CCMAil April 2009 - Labour Court by fjwuxn

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									                                                        CCMAil                                                             Revolutionising Workplace Relations
                                                                                                                                                                                  April 2009
                                                                               CONTENTS

CCMA CASE ALERTS..........................................................................................................................................................................2

LABOUR COURT AND APPEAL COURT JUDGMENTS ....................................................................................................................4

DECISIONS: OTHER DISPUTE RESOLUTION FORUMS ..................................................................................................................8

DECISIONS: AUSTRALIAN INDUSTRIAL COMMISSION ................................................................................................................11

LABOUR WATCH ...............................................................................................................................................................................14

          A selection criteria for retrenchment must be fair and objective .............................................................................................14

          Short time work as an alternative to retrenchment ..................................................................................................................16

          The global economic crisis and the looming retrenchments ..................................................................................................21

GLOBAL TRENDS

          Economic meltdown –This crisis has a woman’s face ............................................................................................................25

          Short time work critical to German firms surviving economic crisis………………………………………………………………...27


LABOUR RELATIONS IN AFRICA

          Impact of global financial crisis in Sub-Saharan Africa ...........................................................................................................28

                                                                                                                                                                    EDITORIAL TEAM
                                                                                                                                                                         Alucia Mdaka
                                                                                                                                                                          Lucky Moloi
                                                                                                                                                                     Nersan Govender
                                                                                                                                                                         Poso Mogale
                                                                                                                                                                       Samuel Denga




                                                                                                                                                                         April 2009 – Page 1

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                                                                                                                         By Samuel Denga

WE14492 - 08 Feni v Shoprite Checkers - Commissioner:                  Further noted: That the respondent did not convene a
Bennet                                                                 disciplinary hearing to give the applicant a chance to defend
Dismissal - Employee dismissed for allegedly stabbing guest at         herself.
company function – Dismissal fair.
                                                                       Held: That the applicant was unfairly dismissed. The respondent
The applicant, a shop steward, was dismissed for alleging              was ordered to compensate the applicant an amount equivalent
stabbing a guest at a respondent’s function. He challenged his         to five months’ salary.
dismissal as being unfair and sought an appropriate relief.
                                                                       Case references
The applicant claimed that he had intervened in an argument
between the guest and a colleague. He also claimed that the
                                                                       Douglas & Others v Gauteng MEC for Health (2008) 5 BLLR 401
guest had stabbed him first and he was acting on self defence.
                                                                       (LC)
The applicant contended that the incident would not have
                                                                       Ferodo (Pty) Ltd v De Ruiter (1993) 14 ILJ 974 (LAC)
occurred if the “outsiders” were not invited to the function.
                                                                       Hoffman v SA Airways (2000) 21 ILJ 2357 (CC)
                                                                       Jones v Retail Apparel (2000) 6 BLLR 676 (LC)
It also testified that it saw the applicant stabbing a guest on the
                                                                       Stocks Civil Engineering (Pty) Ltd v RIP No & Another (2002) 23
day in question. It further testified that the guest was unarmed.
                                                                       ILJ 358 (LAC)
The applicant had been warned previously of carrying a knife at
                                                                       Ouwehand v Hout Bay Fishing Industries (2004) 25 ILJ 731 (LC)
work but he did not stop his behaviour.
                                                                       KNDB11587 - 08 Birembano v Purple Moss cc t/a Joe Cools
Noted: That the applicant stabbed a guest and acted in
                                                                       - Commissioner: Grobler
retaliation but not in self defence.
                                                                       Dismissal - Employee dismissed for allegedly speaking out
                                                                       about underpayments - Dismissal unfair.
Held: That the dismissal of the applicant was both substantively
and procedurally fair. The application was dismissed.
                                                                       The applicant was employed as a waiter on a fixed term contract
                                                                       and his services were terminated after he had worked for two
WE5237 - 08 Newton v Glyn Marais Inc - Commissioner: du
                                                                       years. He challenged his dismissal as being unfair and sought
Plessis
                                                                       an appropriate relief.
Dismissal - Employee dismissed for allegedly failing to prepare
litigation papers – Employer failed to prove poor performance -
                                                                       The applicant claimed that he was unfairly dismissed for
Dismissal unfair.
                                                                       “speaking out”’ during a meeting about underpayment of waiters
                                                                       in the company. He claimed that the respondent was not paying
The commissioner was called upon to determine whether the
                                                                       minimum wage as stipulated by the sectoral determination 14:
dismissal of the applicant was both substantively and
                                                                       Hospitality Sector. The applicant also claimed that he was
procedurally fair. The applicant was dismissed for alleged poor
                                                                       promised to be employed on a permanent basis.
performance. She challenged her dismissal as being unfair and
sought for an appropriate relief.
                                                                       The respondent denied that the applicant was dismissed and
                                                                       was not paid the minimum wages according to the sectoral
The respondent claimed that the employment relationship had
                                                                       determination. It claimed that the applicant was employed on a
been terminated by mutual agreement, the applicant was not
                                                                       fixed term contract which had expired.
dismissed. It contended that applicant voluntarily submitted her
resignation as she was aware that her performance was below
                                                                       Noted: That the applicant was an employee who was employed
standard.
                                                                       on a fixed term contract and he quailed for a minimum wages as
                                                                       stipulated by the Basic Conditions of Employment Act 75 of
The applicant argued that there was no termination binding
                                                                       1997(BCEA).
agreement between them. She denied that she signed such an
agreement. The applicant contended that she was dismissed
                                                                       Also noted: That the CCMA lacked jurisdiction to entertain the
without a hearing and she was forced to resign.
                                                                       wage claim.
Noted: That there was no proof of the terms and conditions for
                                                                       Held: That the applicant was not dismissed for speaking his
mutual agreement.
                                                                       mind during a meeting but for operational reasons.


                                                                                                                            April 2009 – Page 2

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Also held: That the respondent was ordered to pay the                  The respondent testified that the applicant was told that she will
applicant the amount by which he had been underpaid since the          not work as a cashier anymore. It denied that it dismissed the
sectoral agreement came into effect.                                   applicant but she absconded.

FS5081 - 08 SACCAWU obo Khakhatiba v Country Meat                      Noted: That the respondent had appointed a new cashier after
Market (Pty) Ltd - Commissioner: van Aarde                             the applicant had left. The applicant was not told what she was
Dismissal – Employee failed polygraph test and dismissed -             supposed to do after she was told that she will no longer work as
Employer claiming employee deserted - Dismissal unfair.                a cashier.

The commissioner was called upon to determine whether the              Also noted: That the applicant was dismissed because she
dismissal of the applicant was both substantively and                  failed the polygraph test.
procedurally unfair. After the respondent discovered large scale
losses through theft, it instructed all employees including the        Held: That the polygraph test results do not provide full context
applicant to go for a polygraph test.                                  of the answers and they are not regarded as scientific. The
                                                                       person who administered a test was not called upon to explain
The applicant testified that after she had failed polygraph test,      or verify the results.
she was dismissed. She contended that she was not given the
results of polygraph test. The applicant denied that she had           Also held: That the dismissal of the applicant was both
absconded, but was dismissed.                                          substantively and procedurally unfair. The commissioner ordered
                                                                       the respondent to reinstate the applicant with retrospective
                                                                       effect.




                                                                                                                            April 2009 – Page 3
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                                                                                                                       By Alucia Mdaka

Labour Court: J2622/08                                                  conduct is concerned with labour and employment relations,
Mogothle v Premier of the North-West Province & Another:                constituted an administrative action for the purposes of PAJA.
Judge van Niekerk
Unfair suspension.                                                      Further noted: That the Senior Management Services (SMS)
                                                                        code provided that the employer may suspend or transfer a
The applicant, the deputy director-general of the Department of         member on full pay if:
Agriculture, Conservation and Development in the North-west
province, brought the application to the Labour Court (LC), as a            The member is alleged to have committed a serious
matter of urgency, to set aside his suspension. He challenged                offence, and
his unfair suspension on three grounds, namely, breach of                   The employer believed that the presence of a member at
contract, breach of statute, and the Promotion of Administrative             the workplace might jeopardise any investigation into the
Justice Act 3 of 2000 (PAJA). The applicant contended that his               alleged misconduct, or endanger the wellbeing or safety of
suspension was unlawful for the following reasons:                           any person or state property.

    That the decision to suspend him was taken by the                  Furthermore, a suspension or transfer of that kind was a
     respondents under the direction from the North-west                precautionary measure that did not constitute a judgment, and
     legislature and not in the exercise of a discretion entrusted      must be on full pay. If a member is suspended or transferred as
     to them,                                                           a precautionary measure, the employer must hold a disciplinary
    That certain jurisdictional preconditions for the suspension       hearing within 60 days. The chairperson of the hearing must
     were not satisfied (these related to an alleged breach of a        then decide on any further postponement.
     regulatory measure governing the suspension of senior
     public sector employees), and                                      Held: That in so far as the 60 days limitation was concerned,
    That he was not heard before the decision to suspend him           the respondents have casted the applicant’s suspension as a
     was taken.                                                         period of “indefinite leave”, suggesting that it was intended to be
                                                                        indefinite. It was held that nowhere in the correspondence
The respondents opposed the application on three grounds:               between the parties was there any allegation that the applicant’s
                                                                        continued presence might jeopardise any of the investigations
    That the application was not urgent,                               that were proposed, or any suggestion that the wellbeing or
    That the LC lacked jurisdiction to grant the order that the        safety of any person or property would be endangered. The
     applicant sought unless he had followed the procedures             respondents had, in the affidavits, failed to produce any
     contemplated by the Labour Relations Act 66 of 1995                substantive evidence to satisfy either of these requirements.
     (LRA), and
    That in any event, the applicant’s suspension (or leave of         Also held: That with regard to procedural fairness, it was also
     absence) was valid and lawful.                                     held that the applicant was not afforded a hearing. Although the
                                                                        SMS code was silent on the requirement of a hearing, for the
Noted: That in so far as the breach of statute component of the         reasons recorded above, the audi alteram partem principle
applicant’s claim was concerned, the claim was founded                  required that prior to his indefinite suspension, the applicant be
primarily on what was referred to as the “SMS code”, a code of          given an opportunity to state a case in response to any proposal
conduct governing senior management service within the public           to that effect made by the respondent. As to the respondent’s
service. It was not clear from the papers whether the SMS code          argument that the applicant had an opportunity to request a
was a statutory, other regulatory measure, or a collective              hearing but chose not to do so, it was also held that that was not
agreement.                                                              for the employee to request a hearing, but for the employer to
                                                                        offer one.
Also noted: That as to the applicant’s claim based on PAJA,
the judgment of the constitutional court in Chirwa v Transnet Ltd       Further held: That the applicant had no other alternative
& Others 2008 (3) BCLR 251 (CC) casted significant doubt on             remedy. The respondents had submitted that the applicant may
whether public sector employees have the right to claim that the        have sought adequate redress in terms of the unfair labour
exercise of a contractual power by their employers, where that          practice provisions of the LRA. That may be so, but the
                                                                        applicant had elected to pursue a contractual remedy. The fact



                                                                                                                            April 2009 – Page 4
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that the applicant may have some other cause of action that he          quantification. However, the applicants claimed that the
elected not to invoke was no consequence. The respondent’s              allegations were not true.
claim, in these circumstances, that an action for damages will
cure any loss that the applicant had suffered, took no account of       Held: That it was apparent to the Court that in the first instance,
the fact that a claim for damages is costly, time consuming and         there was no dispute in respect of the aspect that the second
complex, and that it cannot account for the detrimental                 applicant had tendered her services on 20 July 2005. Therefore,
consequences of indefinite suspension. The applicant was                it was found that there was no real and genuine dispute of fact,
entitled to the relief that he sought. The decision of the second       which would necessitate that the order should be refused.
respondent requiring the applicant to take leave of absence was
set aside. The respondents were held jointly and severally liable       Noted: That the contention of the respondent that the
to pay the costs of the proceedings.                                    application should fail since there was a delay and that no
                                                                        condonation was sought, and that the arbitration award was a
Case reference                                                          debt as contemplated in the Prescription Act 68 of 1969
                                                                        (Prescription Act), was rejected. It was noted that in Solidarity &
Chirwa v Transnet Ltd & Others 2008 (3) BCLR 251 (CC)                   Others v Eskom Holdings Ltd 2008 (29) ILJ 1450 (LAC), Labour
                                                                        Appeal Court said the following:
Labour Court: J1226/08
Chemical, Energy, Paper, Printing, Wood & Allied Workers                “The view that the unreasonable delay rule applies to a case
Union & Another v LE Research (Pty) Ltd: Judge Moshoana                 where the Prescription Act applies will render the relevant
Court order – Employee sought court order for arbitration award.        provisions of the Prescription Act redundant. In terms of the
                                                                        Prescription Act, if A assaults B, B has three (3) years within
The applicants brought an application for an order in the               which to institute court proceedings for the payment of damages
following terms:                                                        arising from the assault. The effect is that B can sit at home and
                                                                        not do anything about his claim until the last minute before the
    Directing the respondent to pay the second applicant an            expiry of the prescription period of three years. There is no rule
     amount of R40 800.00 together with interest at the rate of         of law to the effect that, despite the availability to him of a period
     15.5% per annum from 11 July 2005 to date of full                  of three years within which to institute court proceedings, B must
     payment,                                                           nevertheless, institute court proceedings within a reasonable
    Directing the respondent to pay the second applicant her           time prior to the expiry of that period of three years, because if
     monthly salary of R1 700.00 for the period from 20 July            he fails to do so, he will be barred for doing so even though the
     2005 to date of judgment together with interest a tempora          prescription period of three years prescribed by the Prescription
     morae,                                                             Act has not expired. The reason why there is no such rule is
    Directing that the costs of the application be paid by the         because, when the legislature prescribed three years it regarded
     respondent on the scale as between attorney and own                three years as a reasonable period within which B should be
     client, and                                                        required to institute his claim for damages. There can, therefore,
    Granting further and or alternative relief.                        not be a rule that effectively nullifies the prescription period
                                                                        provided for in the Prescription Act”.
The background of the case was that the respondent had
dismissed a number of its employees, including the second               Also held: That where Prescription Act applies, there is no
applicant in July 2003. A dispute regarding the fairness of the         room for the rule of unreasonable delay. It was also held that in
dismissal was referred to the National Bargaining Council for the       respect of prayers 2 and 3 it would be unnecessary to make a
Chemical Industry. An award was issued on 11 July 2005,                 court order since it was inclined to make prayer 1 an order of
wherein the arbitrator found the dismissal of the second                court. Prayer 1 in respect of the award contained a re-
applicant to be substantively unfair and ordered the respondent         instatement order. Accordingly, the argument of unreasonable
to re-instate him retrospectively. The award also stated that the       delay was dismissed. The arbitration award was, accordingly,
second applicant must report for duty on 18 July 2005 but she           made a court order and the respondent was ordered to pay
failed to do so.                                                        costs.

