unfair, is one that a reasonable decision maker would arrive at.

[60] In the result, the following order is made:

Order

1. The application to review and set aside the first respondent’s arbitration award dated 28 May 2021 is dismissed.

2. The applicant is ordered to pay the third respondent’s costs, including any reasonable disbursements incurred by the third

respondent following the withdrawal of the third respondent’s erstwhile attorneys.

S.S Tebeile

Acting Judge of the Labour Court of South Africa

Appearances: For the Applicant: Adv. M Van As Instructed by: Fluxmans Incorporated For the Third Respondent: Self

[1] Act 66 of 1995, as amended.

[2] (2015) 36 ILJ 2832 (LAC); [2015] 9 BLLR 918 (LAC) at para 44.

[3] [2019] ZACC 7; (2019) 40 ILJ 965 (CC) at para 29.

[4] [2019] ZALAC 73; (2020) 41 ILJ 877 (LAC) at paras 16 – 19.