The respondent claimed that the second applicant’s                      Case references
representative had telephoned one of its managers indicating
that the second applicant would not be reporting for duty as she        Char Technology (Pty) Ltd v Mnisi & Others 2000 (7) BLLR 778
felt that she was riding on the back of others. The respondent          (LC)
submitted that the application should be dismissed on the basis         Mahala v Nkombombini & Another 2006 (5) SA 524 (SECLD)
that there has been an unreasonable delay. It argued that there         Plascon Evans Paints v van Riebeeck Paints 1984 (3) SA 623
are disputed facts and that the Court lacked jurisdiction to order      (AD)
prayers 2 and 3, in particular. The respondent argued that the          Republican Press (Pty) Ltd v CEPPWAWU & Gumede & Others
commissioner had failed to quantify the award. If the matter had        2007 (11) BLLR 1001 (SCA)
come before the LC for an order in terms of s 158(1) (c) of the         Solidarity & Others v Eskom Holdings Ltd 2008 (29) ILJ 1450
LRA, it would have been referred back to the CCMA for                   (LAC)



                                                                                                                            April 2009 – Page 5
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Stellenboch Farmers Winery (Ltd) v Stelenvale Winery (Pty) Ltd          that it had complied with the provisions of s 189 and offered him
1957 (4) SA 234 (C)                                                     the post of distribution supervisor at the Rustenburg depot. The
Trollip v du Plessis & Another 2002 (2) SA 242 (W)                      applicant did not respond to the letter and insisted that the
                                                                        respondent should address his issues before he could respond
Labour Court: JS69/07                                                   to the offer. After being told by the bookkeeper to return his
King v Doughlasdale Dairy (Pty) Ltd: Judge Molahlehi                    petrol card, the applicant received an email the following day,
(Acting)                                                                informing him that his retrenchment was effective on that day.
Dismissal for operational requirements – Employer use poor              The applicant then referred an alleged unfair dismissal dispute
work performance of managers to exercise retrenchment -                 for conciliation and it was unresolved. He then approached the
Dismissal both substantively and procedurally unfair.                   LC for adjudication.

The matter concerned the alleged unfair dismissal of the                Noted: That in terms of s 189 of the LRA an employer is
applicant for operational reasons by the respondent. The                required to consult with its employees or their representatives
applicant sought compensation for the as a relief. The issue for        before embarking on a retrenchment exercise. The consultation
determination was whether the dismissal of the applicant was            process must commence as soon as the employer contemplates
both procedurally and substantively fair. Furthermore, whether          dismissals due to operational requirements. Therefore, a final
the respondent had considered alternatives and consulted with           decision to retrench must not have already been taken at the
the applicant prior to the dismissal.                                   time the consultation process commences. The employer must
                                                                        also, before taking the decision to retrench, give reasonable
The applicant commenced employment with the respondent                  notice of the need to retrench to the likely to be affected
during July 1999 as a checker and at the time of his dismissal          employees or their representatives. The notice must be given in
he occupied the position of area sales manager at the                   writing and provide the employees with sufficient information
respondent’s Pretoria operations. The applicant submitted that          and time to enable them to consider and make suggestions on
on 10 August 2006, he received an email with an attachment              the alternatives to retrenchment. In addition, the notice must set
setting out several business constraints that the respondent was        out the reasons for the proposed retrenchment, the alternatives
confronted with. One of the clauses in the attached document            considered and the reason why it is deemed the alternatives
dealt with the assessment of the area managers, their key               would not be appropriate. The notice should also indicate the
performance assessment, and management of the branch,                   number of employees likely to be affected and the job
including sales complaints and administration. Subsequent to            categories in which they are employed including the selection
that email, the issue of performance was, accordingly,                  criteria to be used in choosing the employees to be dismissed.
discussed with him at the meeting convened by the
respondent’s acting sales manager. The area managers present            Also noted: That it was the respondent’s contention that it had
at that meeting explained that the problem with performance             consulted with the applicant at the meeting held on 23 August
does not lie with them but with the factory and the general             2006. The Court noted that the probabilities do not support the
manager.                                                                version of the respondent that the meeting was a consultation
                                                                        meeting as envisaged in s 189 of the LRA.
Another meeting with managers was convened on 19
September 2006 and a new and final structure in terms of which          Held: That the version of the applicant was more probable than
the area sales managers and sales representatives’ positions            that of the respondent. The email in one sentence said that “I
were made redundant was presented. The positions in the new             expect drastic improvements on all levels of our business”. The
structure were replaced by the position of field sales                  attached documentation said nothing related to consultation or
representatives. After being presented with the new structure,          retrenchment. At the end, the attached documentation stated
those who were present in the meeting, were told that                   that “we need to up our game and start reaching our goals.
application forms would be sent to those who are affected, and          Employees, who fail to reach the required standards after being
that if they wish, they could apply for the new positions. They         trained properly, should be dealt with”. It was held that the
were also told that they would compete with external candidates         restructuring was only mentioned as an option should the
for the new positions and that the unsuccessful ones would be           performance of managers not improve. Therefore, the meeting
retrenched. The applicant unsuccessfully applied for the position       of the 23 August 2006 cannot be regarded as a consultation
and two external and one within the company were appointed.             meeting as envisaged in s 189 of the LRA as employees were
The applicant was offered another position in another branch            not notified prior that they were invited to a restructuring
with a salary reduction which he had refused.                           meeting.

The applicant then addressed the letter to the respondent,              Also held: That the respondent had used the retrenchment
wherein he sought to confirm what had transpired with regard to         exercise to address the poor performance of its managers,
restructuring and the retrenchment. The thrust of that letter was       including the applicant. In that respect, the process had
that the respondent did not comply with the provisions of s 189         commenced with it sending a letter to managers in which it
of the LRA and further requested the respondent to reconsider           complained about poor work performance.
its approach and decision to appoint the field services support
managers. In response to that letter, the respondent indicated



                                                                                                                            April 2009 – Page 6
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Further noted: That the position offered to the applicant was            ruling in respect of the scope of the evidence which may be
lower than what he had occupied, and had the applicant                   introduced. However, that discretion can be made on a prima
accepted it, that would have resulted in more than double                facie view of relevance.
reduction in his salary. That position also entailed the applicant
to do the work in the fridge from time to time and that was the          Also noted: That s 138(1) and (2) of the LRA provide the
reason he rejected it as he was diagnosed with cancer.                   legislative framework within which a commissioner must conduct
                                                                         arbitration. It provides that:
Further held: That the dismissal of the applicant was found to
be both substantively and procedurally unfair. The respondent                The commissioner may conduct the arbitration in a manner
was ordered to compensate the applicant an amount equivalent                  that he/she considers appropriate in order to determine the
to 12 months’ salary and to pay costs.                                        dispute fairly and quickly, but must deal with the substantial
                                                                              merits of the dispute with the minimum of legal formalities,
Labour Court: JR3217/06                                                       and
Sondolo IT (Pty) Ltd v Howes & Others: Judge Basson                          Subject to the discretion of the commissioner as to the
Ruling – Postponement - Review – Whether appointed                            appropriate form of the proceedings, a party to the dispute
commissioner to take over arbitration bound by ruling of initial              may give evidence, call witnesses, question the witnesses
commissioner – Reviewed and set aside.                                        of any other party, and address concluding arguments to
                                                                              the commissioner.
This was an application to review and set aside the second
respondent’s ruling. The crux of the application was whether the         Further noted: That the LRA does not give guidance on what
commissioner who was appointed to take over arbitration that             would happen in the event where a commissioner is unable to
was referred to him erred in law in considering himself bound by         proceed with the merits of the arbitration whether as a result of
the ruling of the initial commissioner. In the initial proceedings, it   death, retirement or for any other reason or where a
was ruled that the application by the employer to bring a new            commissioner recuses himself from the process. It was also
charge of racism against the employee was inadmissible.                  noted that s 17 of the Supreme Court Act 59 of 1959, provides
                                                                         in respect of proceedings in the High Court that, if at any stage
The gist of the case was that the first respondent was dismissed         during the hearing of any matter by a full court, any judge dies
after a disciplinary enquiry found him guilty of serious                 or retires or is otherwise incapable of acting or is absent, the
misconduct. The first respondent was charged with:                       remaining judges, provided that they constitute the majority of
                                                                         the judges before whom the proceedings commenced, will
    Use of abusive language against a senior executive and a            proceed with the matter.
     member of the management board, insulting and calling
     them with derogatory names, and                                     Held: That although the LRA and the CCMA Rules do not
    Incompatibility   and    disregarding    working     and            expressly offer any such express guidance in respect of
     communication standards.                                            proceedings before the CCMA, the LC viewed that the
                                                                         provisions of s 138(1) of the LRA are sufficiently clear to support
He then referred a dispute about his unfair dismissal to                 a conclusion that a commissioner cannot be bound by the
conciliation and when the dispute remained unresolved, it was            rulings made in respect of the substantive merits of a dispute in
referred to arbitration.                                                 earlier proceedings. The ruling of the second respondent was
                                                                         reviewed and set aside.
Noted: That when requested to make a ruling upon the
admissibility of evidence, the commissioner is entitled to make a




                                                                                                                             April 2009 – Page 7
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                                                                                                                           By Poso Mogale

Metal & Engineering Industries Bargaining Council:                      Metal & Engineering Industries Bargaining Council,
MEGA19329                                                               Johannesburg: MEGA17565
NUMSA obo Kholoanyane & Others v WISPECO (Pty) Ltd:                     NUMSA obo Masina v Cobra Watertech: Panellist Driscoll
Panellist Cachalia                                                      Intimidation.
Theft – Dismissal held to be both substantively and procedurally
unfair but no relief ordered.                                           The applicant was dismissed after being found guilty of
                                                                        intimidating a colleague during a work stoppage. He denied
After being confronted with videotapes proving that they had            having committed the offence. He contended that his dismissal
stolen aluminium from the respondent’s factory, the applicants          was procedurally unfair as he had not been informed of the
confessed on videotape and stated that they had decided to              precise details of the alleged misconduct and because the
resign. The resignations were later confirmed in writing.               presiding officer had interrupted his cross-examination of the
However, the applicants contended that they had been forced             employer’s witnesses.
to resign. The respondent denied that. It argued that the council
lacked jurisdiction to arbitrate the matter as the resignation          On the substantive fairness, the applicant claimed that he was
letters constituted binding agreements between the employees            not at the factory when the alleged offence was committed.
and the company.
                                                                        Noted: That while the offence of intimidation requires proof of
Held: That the arbitrator rejected the jurisdictional point on the      intent, it does not require that the accused should intend to
ground that he was required to determine whether the                    induce fear. It is enough that a threat should be made to induce
termination of the applicant’s dismissal constituted a dismissal.       the person against whom it is directed to do or refrain from
                                                                        doing something. It was noted that the complainant had testified
Noted: That the applicants’ defence was that they have been             that when he asked the applicant what he meant, he was told
encouraged by private investigators hired by the respondent to          that “something bad” might happen to him if he worked
commit the thefts. It was noted that that evidence was not              overtime.
challenged by the respondent.
                                                                        Held: That in the context within which the words were uttered,
Also noted: That although the applicants had been unlawfully            that was clearly a threat. The fact that nothing had actually
entrapped, each of them had dishonestly denied stealing from            happened was immaterial. The fact was that to threaten a
the respondent. Theft remains a serious offence, regardless of          colleague against performing his duties constituted gross
the circumstances under which it was committed.                         misconduct, for which dismissal was the appropriate penalty.

Also held: That after an analysis of the evidence, it was held          Also noted: That turning to the procedural fairness, although
that the applicants had not resigned voluntarily and that               disciplinary hearings are not required to conform to the
termination of their services had, therefore, constituted a             procedural standards of criminal trials, accused employees are
dismissal. Since they had not been afforded any hearings, their         entitled to be informed of the charges against them. Given the
dismissals were held to be procedurally unfair. Although the            amount of information with which the applicant had been
applicants’ dismissals were substantively unfair, they were not         supplied, it would have been difficult for him to prepare his
entitled to any relief.                                                 defence.

Case reference                                                          Also held: That the applicant’s dismissal was, accordingly,
                                                                        procedurally unfair and he was awarded compensation
Cape Town City Council v SAMWU & Others (2000) 11 BLLR                  equivalent to three months’ salary.
1239 (LC)
                                                                        Case references

                                                                        Adcock Ingram Critical Care v CCMA & Others (2001) 22 ILJ
                                                                        1799 (LAC)
                                                                        Anglo American Farms t/a Boschendal Restaurant v Komjwayo
                                                                        (1992) 13 ILJ 573 (LAC)



                                                                                                                            April 2009 – Page 8
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Foster v Chairman, Commission for Administration (1991) 4 All           NUM v Deelkraal Gold Mining (1994) 7 BLLR 97 (IC)
SA 786                                                                  Tshishonga v Minister of Justice & Constitutional Development
Highveld District Council v CCMA & Others (2003) 24 ILJ 517             & Another (2007) 4 BLLR 327 (LC)
(LAC)
Mhlambi v Matjhabeng Municipality & Another (2003) 24 ILJ               National Bargaining Council for the Chemical Industry,
1659 (O)                                                                Pietermaritzburg: CHEM4625
Police & Prisons Civil Rights Union v Minister of Correctional          Singh v Chemical Specialities: Panellist McGladdery
Services & Others (1999) 20 ILJ 2416 (LC)                               Gross negligence – Spillage of chemical – Clean disciplinary
                                                                        record and long service irrelevant.
National Bargaining Council for the Road Freight Industry,
Bloemfontein: FSRFBC1861                                                During a night shift when the applicant was in charge of the
TAWUSA obo Khumalo & Others v Super Group: Panellist                    respondent’s plant, he decided to transfer a noxious and highly
Venter                                                                  inflammable chemical from one tank to another. While the
Point in limine – Evidence in camera – Witness fearing for life.        transfer was in progress, he left the tanks to attend to other
                                                                        duties. About 3000 litres of the chemical was spilled. The
Two days prior to the arbitration hearing, the respondent raised        applicant recorded the spillage in the occurrence book (OB) but
a point in limine to stay the proceedings until a pre-arbitration       did not provide further details about the incident. The following
conference has been convened, for leave to lead certain                 day, emergency services were called by a neighbouring
evidence in camera in a suitable venue and that the matter be           company. It was established that the chemical had seeped into
heard by a senior commissioner.                                         the ground outside the respondent’s premises, exposing the
                                                                        area to pollution and the public to danger of inhaling toxic
Noted: That the council’s rules provide that the secretary or a         vapours.
commissioner may direct parties to convene a pre-arbitration
conference. However, there was no requirement that such a               The applicant was, subsequently, dismissed for gross
conference must be held. It was noted that parties had ample            negligence and failing to follow company procedures. He
opportunity to convene a pre-trial conference but had not done          claimed that his dismissal was unfair because he was very busy
so.                                                                     at the time of the incident and because the respondent bore a
                                                                        measure of responsibility for the spillage.
Held: That there was, accordingly, no basis for a stay of
proceedings to enable them to do so.                                    Noted: That the applicant had worked for the respondent for 17
                                                                        years and had a clean disciplinary record. The respondent had
Also held: That since the parties had agreed that the matter be         proved that rigorous procedures must be complied with in order
heard by the appointed commissioner, the request for the                to satisfy health and safety regulations. It indicated that it would
appointment of a senior commissioner fell away.                         not have been permitted to store hazardous materials unless
                                                                        the authorities were satisfied that these rules were in place.
Also noted: That as to the request that certain evidence should         Although the applicant denied that he was aware of these
be led in camera, it was also noted that the respondent had led         procedures, the evidence indicated that for 13 years he had
evidence to the effect that a critical witness was reluctant to         complied with them.
testify in open proceedings as he feared for his life. Although
the council rules did not specifically provide for in camera            Held: That the applicant must have been aware of the
proceedings, the test was whether any exceptional                       procedures. It was held that employers are not confined to
circumstances justified a deviation from the general rule that all      taking disciplinary action against only the employees who have
evidence must be presented in the presence of other parties.            flouted rules laid down in disciplinary codes. Employees may
                                                                        also be disciplined when they conduct themselves in a manner
Further noted: That all the applicants owned firearms. The              they know or should know is wrong. The arbitrator found that
witness concerned had already deposed to an affidavit                   the respondent had proved that the applicant had indeed failed
summarising the evidence that he intended to give. The                  to exercise due care.
applicants were in possession of that affidavit and
arrangements could be made for the applicants to put questions          Also noted: That the seriousness of the applicant’s misconduct
to the witness through the arbitrator.                                  was aggravated by the fact that he had recorded in the OB that
                                                                        some solvent had spilled because the tank pipe came off.
Further held: That the respondent could call one witness to
testify on the contents of the affidavit already filed and parties      Also held: That the applicant had deliberately attempted to
would then be informed of the day of the hearing where the              downplay the true magnitude of the spillage. To merely enter a
evidence would be led.                                                  brief note in the OB and then go home was not the action of a
                                                                        diligent employee. By doing so, the applicant had placed his
Case references                                                         employer’s property and the lives of his colleagues at risk.

Edcon Ltd v Pillemer NO & Others (2008) 5 BLLR 242 (LAC)



                                                                                                                            April 2009 – Page 9
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Further held: That turning to the appropriateness of the                Case references
sanction of dismissal, it was found that there are limits to the
extent to which employees may rely on length of service and             FCCDTAWU obo Mathe v Express-it (2000) 21 ILJ 1697
clean disciplinary records. The applicant had demonstrated that         (CCMA)
he could not be trusted to exercise reasonable care and                 Fourie’s Poultry Farm (Pty) Limited t/a Chubby Chick v CCMA &
diligence in the execution of his duties. The application was           Others (2001) 10 BLLR 1125 (LC)
dismissed.                                                              Nampak Corrugated Wadeville v Khoza (1999) 2 BLLR 108
                                                                        (LAC)
                                                                        Sidumo Z & Congress of South African Trade Unions v
                                                                        Rustenburg Platinum Mines Ltd & Others (2007) ZACC 22




                                                                                                                          April 2009 – Page 10
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                                                                                                                        By Samuel Denga

U2008/3383 Construction, Forestry, Mining & Energy Union                 aggregate annualised wage for the day (as is required by sub
v North Goonyella Coal Mines (Pty) Ltd – Commissioner:                   clause 91.) and would be paid an appropriate hourly rate for
Bacon                                                                    each hour worked.
Payments – Employee entitlement to high wage when shifts
change – No proof of unfair labour practice.                             The respondent contended that sub-clause 7.10 complemented
                                                                         sub-clause 9.1, they cannot be separated. It also contended
The applicant union lodged a dispute by virtue of Clause 38 of           that it was required to pay the higher of the two payments.
the collective agreement which provides that if a grievance
arise out of the interpretation of the agreement certain steps           Noted: That both subclauses apply to the same hours of work.
need to be followed. In addition, in the event that the grievance        When the parties formulated their agreements, they did not give
is not resolved, either party may refer it to the Commission for         any direction or guidance as to how the two subclauses
determination. The respondent changed shifts of staff                    interrelate.
unilaterally without consulting the applicant.
                                                                         Also noted: That according to the agreement reached by
The parties’ arguments focused on sub-clauses 7.10 and 9.1 of            parties, for any change of shift, a period of notice ought to be
the agreement. Sub-clause 7.10 reads:                                    given. The parties’ agreement will not commence to operate
                                                                         until January 2010 would the parties have retained the wording
“Change of shift…NGCM may require an employee to change                  of the above mentioned sub-clauses without finding any need to
their shift (e.g., from dayshift to nightshift or vice versa) to suit    clarify their interrelationship.
operational requirements. Where four days notice has not been
provided, the employee will be paid overtime rates for all work          Further noted: That there was no dispute about the
undertaken until this four days notice period has passed.”               interrelationship and it was an accepted industry practice that
                                                                         the two subclauses interact in the way they were described.
While sub-clause 9.1 reads:
                                                                         Held: That there is no obligation for the employer to pay
“Employees shall receive an average annualised aggregate                 additional payments for the double time shift which the
wage on a weekly basis as follows:                                       employee had worked. The application was dismissed.

    “The annualised aggregate wage is all-inclusive and                 C2009/2001 WT (Pty) Ltd v Metal Industry – Senior Deputy
     includes payment for base rate, rostered overtime,                  President: O’ Callaghan
     nightshift penalty, weekend penalties, all disability               Severance pay – Employer appeal to set aside obligation to pay
     allowances, North Goonyella allowance, public holiday               severance pay – Employee given funds to start business after
     penalties and tool allowances”. and                                 been retrenched – Appeal denied.
    “The payments not included in the annualised aggregate
     wage are bonus, housing allowance, underground toilet               On January 2009 the employer lodged an appeal to vary the
     allowance, excess wet allowance, multi functional first aid         Metal Industry (SA) award in order to remove the obligation to
     allowance, first aid allowance and non-rostered overtime”.          pay severance pay as prescribed in clause 4.4.7.2 of the
                                                                         National Agreement Preserving Award (NAPSA).
The applicant union claimed that the grievance was about the
                                                                         The applicant employer operated a cartage and engineering
interaction between sub-clause 7.10 and 9.1 of the collective
                                                                         business in the mid-North South Australian town until late 2008.
agreement. It contended that sub-clauses 7.10 and 9.1 operate
                                                                         The employer retrenched one employee, it claimed that it
independently of each other.
                                                                         offered him an opportunity to start his own business in its sister
                                                                         company in Western Australia. It argued that the employee was
Each sub-clause stood alone and when enlivened, each of the
                                                                         paid above award rates over the duration of his employment.
two sub-clauses directed certain payments to be made to an
                                                                         The applicant further argued that it did not pay the employee
employee. The applicant union argued that when an employee
                                                                         severance pay because it could not afford to pay it and had
is required to change shifts without four days notice, such
                                                                         provided various financial information to the applicant to show
employee would be paid for any day worked according to the



                                                                                                                           April 2009 – Page 11
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that it cannot afford payments. The employee denied that there          consultation process, the applicant raised some of these issues
was any business opportunity given to him after retrenchment            for clarity, such as whether:
and sought severance pay.
                                                                                 The voluntary retrenchments would be considered,
Noted: That the employee was not paid an hourly rate in                          The mine could be operated on a Monday to Friday,
excess of the award minimum rate and was not paid for                             eight hour shift basis with the resultant savings from
overtime worked over the seven years of his service.                              the reduction in individual employees’ earnings being
                                                                                  directed at employing more employees than would
Also noted: That the applicant may make an application to the                     otherwise be necessary, and
Commission to have the severance pay prescription varied if                      The method ranking for those employees to be
the employer obtains acceptable alternative employment for an                     transferred to Oaky North and those employees to be
employee.
                                                                                  selected for retrenchment.
Further noted: That the employee was not given alternative
employment. To give employee an opportunity to operate his              The applicant denied that it was consulted for the restructuring
own business does not mean that he was given an acceptable              on the mine. The applicant union testified that the respondent
alternative employment.                                                 did not follow procedures as stipulated in the Workplace
                                                                        Relations Act of 1996 (WRA).
Held: That the application made under clause 38(9) of the
NAPSA was refused.                                                      Noted: That according to the WRA, if the employer decide to
                                                                        terminate the employment of 15 or more employees for reasons
C2008/3411 Construction, Forestry, Mining & Energy Union                of economic, technological, structural or similar nature, or for
v Oaky Creek Coal (Pty) Ltd – Commissioner: Bacon                       reasons including such reasons, the employer must consult with
Consultations – Employer failed to consult union over                   a union or affected employees.
retrenchment – Employer ordered to consult union.
                                                                        Also noted: That the applicant was consulted but there was no
The respondent announced that due to the deteriorating                  agreement between the parties. Further consultation process
cooking coal market and its impact on operations, it had taken          was proposed by the applicant in order to delay the
the decisions to restructure its operations. Due to restructuring       retrenchment, but the respondent proceeded with the
of the mine operations, there was significant reduction in              retrenchment without further consulting the applicant.
production that led to some positions becoming redundant and
the removal of “non specialist” contractors from the site. The
                                                                        Held: That the commissioner ordered that the parties must
respondent alleged that it was agreed that some employees
                                                                        continue to engage in further consultation process. The
would be transferred from Oak Creek mine to Oaky North Mine
                                                                        applicant must submit its proposal to the respondent while
and some will be retrenched. The changes proposed by the
                                                                        retrenchees continue working.
respondent included a significant reduction in production from
the Oaky No.1 mine by ceasing longwall operations and
reducing development operations to one development unit                 C2008/2686 Liquor Hospitality & Miscellaneous Union v
operating 24 hours per week as a longwall operation.                    Wattly Australia (Pty) Ltd – Commissioner: Harrison
                                                                        Unpaid meal break and overtime.
These changes would have an impact on the workforce and
about 503 employees were transferred from Oaky no.1 to Oaky             This was an application made pursuant to s.170LW of the pre-
North mine. After transfer, all employees were graded, new              reform WRA. The Liquor, Hospitality and Miscellaneous Union
grading would determine which employees to be retrenched.               (LHMU) by notice dated 21 July 2008 applied to have a dispute
Employees were divided into three categories:                           resolution process conducted following an earlier decision by
                                                                        Wattyl Australia (Pty) Limited (Wattyl) to require employees at
                                                                        its colours and chemicals plant at West Footscray, Victoria, to
    Those who would be transferred to Oaky North
                                                                        take a 30 minute unpaid meal break on each shift. The
     (approximately 503 employees),
                                                                        applicant alleged that the respondent’s actions altered a long
    Those who would remain at Oaky no. 1 (approximately 70             standing custom and practice of providing a group of
     employees), and                                                    employees with a paid meal break.
    Those who would be retrenched (approximately 20 to 25
     employees).                                                        The applicant’s dispute was related to the application of the
                                                                        following clauses of the agreement:
The respondent contended that it had consulted the applicant
about restructuring and a presentation was made explaining in               Clause 6(b): Relationship to awards/agreements/custom
broad terms the option chosen and reasons for restructuring. It              and practices,
also contended that an agreement was reached that some                      Clause 24(h): Pay work conditions (colour and chemicals),
employees would be transferred from Oak Creek mine to Oaky
North mine. The respondent further argued that during its



                                                                                                                          April 2009 – Page 12
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    Clause 27(j): Shift work overtime conditions (colour and           Noted: That the catalyst for the review of meal break practices
     chemicals), and                                                    arose from a claim lodged in 2007 by a former employee for
    Clause 32(b): Meal breaks.                                         back payment of all overtime double time, as provided for in the
                                                                        Agreement since 2003. That person and all current employees
The applicant sought the following relief:                              were subsequently back paid.

    The Commission to make a finding that Wattyl has acted             Held: That the evidence demonstrated that times prior to 2008,
     contrary to the terms of the agreement,                            some employees would not take a structured lunch break. That
    Wattyl be ordered to re-introduce the custom and practice          practice resulted in the employees believing that the lunch
     of providing a group of employees with a paid meal break,          break was paid and counted as time worked and that the last
     and                                                                half hour of the shift was at penalty rates. A 30 minutes lunch
    The Commission to make any other order it deems fit for            break was never enforced by management until the policy
     the settlement of the dispute.                                     change in December 2007.

The respondent contended that the Commission lacked                     Also held: That the employees subject to this application were
jurisdiction to deal with the matter and reserved its rights to         categorised as “other than continuous shift work”. Shift work
challenge whether there was in fact a dispute about the                 conditions are set out in Clause 26 of the Agreement.
application of the agreement. The matter which fell for                 Relevantly, clause 26(c) (iv) states that “Hours – other than
determination was whether there was an existing custom and              continuous shift work”. It was also held that such ordinary hours
practice regarding paid meal breaks and whether the                     would be worked continuously except for meal breaks at the
Commission should make orders sought by the applicant. The              discretion of the employer.
respondent testified that it had made the decision to enforce the
taking of meal breaks based on the provisions contained in s            Further held: That the meal breaks did not form part of the
607 of the WRA which prohibited an employer from requiring an           ordinary hours of work, therefore, were not paid for. The
employee to work more than five hours without an unpaid meal            respondent’s decision to implement a structured 30 minutes
break. It indicated that it also motivated to implement the             unpaid meal breaks on each shift was permitted. The
changes because the business “would save around $60,000                 application was, accordingly, dismissed.
per annum”.




                                                                                                                          April 2009 – Page 13
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                                                  A SELECTION CRITERIA FOR RETRECHMENT MUST BE FAIR AND OBJECTIVE
                                                                                                    By Samuel Denga

Introduction                                                            the LRA requires that the employer must use selection criteria
                                                                        that have been agreed to by consulting parties or if none have
Employees in South Africa, like those around the world are not          been agreed to, to use selection criteria that are fair and
immune from the global economic meltdown that is causing                objective. The Court also held that the respondent had failed to
retrenchments all over the world. As this tough economic climate        comply with agreed selection criteria. The respondent was
really digs in, it is an unfortunate reality that employers, both big   ordered to compensate each applicant an amount equivalent to
and small, may need to retrench employees. Employers must               five months’ remuneration.
make sure that retrenchment is done in a proper and fair
manner. Retrenchment is covered in the Labour Relations Act             In Oosthuizen v Telkom SA Ltd (2007) 16 (LAC), the appellant
66 of 1995 (LRA) in its Code of Good Practice on Dismissals             employee had worked for 30 years with the company. He
Based on Operational Requirements. The main problem when it             applied for 22 positions without success. When the company
comes to retrenchment is who goes and who stays in the                  wanted to reduce the number of its employees due to
company. This is due to the fact that retrenchment is due to            operational reasons, he was dismissed. He was shortlisted for
operational requirements but not the employee’s fault,                  four times after he was retrenched for other positions without
misconduct or incapacity.                                               success. He challenged his dismissal as unfair. The respondent
                                                                        employer argued that all interviews of staff in the redeployment
Section 189 of the LRA imposes on employers who want to                 pool were conducted in accordance with a fair and objective
dismiss employees due to operational reasons prior to                   procedure. The criteria which was used include skills, suitability
retrenchment to consult the affected parties. The employer and          and employment equity policy. The employer had failed to call a
the affected parties must engage in a meaningful joint                  single person who was part of the interviewing panel in respect
consensus seeking process. They must attempt to reach                   of 26 positions that the employee had applied for. The employer
consensus, this include selection criteria. As sections 189 (5)         did not explain why the employee was not given one of those
and (6) of the LRA puts it, the employer must allow the other           posts. It did not show how those who were appointed to those
consulting party an opportunity during consultation to make             posts had either longer service, better skills or qualifications. The
representations about any matter on which they are consulting.          Court concluded that the employer had failed to prove that there
The LRA requires that an employer should act in good faith              was a fair reason for the selection of the employee and the
throughout consultation and seriously consider proposals put            dismissal was substantively unfair.
forward.
                                                                        In Pheeha v Denel Personnel Solutions (Pty) Ltd (2008) 9 BLLR
Selection criteria                                                      811 (MEIBC), the applicant was retrenched when the
                                                                        respondent labour broker restructured after losing a major
Section 189 (7) of the LRA provides that employers must select          contract. The respondent claimed that the applicant had been
employees to be dismissed for operational reasons according to          among eight employees who had applied for a particular post in
selection criteria that have been agreed upon by consulting             the new structure, and that he had been rated fourth in terms of
parties, or, if no criteria have been agreed upon, criteria that is     criteria agreed to by the consulting union. The applicant
fair and objective. The correct criteria must be used when              contended that the respondent had unilaterally adopted the
selecting which employee(s) will be retrenched. If employees are        criteria by which he had been evaluated and applied them
selected in terms of criteria that is unfair, their dismissals would    subjectively. The commissioner concluded that both parties
be considered as substantively unfair and possibly automatically        agreed that skills retention was the criteria used in the selection
unfair.                                                                 of employees for the new structure. The dismissal of the
                                                                        applicant for operational requirements was fair. The application
To select employees for retrenchment based on their union               was dismissed.
membership, sex, pregnancy, age or some other discriminatory
ground would result in unfair retrenchment and may constitute           In Lethlake & Another v Metcash Trading Ltd (2007) JOL 19888
an automatically unfair dismissal. Acceptable selection criteria is     (LC), the applicants were dismissed for operational reasons.
based on length of service, skills, qualifications, previous            Some employees had applied for reinstatement while others for
performance record or combination of those selection criteria           compensation on the grounds that their dismissals had been
characteristics.                                                        substantively and procedurally unfair. It was held that in terms of
                                                                        s 191(5) (b) (ii) of the LRA, the Labour Court may not or cannot
In Airey & Others v GE Security Africa (2008) JOL 22792 (LC),           adjudicate a dispute about procedural fairness of a dismissal
the applicant challenged the respondent’s selection criteria for        based on operational requirements. It was also held that the
retrenchment as being unfair. The Court held that section 187 of        selection criteria was based on skills and experience. The fact



                                                                                                                           April 2009 – Page 14
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that the services of applicants were not retained while those of       that the retrenchments of applicants were necessitated by the
other employees were, was not unfair. The dismissals of the            ceasing in supply of diamonds to the respondent’s business.
applicants were found to be substantively fair.                        That led to the closure of the department in which the applicants
                                                                       worked. The respondent had applied the LIFO principle in
Last In, First Out (LIFO) principle                                    selecting candidates for retrenchment. The dismissals were
                                                                       confirmed as procedurally fair and the application was
In a situation where there is no agreed criterion, the LIFO            dismissed.
principle may be applied. In LIFO, employees with shorter
service are retrenched, rather than those who had longer               Conclusion
service. According to the International Labour Organisation,
LIFO is regarded as fair and objective because:                        When it comes to large-scale retrenchments or even small-scale
                                                                       operational requirements dismissals, the question always arises
   It is easy and certain to determine who will be retrenched,        as to which employees would be selected. In the case of a
   It protects employees who have served for a long period,           restructuring, for example, some employees may fall off the new
   It is easy to explain, and                                         organisational chart, while others simply find themselves moved
                                                                       to another position, almost like a piece in a puzzle. In cases
   It reduces the possibility of accusations of favouritism.
                                                                       referred above, the courts have had to decide whether the
                                                                       criteria used was fair or not. Employers use different selection
Its disadvantage is that it can result in imbalance in the age
                                                                       criteria, but must avoid criteria that is unfair.
profile of the workforce and can remove recently acquired skills.
The application of LIFO presupposes a pool from which the
                                                                       Case references
employer will select employees for dismissal. In the case of
closure of the undertaking, selection criteria will be useless.
                                                                       Airey & Others v GE Security Africa (2008) JOL 22792 (LC)
                                                                       Lethlake & Another v Metcash Trading Ltd (2007) JOL 19888
In NUMSA obo Buswana v Dimbaza Foundries (Pty) Ltd (2007)
                                                                       (LC)
16 MEIBC, the respondent retrenched 55 out of 56 employees.
                                                                       NUMSA obo Buswana v Dimbaza Foundries (Pty) Ltd (2007) 16
About 55 employees claimed that the retrenchment procedure
                                                                       (MEIBC)
was unfair because the respondent did not apply the LIFO
                                                                       NUM & Others v Geffens Diamonds Cutting Works (Pty) Ltd
principle. The respondent contended that it did not apply the
                                                                       (2008) JOL 21303 (LC)
LIFO principle because the applicants and another employee
                                                                       Pheeha v Denel Personnel Solutions (Pty) Ltd (2008) 9 BLLR
had the same length of service, but the other employee had the
                                                                       811 (MEIBC)
greater skills. The applicant’s union argued that the applicant
                                                                       Oosthuizen v Telkom SA Ltd (2007) 16 (LAC)
had not been given training as was done with the other
employee. The arbitrator held that there was no evidence to
                                                                       References
prove that the respondent had selected the applicant in a
subjective or capricious manner, the application was dismissed.
                                                                       Republic of South Africa. The Labour Relations Act.66 of
                                                                       1995. Government Printers: Pretoria
Another case is that of NUM & Others v Geffens Diamonds
                                                                       van Nieker, A. et al. 2008. Labour@work. LexiNexix.Cape
Cutting Works (Pty) Ltd (2008) JOL 21303 (LC), where four
                                                                       Town.
employees were dismissed for operational requirements. They
                                                                       www.weksmans.com. Accessed in April 2009.
challenged their dismissals as being both substantively and
procedurally unfair and claimed for reinstatement as well as
compensation equivalent to 12 months remuneration. It was held




                                                                                                                          April 2009 – Page 15
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                                                                   SHORT TIME WORK AS AN ALTERNATIVE TO RETRENCHMENT
                                                                                                         By Alucia Mdaka

Introduction
                                                                        How can short time work be implemented?
When recruiting employees, it is generally an employer’s
intention to retain them in a full-time capacity. However,              As mentioned above that short time may be worked as an
situations do arise where normal working is no longer possible          alternative to retrenchment, that means if there is less work and
and the employer is faced with the problem of reducing working          still the same number of employees to do it, the little work that
hours. As in the current global economical crisis that has hit the      remains can be more equitably shared amongst those
labour markets, most employers may consider to exercise                 employees.
retrenchment while others are closing down their businesses.
That could result in many employees losing their jobs. Section          In the instances where short time is imposed, it should not be
189 of the Labour Relations Act 66 of 1995 (LRA) make                   imposed unilaterally by the employer as it entails a change to
provision for employers to consider alternatives before                 working hours and reduction to remuneration. Employees’
exercising retrenchment. That means employers have the                  consent is necessary before the employer can implement short
choice to look at different ways to minimise the chances of             time. If employers were to unilaterally impose short time, it
dismissing employees due to operational reasons. Rather than            would be an unlawful breach of the contract of employment.
making employees redundant, an employer has the option of               That can amount to a dispute of unilateral changes to terms and
introducing short time work in such situations. The article will        conditions of employment. The case of SACTWU obo
deal with short time as an alternative to retrenchment focusing         Ndlangisa & Others v Prowood Clothing (2005) 14 NBCCMI
on how to implement it, consultation, notice, duration, selection       6.10.2 addressed the issue of short time being imposed
criteria, entitlement to Unemployment Insurance Fund (UIF) and          unilaterally. In this case, the applicants had referred a dispute to
the payments of salaries and deductions made to employees on            the bargaining council claiming that the respondent’s failure to
short time. It is also aimed at providing some guidelines to both       consult them before implementing short time constituted an
employers and employees on how to handle the current                    unfair labour practice. However, the arbitrator held that the
economic crisis by using short time as a tool to minimise or            bargaining council lacked jurisdiction to entertain the matter
avoid retrenchment.                                                     because the definition of an unfair labour practice does not
                                                                        include disputes of such a nature. The arbitrator highlighted the
What is short time work?                                                following aspects with respect to short time:

Section 9 of the Basic Conditions of Employment Act 75 of                   Short time is a fundamental incursion into the employment
1997 (BCEA) provides that employees must work an average of                  relationship, and
45 hours per week and nine hours a day. Short time work                     Employees, whilst still in the employ of the employer,
means a temporary reduction in the number of ordinary hours of               temporarily forfeits their right to wages or salary.
work owing to slackness of trade, shortage of raw material,                  Therefore, it is not something that can be unilaterally
vagaries of weather, breakdown of plant machinery or buildings               imposed by an employer who may be experiencing
that are unfit for use or is in danger of becoming fit to use.               temporary financial difficulties.
However, the BCEA is silent on the issue of short time,
therefore, it is something that employers should consult with           It was held that the short time could have been introduced as
their employees on and both parties must agree to it.                   an alternative to retrenchment only after the agreement had
                                                                        been reached with the employees or their union. The affected
Furthermore, an employee is considered as being on short time           employees were advised to claim against the respondent for
if the following applies:                                               unpaid wages for the period that they were on short time to the
                                                                        Department of Labour.
    It is for a temporary period and there is only limited amount
     of work for an employee to do with the usual employer,             Another case that dealt with unilateral changes to terms and
    An employee is still under the contract of employment with         conditions as a result of short time was the one of FBWU &
     his/her employer, and                                              Others v Parys Roller Milling Company (1994) 1 ICJ 5.2.28. In
    An employee is still expected or expects to return to full         this case, the applicants had referred an unfair dismissal
     time employment with the same employer. Therefore,                 dispute after they had been retrenched. They alleged that the
     when an employer recovers from economic crisis,                    respondent had imposed short time unilaterally as it had
     employees would be expected to return to their normal              introduced it without any consultation. The respondent's case
     working hours.                                                     was that the dismissal followed an unlawful work stoppage or




                                                                                                                          April 2009 – Page 16
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strike. The applicants in April had asked for an increase and it         at a late stage in the life of the agreement if the point was not
was in financial difficulty because of the draught and the               raised during negotiations. The arbitrator held that the short
consequent shortage of maize. It indicated that they had been            time provision in the NBF agreement was intended to provide
informed that in May short time would be introduced. On 25               for situations in which employers were confronted with the
May it intended to implement short time and introduce a roster.          circumstances mentioned in the definition of short time.
The workers had also been told that they would be informed of            Therefore, the agreement permitted short time to be
how the wages would be payable for short time. The workers               implemented without the consent of the employees. This case
who were supposed to do so did not get on with their duties.             revealed that the collective agreement gives employers the right
They were all told to leave. The Court noted that short time is          to implement short time as and when required.
described as merely a tool in the retrenchment process. The
guidelines on retrenchment should therefore have been applied            In Fry’s Metals (Pty) Ltd v NUMSA & Others (2002) 11 LAC
as there should not be a departure from them except for good             1.11.37, after a review of its operations, the appellant decided
reason. The Court held that based on the entire evidence                 that it was necessary to alter certain of its operating
submitted, the respondent's conduct was found to be both                 procedures, including changing from a three-shift to a two-shift
unreasonable and unfair. The respondent was ordered to                   system and withdrawing a transport subsidy to its employees.
reinstate the applicants retrospectively.                                The respondents’ shop stewards rejected the proposed new
                                                                         shift system. The appellant then gave the affected employees
Employees’ consent                                                       notice that they might be retrenched if they refused to accept
                                                                         the two-shift system. When the workers refused to consent to
Recognition agreements, substantive agreements and even                  the proposed short time, they were given notices of
bargaining councils’ main agreements may contain provisions              retrenchment. The respondents obtained an order from the LC,
relating to working of short time. In NUMSA v Volkswagen of              which, inter alia, restrained the appellant from proceeding with
SA (Pty) Ltd (2007) 10 BALR 989 (P), after the respondent had            the retrenchment on the basis that the dismissals would be
introduced short time at its plant, the applicant union referred a       automatically unfair.
dispute in terms of the main agreement of the National
Bargaining Forum (NBF) for the automobile manufacturing                  The Court noted that the issues raised by the appeal were:
industry. The issue for determination was whether the main
agreement permitted the employer to implement short time                     Whether an employer has a right to dismiss employees
without the consent of the affected employees and, if not,                    who are not prepared to agree to changes to their terms
whether the circumstances relied on by the employer to                        and conditions of employment, and, if so,
implement short time fell within the short time or the lay-off               The nature of the relationship between that right and the
provisions of the agreement. The arbitrator was also required to              employee’s right not to be dismissed for a purpose of
determine whether the employer was permitted to implement                     being compelled to agree to a demand in respect of a
short time after a dispute had been formally declared. The                    matter of mutual interest in terms of s 187 (1) (c) of the
arbitrator found that that was depended on a proper                           LRA.
construction of the agreement. The relevant clause of the
agreement was silent on the matter. The union contended that             The Court also noted that the background to that provision was
that meant that the consent was required based on the                    the debate over termination lock-outs under the 1956 LRA.
contractual principle that employees who tender their services           Under that Act, it was correctly held that a final and irrevocable
must be paid, even if their services are not required, unless            dismissal did not constitute a lock-out because the dismissal
they voluntarily forfeit their right to be paid. The arbitrator noted    was not aimed at inducing the employees to accept a demand.
that where the agreement was silent, the intention of the parties        The Court held that that reasoning applies with equal force to
must be ascertained from the words of the agreement. While it            section 187(1) (c). A final dismissal cannot serve the purpose of
might be logical to begin with the contractual principle, the            compelling the dismissed employee to accept a demand. A
inclusion of short time in the agreement was, in itself, a               “lock-out dismissal” can only occur if the employees are given
departure from that principle. Short time was designed to give           the opportunity to accept the employer’s demand. Once the
employers flexibility to cut their wage bill during slowdowns in         dismissal becomes final, the dismissal is not a lock-out
production. The union's willingness to agree to short time               dismissal, its purpose was rather to get rid of the dismissed
indicated that it appreciated that business could be cyclical and        employees and replace them with others who were willing to
that short time was necessary.                                           satisfy the employer’s business requirements. Although a lock-
                                                                         out dismissal does not appear to fit into the statutory definition
The arbitrator also noted that the agreement was the product of          of dismissal, it was clear that section 187(1) (c) of the LRA
collective bargaining. If the union feared that short time might         contemplated a special kind of dismissal.
be abused, it could have negotiated safeguards or insisted on
an express provision requiring the employees' consent. If it did         The Court held that the argument that an employer cannot
not do so, the employer was entitled to presume from the                 retrench employees in order to increase profits, but only to
manner in which the relevant clause was drafted that no                  ensure survival, was not supported by the LRA. The
requirement for prior consent would be implied. The arbitrator           respondent’s argument that the appellant was obliged, in the
held that it would be unfair to permit the union to raise the point      circumstances, to lock the employees out until they accepted its



                                                                                                                           April 2009 – Page 17
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demand was dismissed. The Court also held that the                          Assure those concerned that they, and their union
respondents had neither alleged nor proved that the appellant                representatives, will be kept informed of relevant
intended to compel them to agree to its demands. The appeal                  developments and that a return to normal operations (by
was upheld with costs.                                                       way of formal withdrawal of the notice) will be made as
                                                                             soon as circumstances permit.
It was held in CWIU & Others v Algorax (Pty) Ltd (2003) 12 LAC
5.2.6 that if it happens that the employer consult with its             As the issuing of notice and the act of short time can cause
employees or with the union but they refused to consent to the          industrial relations problems, the possibility of redeploying
short time proposal, where an employer seeks to reduce costs            employees to other productive work should always be
in its business, an employer had a genuine operational                  examined fully before issuing such notice. It is important to note
requirements justifying the working short time. In this case, the       that in SACTWU’s case, employees were sent to short time on
employer had dismissed its employees after they had rejected            the same day they were notified of the short time work. No prior
the proposal that the employer had made seeking to replace the          notice was given to either employees or their union. That was
eight-hour three-shift system with a twelve-hour two-shift              challenged by the employees’ union indicating that the
system in order for the business to be more viable so as to save        employer’s failure to give prior notice had constituted an unfair
employment for its employees. The Labour Appeal Court (LAC)             labour practice. Therefore, it is a clear indication that for the
noted that the employer can demand that they work short time            employers to avoid disputes of such nature, they should notify
but they are not under its obligation to comply with that               their employees of the proposed short time work well in
demand. It was noted that if they refused to do so, such                advance.
employees may be dismissed for operational reasons. The
Court found that the respondent had complied with the                   How long can an employer place employees on short time?
provisions of section 189(1). Furthermore, it succeeded in
proving that the reason for the dismissal of its employees was          As it was mentioned that short time is regarded as a temporary
based on its operational requirements, as required by section           measure, therefore, there is no prescribed period to place
188(1) (a) (ii) of the LRA. The dismissals of the employees were        employees on short time. However, the timing should be fair
held to be automatically unfair. The appeal was dismissed.              and reasonable and both parties must agree to it. For example,
                                                                        it may last for a day, weeks or even months. The case between
Notice                                                                  SACU obo Majiet v Living Leather (2008) 17 BCFMI 10.8.1
                                                                        addressed the issue of duration. The applicant was employed
It is an industrial relations concept and a practice used to give       by the respondent as a machinist until she was placed on short
employees notice of pending short time work. Thus where there           time. She also did not receive a salary while placed on short
is a real risk of short time being necessary, notice should be          time. The applicant made several attempts to contact the
given to employees. Notification does not have to be in writing         respondent in order to establish when her short time would end
but it is advisable that it should be. The length of the notice will    so that she could return to work, without any success. She,
be dependent on whether or not the cause and the appropriate            therefore, reasoned that she was dismissed. She referred a
date of the interruption of normal working is known in advance          dispute to the bargaining council alleging that she had been
and, if so, how long in advance.                                        dismissed as the respondent never recalled her to work. The
                                                                        arbitrator found that the respondent's version showed that the
When the cause or approximate date of intended short time               company had placed the applicant on short time for poor work
work is known well in advance, the employees or union                   performance. That was not the proper course of action, and she
representatives should be briefed informally as early as                had not received a hearing as to her performance and it had
possible and a notice of not less than the normal payment               also failed to inform her of the date on which she could return
period (a week or a month) should be issued to each employee            for duty. Therefore, it was clear that the applicant's services
concerned.                                                              were terminated. The dismissal was, accordingly, both
                                                                        procedurally and substantively unfair. The respondent was
In some emergency cases, notice given to expire at the end of           ordered to compensate the applicant with an amount equivalent
the working day in question may be all that it is possible to give.     to six months’ salary.
There is no standard form of notice. However, such notice
should:                                                                 The SACTWU’s case also addressed the issue of duration. In
                                                                        this case, employees were placed on indefinite short time and
    Be addressed to each employee likely to be affected (care          they alleged that the failure by the employer to tell them as to
     should be taken to contact all employees affected for              how long they would be on short constituted was unfair. The
     example, those on sick leave, on leave etc.),                      Court noted that the main key over the issue was the
    Carry the date of issue and the time and date of expiry,           agreement as the employer who is going through difficult
    indicate that employment will be on a day-to-day basis             financial times may not simply send its employees home until its
     from the time of expiry,                                           business picks up.
    Explain briefly the circumstances which necessitated it,
     and                                                                In the instances where a collective agreement exist, if an
                                                                        employee, as a result of the introduction of short time, works for



                                                                                                                          April 2009 – Page 18
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less or is paid for less than five full days during any period of       Can employees claim UIF while on short time?
four consecutive weeks, such contract of employment shall be
deemed to have been terminated. The employee or the union               Section 16 of the Unemployment Insurance Act 63 of 2001
may refer a dispute based on a claim for severance pay in view          (UIA) provides that subject to section 14 of the UIA, an
of the fact that the employee is deemed to have been                    unemployed contributor is entitled to unemployment benefits
terminated for operational reasons. Based on what was                   contemplated for any period of unemployment lasting for more
mentioned above, it is interesting to note that employers and           than 14 days, if the reason for the unemployment is:
employees or the union should agree on the actual date or
estimated date as to when to return to their normal working                 The termination of the contributor’s contract of employment
hours.                                                                       by the employer of that contributor or the ending of a fixed
                                                                             term contract,
Selection criteria                                                          The dismissal of the contributor, as defined by section 186
                                                                             of the LRA, and
The Code of Good Practice on Dismissal based on Operational                 Insolvency in terms of the provisions of the Insolvency Act
Requirements (the Code) states that if one or more employees                 24 of 1936.
are to be selected for dismissal from a number of employees,
the LRA requires that the criteria for their selection must be          However, such employees should have registered with the
agreed with the consulting parties or if no criteria have been          Department of Labour and contributed to the fund. Therefore,
agreed to, the one applied must be fair and objective.                  employees on short time are not entitled to claim the UIF as
Therefore, when selecting employees for short time working, an          they are still considered to be employed.
employer should apply the same standard of selection criteria
as set out by the Code. Selection criteria that are generally           Leave
accepted to be fair include the length of service, skills and
qualifications. Generally, the test for fair and objective criteria     Employees’ leave that are on short time work does not get
will be satisfied by the use of last in first out principle.            affected by the fact that their ordinary working hours are
                                                                        reduced. They still qualify for their 21 consecutive days of paid
Furthermore, the selection must not discriminate against                leave per annum, 36 months sick leave cycle and three days
employees on any arbitrary grounds as stipulated under section          family responsibility leave per annum as provided by the BCEA.
6 of the Employment Equity Act 55 of 1998, namely: gender,
sex, age, sexual orientation, religious beliefs, race etc. The LC       Dispute resolution
had held in the case between CWIU v Johnson & Johnson
(1997) 2 LC 8.29.1 that the dismissals of the female employees          Disputes regarding unilateral changes to terms and conditions
were unfair. The union alleged that the selection criteria which        of employment are disputes of interest and, therefore, cannot
was used to select the retrenched employees was not fair and            be arbitrated by the CCMA. In the instances where the
objective and was discriminatory on the grounds of gender as            employer unilaterally impose short time work without consulting
only female workers were selected for retrenchment. The                 its employees, under common law, they can either seek an
respondent was ordered to pay the employees compensation                interdict against the employer in the ordinary courts or wait until
equal to the remuneration which each would have been paid               the variation is introduced and refuse to work because of the
from the date of dismissals until the date of the handing down of       employer’s breach, and sue for damages (Civil Court). This
the judgment. It is, therefore, important for employers to treat        action could be an inadequate consolation as the employer
the selection criteria with caution in order to avoid disputes of       could respond by exercising its contractual right to dismiss on
such a nature.                                                          notice. Under the LRA, the CCMA has the power to arbitrate on
                                                                        the substantive fairness of such a dismissal.
Remuneration and deductions
                                                                        The other option for an individual employee is to directly refer
When employees are on short time work, they only receive                the matter to the LC for adjudication. If the change(s) affects a
salary or wages on the hours worked. That means employees               number of employees they can go on strike after proper
take wage cut in order to keep their co-workers in their jobs.          procedures have been followed.
That is one of the reasons it was mentioned that consultation is
the most important element that the employer should consider            In instances where short time has been inconsistently applied,
before implementing short time work and must both agree to it           for example, where certain employees has been put on short
and the payment method.                                                 time while others are not, they can lodge an unfair
                                                                        discrimination or victimisation grievance in writing with their
Section 34 of the BCEA provides that an employer may not                employer. The matter can thereafter be referred to the CCMA
make deductions from an employee’s remuneration unless both             within six months. If the matter remains unresolved through
parties had agreed in writing to it. It also provides that the total    conciliation, it can either be referred for arbitration (if both
deductions should not exceed one-quarter of the employee’s              parties agree) or to the LC for adjudication.
remuneration.




                                                                                                                          April 2009 – Page 19
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Conclusion                                                              FBWU & Others v Parys Roller Milling Company (1994) 1 ICJ
                                                                        5.2.28.
Even in the best run company, circumstances can arise which             Fry’s Metals (Pty) Ltd v NUMSA & Others (2002) 11 LAC
lead to a temporary reduction of work that may result to                1.11.37
employers excising retrenchment. The article revealed that              SACTWU obo Ndlangisa & Other v Prowood Clothing (2005) 14
short time is one of the measures that employers can consider           NBCCMI 6.10.2
in order to minimise the chances of retrenching employees.              NUMSA v Volkswagen of SA (Pty) Ltd (2007) 10 BALR 989 (P)
Short time is more accommodative to both employers and                  SACU obo Majiet v Living Leather (2008) 17 BCFMI 10.8.1
employees since it is for a temporary period and employees can
return to their normal duties when the employer’s business              References
have picked up. Although, it had an impact on employees’
salaries and job because their working hours and salaries are           Mischke. C. 2009. “Alternative to dismissal”.IRNETWORK.
reduced, it is interesting part to note that they do not lose their     www.irnetwork.co.za. Accessed in March 2009
jobs. Therefore, it needs one’s sacrifices. It is important to note     Mischke. C. May 2008. “When the lights go out: Working short
that employers should treat the implementation of short time            time”. IRNETWORK. www.irnetwork.co.za. Accessed in March
with caution in order to avoid the breach of contract that could        2009
result in unilateral changes of terms of condition of employment        Lay off, short-time working and redundancy. 2009.
and unfair dismissal dispute. Moreover, the inconsistent                http://www.employmentrights.ie. Accessed in March 2009
application of short time should be avoided, employers are              Personnel policies and procedures: Layoff and Short time
encouraged to use criteria that is fair and equitable when              working. Web: http://www.ibec.ie. Accessed in March 2009
selecting employees for short time. The article also revealed           Republic of South Africa: Unemployment Insurance Act 63 of
that consultation plays a measure role when employers propose           2001. Government printers: Cape Town
to introduce short time work and that both parties must agree to        Republic of South Africa. Basic Conditions of Employment
it.                                                                     Act 75 of 1997. Government Printers: Pretoria
                                                                        Republic of South Africa: Employment Equity Act 55 of 1998.
Case references                                                         Government Printers: Pretoria
                                                                        Republic of South Africa. Labour Relations Act 66 of 1995.
CWIU & Others v Algorax (Pty) Ltd (2003) 12 LAC 5.2.6                   Government Printers: Pretoria
CWIU v Johnson & Johnson (1997) 2 LC 8.29.1




                                                                                                                          April 2009 – Page 20
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                                                         THE GLOBAL ECONOMIC CRISIS AND THE LOOMING RETRENCHMENTS
                                                                                                       By Poso Mogale


Introduction                                                             retrenchments must be effected in accordance with a fair
                                                                         procedure and must be for a fair reason. For the purpose of this
The current negative worldwide economic conditions have                  article, the focus will be on large scale retrenchments as
crippled various industries. According to media reports, the             regulated by section 189A of the LRA. This section makes
retail motor and manufacturing industry, the mining sector and           provision for the appointment of a facilitator at the request of
the textiles sector are among the top hardest hit by the                 either party by the Commission for Conciliation, Mediation and
“economic meltdown”. All countries across the world are                  Arbitration (CCMA) to assist parties regarding the contemplated
affected by the “deepest and most serious economic crisis in at          retrenchment(s).
least the last 80 years”. Speculations are that in South Africa,
amongst other things, the National Credit Act 34 of 2005 (NCA)           Substantive fairness
which came into being on 1 June 2007 and the continuous
increase in interest rates have aggravated the situation. The            Section 213 of the LRA defines operational requirements as
effect of the NCA was that it was almost impossible to obtain            requirements based on the economic, technological, structural
credit and consequently fewer sales were made in the motor               or similar needs of an employer. For the retrenchment to be
industry and banks could not borrow money to its clients as              substantively fair, the employer must show that it had a valid
they had previously done so. The retail sector also felt a pinch         and fair operational need to do so. For instance, retrenchment
as consumers were no longer able to spend as much as they                must have been the only viable option and the last resort.
used to.

All these factors have led to complete closure or reduction of
production in most industries. Retrenchments seem inevitable.
It is estimated that 250 000 jobs could be lost in 2009. The
Unemployment Insurance Fund recorded about 32 517
employment termination claims as a result of expiry of
contracts, followed by 9 644 retrenchments in the last quarter of
2008. However, some employers are taking advantage of the
situation by assuming that employees are aware of the
economic conditions and would, therefore, not question them
when they say they can no longer afford to employ them. In
order to avoid severance payments, some employers use “non-
existent” reasons to try and get rid of the employees, especially
those who have long service.

The objective of this article is to:
                                                                                          Economy toughest for older employees
    Try and find the best way around retrenchments based on
     economic reasons,(In Kukard & Others v Molapo                       The Labour Appeal Court (LAC), in CWIU & Others v Latex
     Technology (Pty) Ltd (2005) 14 LC 7.1.4 it was held that            Surgical Products (Pty) Ltd (2005) 14 LAC 7.1.3, held that “the
     the employer must show that the retrenchments were                  respondent had failed to show that there was a reason to
     aimed at achieving savings and that the reason for the              downsize. It had failed to show the basis upon which it could be
     retrenchment must be a bona fide business related                   said that it had a reason to downsize because soon after the
     reason), and                                                        retrenchments, it employed about 80 contract workers who
    Interventions by various stakeholders.                              have not been shown to possess skills which the retrenched
                                                                         employees did not have and for whose preference to the
Fairness of the retrenchment                                             retrenched employees it had provided no justification.” On the
                                                                         issue of selection criteria it was held that although the selection
In terms of the Labour Relations Act 66 of 1995 (LRA) small              criteria agreed to by the parties could be subjective, because it
scale retrenchments are governed by section 189 while large              was agreed upon, the employer would not be held liable for
scale (employers with more than 50 employees) retrenchments              applying the subjective criteria. In fact, it would be acting unfair
are governed by section 189A. Like all other dismissals,                 should it deviate from the agreed criteria. It is only when the




                                                                                                                             April 2009 – Page 21
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employer applies selection criteria that have not been agreed               Short time – Reducing the number of hours that
upon that the criteria must be fair and objective.                           employees would ordinarily have worked.
                                                                            Cutting bonuses – With a view to save jobs cutting
The issue of selecting who to retrench is also vital as the                  bonuses including those of managers, executives and
substantive fairness of a retrenchment could be challenged on                board members until the situation has changed could be
the basis of selection criteria. The employer could consider                 implemented.
factors such as key skills, length of service, performance                  Temporary layoffs – That is mostly applicable to
record, disciplinary record, educational requirements and                    casual/contract workers. The company can freeze the
experience.                                                                  utilisation of these workers until things are better or back to
                                                                             normal.
One of the roles of the facilitator would be to deal with issues            Extended Christmas breaks.
around the reason(s) for the retrenchment, measures to avoid                Wage and salary freezes.
the retrenchment and the controversial issue of disclosure of               Reduction of overtime work.
information. The union may request that certain information be              Focus on saving electricity.
disclosed in order to convince itself that the employer can
indeed not afford to keep the employees. During facilitation,           Payments at retrenchment
parties can enter into an agreement to the effect that should the
employer’s economic conditions improve, retrenched                      It is worth mentioning that retrenchments are “no fault
employees would be granted first preference. However, that re-          dismissals”. In terms of the Basic Conditions of Employment Act
employment would not be automatic, parties must, therefore,             75 of 1997 (BCEA), an employee is entitled to the following
agree on the criteria for re-employment. In the absence of an           payments at termination of employment due to operational
agreement, the employer would not be obliged to re-employ the           requirements:
affected employees.
                                                                            Leave accrued and not taken,
Procedural fairness
                                                                            Salary for the days worked,
Both parties must agree on the process of facilitation and notify           Notice pay (if the employee was not required to work
the CCMA in writing by completing LRA form 7.20. If a facilitator            during the notice period),and
is appointed, the employer is not allowed to retrench for a                 Severance pay calculated at one week’s salary for each
period of 60 days. After 60 days has lapsed, the employer may                completed year of continuous service. A collective
give notice of retrenchments. The union may also give notice of              agreement may provide for more than one week for each
a strike or refer a dispute concerning the substantive fairness of           year. It must be noted that an employee who unreasonably
the retrenchment to the Labour Court (LC). Once the matter                   refuses an offer of alternative employment forfeits the right
has been referred to the LC the union forfeits the right to strike.          to severance pay.
The same principle would apply if they choose the strike route.
Should the union decide to go on strike, they need to follow the        According to section 35(5) of the BCEA the following payments
strike procedures in terms of section 64 of the LRA.                    should be included in an employee's remuneration for the
                                                                        purposes of calculating pay for annual leave in terms of section
It must be borne in mind that a facilitation is conducted on a          21, payment instead of notice in terms of section 38 and
with prejudice basis. However, parties may agree in writing that        severance pay in terms of section 41:
a part of the facilitation be conducted on a without prejudice
basis. The part of the facilitation conducted on a without                  Housing or accommodation allowance or subsidy or
prejudice basis may not be disclosed in any court proceedings.               housing or accommodation received as a benefit in kind,
No person may call a facilitator to give any evidence on any                Car allowance or provision of a car, except to the extent
aspect of facilitation in any legal proceedings.                             that the car is provided to enable the employee to work,
                                                                            Any cash payments made to an employee, except those
Alternatives to retrenchment                                                 listed as exclusions in terms of this schedule,
                                                                            Any other payment in kind received by an employee,
Retrenchment must always be the last resort. In a quest to                   except those listed as exclusions in terms of this schedule,
avoid retrenchments parties can agree on some of the                        Employer's contributions to medical aid, pension, provident
measures listed below. The measures to be employed would be                  fund or similar schemes, and
determined by the challenges faced by that particular industry.             Employer's contributions to funeral or death benefit
Those measures are:                                                          schemes.

    Re-assignment/Redeployment – That can involve                      The following items do not form part of remuneration for the
     redeploying employees to other departments/units/plants            purpose of these calculations:
     were there are vacancies. Those employees might have to
     be trained on new skills.                                              Any cash payment or payment in kind provided to enable
                                                                             the employee to work (for example, an equipment, tool or



                                                                                                                          April 2009 – Page 22
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     similar allowance or the provision of transport or the             The minister of finance in his 2009 budget speech has
     payment of a transport allowance to enable the employee            announced a major public investment programme of about
     to travel to and from work),                                       R787 billion over the next three financial years. According to the
    A relocation allowance,                                            PJWG that programme must be maintained even in the midst of
    Gratuities (for example, tips received from customers) and         the current economic challenges and should be implemented
     gifts from the employer,                                           on an expedited basis where possible. In terms of industrial and
    Share incentive schemes,                                           trade policy measures it was agreed that:
    Discretionary payments not related to an employee's hours
     of work or performance (for example, a discretionary profit            A significant part of the national response to the global
     -sharing scheme),                                                       economic slowdown should be to rebuild local industrial
    An entertainment allowance, and                                         capacity and avoid de-industrialisation during the period
    An education or schooling allowance.                                    ahead.
                                                                            Sector specific strategies to address vulnerable sectors
The value of payments in kind must be determined as follows:                 (those with significant employment and labour intensity
                                                                             and where there are currently large planned or actual job
    A value agreed to in either a contract of employment or                 losses and company closures as a result of the crisis) will
     collective agreement, provided that the agreed value may                be set up to prevent job losses and regain jobs and
     not be less than the cost to the employer of providing the              productive capacity lost and to promote employment
     payment in kind, or                                                     creation.
    The cost to the employer of providing the payment in kind.             Special consideration must be granted to measures to
                                                                             address the specific needs of Small Medium and Micro
An employee is not entitled to a payment or the cash value of a              Enterprises (SMME) in this crisis.
payment in kind as part of remuneration if:                                 A special national jobs initiative that brings together a
                                                                             range of new and revamped separately administered
    The employee received the payment or enjoyed, or was                    programmes will be launched.
     entitled to enjoy, the payment in kind during the relevant             Skills development and the promotion of learnerships and
     period, or                                                              high-level skills would be an essential part of all sector
    In the case of a contribution to a fund or scheme that forms            recovery programmes. Pushing for workers who might be
     part of remuneration, the employer paid the contribution in             retrenched to be re-skilled to enable them to be absorbed
     respect of the relevant period.                                         into other sectors that are less affected by the crisis.
                                                                             All social partners would encourage local procurement of
Where payment fluctuates, for example, in the case of                        supplies, services and other requirements wherever
commission based employees, remuneration must be                             possible in order to maintain and increase local output and
calculated over a period of 13 weeks, or if the employee has                 employment levels.
been in employment for shorter than that, for such shorter                  Funding for distressed sectors through the Industrial
period. A payment received in a particular period in respect of a            Development Corporation (IDC) and Development Bank of
longer period (e.g. a 13th cheque) must be pro-rated.                        Southern Africa (DBSA).
                                                                            Organised business and its affiliates to urge and
Government interventions                                                     encourage Chief Executive Officers to avoid retrenchments
                                                                             as a result of the global economic crisis and instead invest
The Presidential Joint Working Group (PJWG) comprising of                    in their people and modernise their productive capacity in
business and labour was constituted under the auspices of the                order to avoid job losses in anticipation of the opportunities
office of the president of the Republic of South Africa. The                 that will emerge after the global economic recovery. At the
PWJG has developed a framework for South Africa’s response                   same time it is expected that policies on executive
to the international economic crisis. Some of the broad                      remuneration would show appropriate restraint.
principles governing its response were as follows:                          Employers and labour are encouraged to explore all
                                                                             possible alternatives to retrenchments. They are also
    To avoid the risk of unfairly placing the burden of the                 encouraged to utilise facilitation by the CCMA as provided
     economic downturn on the poor and the vulnerable,                       for in section 189A of the LRA. It was agreed that parties
    To ensure that all activities that are aimed at strengthening           should explore ways to strengthen the CCMA with regards
     the capacity of the economy to grow and create decent                   to its role in avoiding retrenchments.
     jobs in the future are protected and supported as far as
     possible, and                                                      In the mining industry, a task team comprising of government,
    To maintain the planned high levels of investment in public        labour and business had been constituted to investigate
     sector infrastructure and to encourage the private sector to       possible solutions to the global financial crisis. The task team
     maintain and improve, wherever possible, their levels of           had to come up with measures to mitigate the impact of the
     fixed direct investment and continue with corporate social         financial crisis on the local mining industry. Government has
     investment programmes.                                             already come to the assistance of the mining sector by delaying
                                                                        the introduction of the mining royalties’ tax for a year.



                                                                                                                          April 2009 – Page 23
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                                                                             restructured in a way that allowed some of its workforce to
In the automotive industry, a joint government-industry task                 become suppliers,
team has also been established to draw up recommendations                   Empowering employees with skills or to help with
on bringing relief to the embattled industry. The task team                  productivity and look at whether companies can change
would look at ways to enhance the cash flow of companies, to                 the way they look at productivity,
stimulate vehicle demand and to ensure employment                           Linking employees and employers with state agencies, and
stabilisation. The task team would also look at methods used in             Improving productivity and rationalising costs. For
other countries to safeguard their automotive manufacturing                  example, at a company called Simmer & Jack, an
bases.                                                                       agreement was reached to the effect that employees
                                                                             would work an additional shift every month until 19
Department of Labour                                                         December 2009. Ultimately, only five employees instead of
                                                                             the initial 495 were retrenched.
Legislative amendments could soon (around June 2009) be on
the cards to extend the payment of benefits by the                      The LC will also be inundated with applications challenging the
Unemployment Insurance Fund (UIF) from the current 8.5                  fairness of retrenchments. Because retrenchments are no fault
months to 11 months. Following a submission to the portfolio            dismissal the LC tends to be harsher on employers to make
committee on labour, UIF commissioner Boas Seruwe said the              sure that they follow the procedures than it would be, for
fund's accumulated surplus of R15.4 billion enables it to soften        example, in a misconduct case. The court also expects the
the negative effect of the economic downturn on employment in           employer to have a very good, solid reason for retrenching
the country.                                                            because retrenchments are supposed to be the last resort. The
                                                                        objectivity of the employer’s selection criteria will also be
As a result of rising worker retrenchments, the fund’s payouts          carefully scrutinised.
have increased from about R250 million a month in the middle
of 2008 to R300 million a month (to some 50 000 beneficiaries)          Conclusion
by the end of the year. He says further retrenchments and a
possible extension of the payment period could lead to a 15%            A collective response to the challenge facing South Africa is
rise in payments this year. However, actuarial valuations show          required in order to withstand the crisis and ensure that the
that the fund is able to handle this.                                   poor and most vulnerable are protected as far as possible from
                                                                        its impact. The biggest challenge for everyone is to protect
Contributions to the fund rose 13.75% to R9.1 billion in the            existing jobs.
financial year to end-March 2008, and payouts by 3% to R2.9
billion. The surplus for the financial year was R6.8 billion.           Case references

The role of the CCMA and the LC                                         CWIU & Others v Latex Surgical Products (Pty) Ltd (2005)14
                                                                        LAC 7.1.3
                                                                        Kukard & Others v Molapo Technology (Pty) Ltd (2005) 14 LC
The CCMA has plans in place to handle the difficult times
                                                                        7.1.4
ahead with an expected increase in cases and more
retrenchments. It is looking at innovative ways to deal with the
expected retrenchment of thousands of people with the                   References
emphasis on changing the mindsets of management and
                                                                        CCMA expects increase in cases plus more retrenchments in
workers to help them withstand the global economic meltdown.
                                                                        2009. www.sabinetlaw.co.za. Accessed in April 2009
In presenting its annual report to parliament, CCMA director Ms
                                                                        Framework for South Africa’s response to the international
Nerine Kahn indicated that it is planned that 70% of disputes
                                                                        economic crisis. www.info.gov.za. Accessed in April 2009
would be resolved at conciliation stage. She also indicated that
                                                                        Republic of South Africa. Basic Conditions of Employment
the CCMA had in the past year been involved in pro-active high
                                                                        Act 75 of 1997. Government Printers: Pretoria
impact outreach activities to raise awareness. CCMA facilitators
were also involved in finding solutions suited to local business        Republic of South Africa. Labour Relations Act 66 of 1995.
                                                                        Government Printers: Pretoria
conditions. She emphasised that the CCMA wanted to find
                                                                        www.engineeringnews.co.za. Accessed in April 2009
solutions that would provide an alternative to retrenchment such
                                                                        www.labour.gov.za /uifbenefits. Accessed in April 2009
as:
                                                                        www.miningweekly.com. Accessed in April 2009
                                                                        www.polity.org.za/article/south-africas-budget-speech-february-
   For the workers to take over a particular aspect of the
                                                                        11-2009. Accessed in April 2009
    business. For example, a Western Cape dairy had been




                                                                                                                          April 2009 – Page 24
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                                                                  ECONOMIC MELTDOWN – THIS CRISIS HAS A WOMAN’S FACE
                                                      By Amelita King Dejardin (gender expert, International Labour Organisation (ILO)
                                                                                                         Summarised by Poso Mogale


The current economic crisis is unravelling before us faster than        The region's experience in 1997 supports this concern. A
even the most pessimistic of experts predicted just a few               survey in the Philippines found that when a male worker lost his
months ago. The effects are already trickling down to ordinary          job, 65% of households reported a fall in income, but when a
working people. In the Asia-Pacific region, the ILO has                 woman worker was retrenched, 94% of households had less
projected that as many as 27 million more people could become           money. More households of retrenched women workers cut
unemployed in 2009. A total of 140 million others in the region's       back on their meals than those where men had lost work.
developing economies could be forced into extreme poverty.              Poorer households also rely more on unpaid care work (for
                                                                        children, the elderly or sick family members) which is almost
The numbers are staggering and, without a doubt, everyone will          always provided by women.
be touched by the crisis. Yet what is lacking from many of the
debates on how countries should respond is a realisation that           So, in tough times women tend to be stretched more between
the crisis has a gender bias. In Asia, working women will be            their conflicting responsibilities. Since the 1990s, the
affected more severely and differently, from their male                 governments of many Asian countries have strengthened their
counterparts. For policy-makers, failure to take into account this      social protection schemes. This is a welcome move since a
gender dimension, especially at the lower end of the socio-             social floor is a vital tool in fighting poverty (and designing a
economic scale, could be a critical miscalculation, worsening           social floor that meets women's needs is one of the themes of
the working and living conditions of millions, deepening                the current ILO Global Gender Campaign).
economic and social inequalities, and wiping out a generation of
hard-won gains in pay equity and workplace equality.                    However, in many countries women do not get equal access to
                                                                        social protection. In some cases, this is because of the non-
Why are women affected differently?                                     standard, low-wage and informal economy jobs they have,
                                                                        which are less likely to come with such social benefits. In others
One reason is that women workers are concentrated in labour-            it is because policy-makers assume women can rely on men, or
intensive export industries that feed into global supply chains. In     because benefits are directly linked to keeping your job - for
contrast, male workers tend to be distributed across a wider            example, most maternity protection systems in Asia are paid
range of economic sectors. Women are also concentrated in               solely by employers.
the lower levels of these global supply chains, in casual,
temporary, sub-contracted and informal employment, where                Of course, this is not a simple black-and-white issue. In some
work is insecure, wages low, working conditions poor, and               areas or sectors men will bear the brunt. For example, demand
workers least likely to be protected by conventional social             for female workers could rise as regular workers are replaced
insurance systems. It follows that shrinking global demand for          by casuals. Among migrant workers in developed economies,
clothes, textiles and electronics (as well as for related business      better-educated, skilled women who work as nurses, doctors or
services like hotels and restaurants) means that women will be          in other specialist healthcare jobs, or as domestic workers, are
the first to lose their jobs.                                           less likely to be laid off than their male migrant worker
                                                                        counterparts - who are mostly in construction, manufacturing
Asia's experience during the 1997 economic crisis provides              and agriculture. It is, therefore, critical that when governments,
evidence to back this projection. In Thailand, 95% of those laid        employers and worker’s organisations sit down to discuss
off from the garment sector were women, in the toys sector it           policies to combat the social and economic effects of the crisis,
was 88%. In South Korea, 86% of those who lost their financial          they do so from the perspective of women as well as men.
services and banking jobs were female.
                                                                        For example, public infrastructure and investment programmes
The consequence of losing a job also affects women differently          are common components of national crisis response packages.
and more severely. Research shows that the poorer the family            However, the bulk of jobs created by these programmes could
the more important the woman's earnings are to its subsistence,         easily go to men because construction, engineering and
children's health and education. And because women workers              technical jobs are dominated by and seen as more suitable for
in Thailand, the Philippines and Vietnam - among other                  men. This is what we saw in 1997.
countries - are concentrated in lower paid jobs they tend to
save less, so a small pay cut or price rise can severely damage         Not only should efforts be made to ensure that these jobs are
them and their dependents.                                              open to women, but the concept of what are public works
                                                                        should be expanded to incorporate social services, healthcare,



                                                                                                                          April 2009 – Page 25
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education, child and youth development. Recruitment strategies          women the leadership of workers' and employers' organisations
must be created to reach women. Child care facilities must be           was dominated by men. If crisis response packages are to be
included. Initiatives specially targeting unemployed women are          effective they must take these gender differences into account.
needed. Economic and fiscal stimulus packages must include
support for microfinance - which has been extremely effective in        Reference
helping women start small businesses. When it comes to the
social aspect of policy responses, basic healthcare, maternity          Dejardin, AK. 2009. Economic meltdown – this crisis has a
and education must be included. Finally, special attention is           woman’s face.
needed to ensure that women's own views and opinions are                http://www.faoilo.org/fileadmin/user_upload/fao_ilo/pdf/Articles/
heard. In 1997, women were not properly included in the social          Bangkok_post.pdf. Accessed in April 2009
dialogue because even in businesses that employed mostly




                                                                                                                          April 2009 – Page 26
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                                             SHORT TIME WORK CRITICAL TO GERMAN FIRMS SURVIVING ECONOMIC CRISIS
                                                                                        Summarised by Alucia Mdaka


Introduction                                                            particular, he explained, depend on the advice offered by local
                                                                        employment agencies. The staff of these agencies are well
Short time work is the right answer when suddenly order books           prepared to provide the services required. He mentioned that
are empty and every effort is being made to save jobs. The              the demand for short time work as a result of the economic
second German recovery package simplifies the conditions of             downturn has risen strongly over the last few months. In
the program and steps up its financial assistance. Short time           January 2008, companies applied to put 290,000 workers on
work and further training offer companies suffering a temporary         short time. Since October 2008, 775,000 applications have
shortage of work a good way of riding out the economic storm            been made from the automobile and metal-working industries.
without having to get rid of workers, commented Federal Labour          The mechanical engineering branch and the plastics branch are
Minister, Olaf Scholz. In this way, employers and employees             the worst hit. On 23 February 2009, Volkswagen announced
can prepare for the post-crisis period, and can then build on           that it was placing two-thirds of its workforce on short time.
previous successes with workers who have improved                       Frank-Jörgen Weise called on businesses to allow employees
qualifications. Along with Frank-Jörgen Weise, Chairman of the          on short time to attend training courses. This will also reduce
German Federal Employment Agency (FEA), Scholz was                      the risk for them of long-term unemployment.
presenting the revised short time working regulations at the
Mercedes-Benz plant in Berlin.                                          Short time work: A suitable and flexible instrument

Improvements, thanks to government action                               Stefan Schneider, Personnel Manager of Mercedes-Benz Cars,
                                                                        praised the less complicated access now made possible for the
It was indicated that a short-time work allowance can now be            short time work allowance: “Short time work is a good way for
paid for a period of 18 months. The FEA will pay half of the            businesses to retain their workforce and their competitiveness
employer's social insurance contributions for 2009 and 2010. If         even in difficult times”, he said.
workers are given further training while working on shortened
hours, the full social insurance contributions will be paid.            It was also indicated that at Daimler AG, 50,000 workers are
Application procedures and requirements for qualifying for the          currently on short time. The short time work allowance plus
short time work allowance will be further simplified.                   company-specific payments bring workers' take-home pay to
                                                                        about 90% of their normal net wage. Stefan Schneider
Advising small companies                                                explained that they “welcome the second recovery package
                                                                        because it makes it simpler for us to use the option of short-
                                                                        time work”. The example he gave of how salaries are
                                                                        complimented by the allowance is that, a married man with one
                                                                        child, in tax bracket three, earns 1,500 Euro (gross) if he works
                                                                        full time. This translates into 1,192 Euro net. On short time, he
                                                                        works only 40% of his normal working time, for which his
                                                                        employer pays him 40% of his normal wage, or 600 Euro (497
                                                                        Euro net). The short time work allowance from the FEA is
                                                                        equivalent to 67% of the loss in net wages, i.e. 476 Euro. Thus,
                                                                        during the short time working period he can take home 973
                                                                        Euro a month. If he was to lose his job, he would be eligible for
                                                                        only 783 Euro in unemployment benefits. On short time, he
                                                                        earns 190 Euro more than that every month, and keeps his job.

                                                                        Reference

                                                                        Short-time work critical to German firms surviving
                                                                        economic crisis. 25 February 2009.
                                                                        http://www.germanyandafrica.diplo.de/Vertretung/pretoria__dz/
                                                                        en/__PR/2009__PR/02/02__short__time__work,archiveCtx=20
The head of the FEA stressed that not only large companies              04826.html. Accessed in March 2009.
can benefit from the short time working arrangements, but also
small and medium-sized businesses. Small businesses in

                                                                                                                          April 2009 – Page 27

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                                                                IMPACT OF GLOBAL FINANCIAL CRISIS IN SUB-SAHARAN AFRICA
                                                                                                 Summarised by Alucia Mdaka

Introduction

The downturn in global growth, the decline in most commodity                  Cross-border spillovers intensified after the crisis broke
prices, and tighter credit have significantly worsened the                    because financial institutions and markets across borders
economic outlook for Sub-Saharan Africa. Risks are rising and                 were closely linked and risks highly correlated.
it is uncertain how long the crisis will last. Such risks involved
job loss and unemployment crisis. The other risks concern a              As a result of the financial crisis, the world economy is facing a
social and political crisis in a number of countries. Therefore,         deep downturn. The January 2009 update of the World
policy makers must walk a tight rope to avoid aggravating the            Economic Outlook projected that the global growth would slow
shock in aggregate demand and to protect hard-won gains in               from just under three and half percent in 2008 to about half
economic fundamentals. Any policy response must also take                percent in 2009 before recovering somewhat in 2010. However,
into account the impact on the poor and seek to incorporate              risks to this outlook remain on the downside.
social safety nets. Countries that do not have debt sustainability
and financing constraints may have some scope for fiscal                 How is Sub-Saharan Africa affected?
easing. But it is also clear that countries will depend critically on
donors honouring their commitments to aid and even increasing            Many countries in Sub-Saharan Africa enjoyed robust economic
aid, despite new competing demands on their own budgets.                 growth in recent years that has strengthened their balance
The International Monetary Fund (IMF) is now moving fast to              sheets. Sound economic policies were an important factor, as it
increase financial support to affected countries, step up                was the favourable external environment and increased
technical assistance, and reinforcing the policy dialogue with its       external support in the form of debt relief and higher inflows.
African members.                                                         Food and fuel price shocks of 2007 and 2008 that preceded the
                                                                         current global financial crisis had weakened the external
The global financial crisis and the short-term outlook                   position of net importers of food and fuel, caused inflation to
                                                                         accelerate, and dampened growth prospects. The global
The current financial crisis is more global than any other period        financial crisis greatly compounds the policy challenges
of financial turmoil in the past 60 years. The extent and severity       confronting the region as it strives to consolidate its economic
of the crisis that began with the bursting of the housing bubble         gains and meet the Millennium Development Goals (MDGs).
in the United States in August 2007 reflected the confluence of          The global financial crisis initially affected advanced economies,
several factors, some are familiar from previous crises, and             emerging markets, and low-income countries in very different
others are new. As in previous times of financial turmoil, the           ways. Advanced economies were first hit mainly by the
pre-crisis period was characterised by:                                  systemic banking crisis in the United States of America and
                                                                         Europe. Emerging markets with well developed financial
    Surging asset prices that proved unsustainable,                     systems were initially mostly affected by cross-border financial
    A prolonged credit expansion leading to accumulation of             linkages through capital flows, stock market investors, and
     debt,                                                               exchange rates. In financially less developed countries the
    The emergence of new types of financial instruments, and            growth and trade effects dominated with lags but crucial for all
                                                                         countries.
    The inability of regulators to keep up.

While the new crisis is characterised by:                                In Africa, frontier and emerging markets were hit first. It was
                                                                         indicated that by now indirect channels are fully at work in all
                                                                         countries, and risks are mounting that other channels may gain
    The rapid expansion of securitisation which changed
                                                                         in importance, especially in the financial sector. It was also
     incentives for lenders and lowered credit standards
                                                                         indicated that:
     systems became fragile because balance sheets became
     increasingly complex (further complicated by increased
                                                                             Frontier and emerging markets: Through their financial
     use of off-balance-sheet instruments),and
                                                                              links with other regions in the world, South Africa, Nigeria,
    Financial market players were highly leveraged and they
                                                                              Ghana, and Kenya were hit first, suffering falling equity
     relied on wholesale funding and external risk assessments.
                                                                              markets, capital flow reversals, and pressures on

                                                                                                                           April 2009 – Page 28

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     exchange rates. Ghana and Kenya had to postpone                    Unemployment scenario
     planned borrowing, and in South Africa and Nigeria
     external financing for corporations and banks is becoming          As for Africa, in the past 10 years, its economies have
     scarce,                                                            experienced faster and steadier economic growth than in the
    All countries: The global slowdown in economic activity            preceding two decades. Even a year ago Sub-Saharan African
     has pushed commodity prices with negative effects on               economies were on average, growing at a similar pace to the
     export earnings and the external current account, fiscal           rest of the world for the first time in three decades and seemed
     revenues, and household incomes. Commodity exporters               to have a bright growth outlook. Today the picture is quite
     face major terms of trade deterioration. IMF research              different.
     shows that in the past, a one percentage point slowdown
     in global growth has led to an estimated half percentage           The International Labour Organisation’s most recent labour
     point slowdown in Sub-Saharan African countries. The               market information for Sub-Saharan Africa confirms that the
     effects may be more pronounced this time because the               region stands out as a region with extremely harsh labour
     tightening of global credit compounds had impact of the            market conditions:
     slowdown, exacerbating risks for trade finance and other
     capital flows, and                                                     The unemployment rate has decreased slightly in the past
    Fragile states whose political and social situation is                  five years but the unemployment scenarios for the region
     inherently vulnerable. Countries like Burundi, Guinea-                  suggest that the unemployment rate could increase to
     Bissau, and Liberia are dependent on very concessional                  eight and half percent this year, adding an additional three
     financing that may well be affected.                                    million people to the ranks of the unemployed,
                                                                            Vulnerable employment (defined as self employed plus
Financial sectors in Sub-Saharan Africa are also vulnerable to               contributing family workers) accounted for more than three
several risks that could still unfold. Unlike in developed                   out of every four persons employed in the region in 2007.
economies, there has been no systemic banking crisis in sub-                 This rate has decreased by three and half percentage
Saharan Africa. Commercial banks and other financial                         points between 1997 and 2007 in Sub-Saharan Africa,
institutions so far remains largely sound. Cross-border banking              however, the worst case scenario for 2009 suggests that
system linkages are minimal, there is less exposure to complex               the rate could increase from 77.4% in 2007 to 82.6% in
financial products, and financial systems are not well integrated            2009, a five point two percentage increase. This would
with other global financial markets. However, as the crisis                  mean that an additional 28 million people could move into
continues, risks could grow because of:                                      vulnerable employment in comparison with 2007, and
                                                                            Similarly with working poverty, almost three fifths of the
    A protracted economic slowdown elevates credit risk. For                employed are classified as extreme working poor in Sub-
     instance, the domestic financial sector is vulnerable to a              Saharan Africa. For 2009 there could be an additional 36
     substantial weakening in client incomes and debt servicing              million people earning less than USD 1.25 per day when
     capabilities, particularly where credit growth has been                 compared to 2007. After a slight decline in the past
     rapid in recent years. Banks could also incur losses on                 decade, the worst case scenario suggests that the rate
     other financial assets, such as deposits with troubled                  could increase from 58.3% in 2007 to 67.2% for 2009.
     correspondent banks.
    Concentrated bank portfolios have become a source of               What is the outlook for Sub-Saharan Africa?
     vulnerability in several African countries. With global
     demand significantly lower and huge declines in the prices         The outlook for economic growth in Sub-Saharan Africa in 2009
     of most commodities, major industries, such as timber and          has worsened in recent months. With the expectation of a more
     cotton are hard hit. Problems in these sectors could quickly       pronounced global downturn, lower commodity prices, and
     affect the banking sector,                                         pressure on capital flows, in January 2009 the IMF projected
    In some countries banking systems may be increasingly              that growth in Sub-Saharan Africa will slow from just over five
     exposed to market volatility. Countries where high equity          percent in 2008 to about three and quarter percent in 2009 and
     returns had led to borrowing for investment in the stock are       over three percentage points less than forecast a year ago.
     at greatest risk, and                                              Although annual inflation has started to decline, it remains high
    Parent banks could withdraw funds from subsidiaries and            in many countries, largely because of the fuel and food price
     local banks. Risks of contagion from distressed foreign            increases through mid-2008. Fiscal balances are expected to
     parent banks to local subsidiaries within Sub-Saharan              deteriorate significantly as tax revenues, especially those that
     Africa could be associated with parent banks, with drawing         are commodity-related, come under pressure because
     capital from African subsidiaries, calling in loans to their       governments face additional demands for social spending
     African subsidiaries, no longer investing local profits in
     local subsidiaries, and/or combination of these.                   Fiscal balance

Therefore, financial sectors, especially banks, must be                 It was indicated that the fiscal balance had declined by about
monitored with care in order to minimise vulnerabilities and            six percentage points of GDP, from a surplus to a deficit of
mitigate risks.                                                         about four percent of GDP. The negative terms of trade shock

                                                                                                                          April 2009 – Page 29

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to commodity exporters is also widening current account                 agendas in order to boost prospects for growth. It was stated
deficits, by about four percentage points of GDP for the region         that because the economic crisis is global, therefore, it could
to six and quarter percent in 2009, though with significant             not be resolved by using only national tools. The solution to the
divergence between groups of countries.                                 crisis needs to be global and co-ordinated, development-
                                                                        oriented, people centered and inclusive. The following are some
Overall fiscal balance                                                  of the policy packages solution in dealing with the economic
                                                                        crisis:
The aggregate projections mask stark deferred from country to
country. Oil and metal exporters have been hardest hit as the           Fiscal policy
oil prices have fallen over 60% from their mid-2008 peak. Oil
exporters are going from fiscal and current account surpluses in        Governments need to walk a tightrope to conserve gains in
2007-08 to deficits in 2009, putting pressure on fiscal and             economic stability without aggravating the impact of the slowing
external accounts. Oil importers benefit from falling oil prices        external demand on domestic activity and especially on the
but are affected by the decline in the prices of other                  poor. In countries that have created fiscal space in recent
commodities, such as coffee, cocoa, or cotton, and by lower             years, automatic stabilisers should be allowed to work. In low-
global demand. Foreign exchange reserves are generally                  income countries, stabilisers work mostly on the revenue side.
adequate now in most countries but are likely to decline in             A slowdown in economic activity tends to lead to lower tax
several countries in 2009.                                              revenue, but on the expenditure side there are few automatic
                                                                        stabilisers, such as well functioning social safety nets. If
The growing dependence of Sub-Saharan Africa and other low-             countries try to keep expenditure at budgeted levels, the fiscal
income countries on export receipts from tourism and                    balance will deteriorate. Moreover, a few countries may have
transportation services, which also tend to be procyclical,             scope for discretionary fiscal easing to sustain aggregate
heightens the region’s exposure to the global recession. Risks          demand depending on the availability of domestic and external
to the outlook are serious and mostly on the downside. The              financing. All these must be done carefully so as to avoid
following are the risks to the outlook:                                 crowding out of the private sector through excessive domestic
                                                                        borrowing in the often thin financial markets. Fiscal revenues
    The slump in global growth could persist longer and the            will drop most dramatically in oil producing countries. While
     impact of the slowdown could be more pronounced than               those countries that saved much of the recent windfalls may
     expected, negatively affecting Sub-Saharan Africa’s                now have room for countercyclical policies, the extent to which
     internal and external equilibrium,                                 they can or should maintain spending depends on the expected
    In some countries the global crisis could have a spillover         duration of the shock and their fiscal position relative to what is
     effect on external competitiveness. For instance, countries        sustainable over the long term. For countries without savings,
     with a fixed exchange rate pegged to the U.S. dollar could         their ability to finance temporary deficits will matter.
     be adversely affected by the dollar’s recent strength,
    Foreign inflows to the region are likely to slow.                  In designing a fiscal stimulus, policymakers should be mindful
     Remittances are likely to be affected because the majority         of how different types of expenditure will affect the country’s
     originates in advanced economies where the economic                external position and economic activity. For instance, any
     slowdown is most pronounced. External aid could also be            countercyclical fiscal policy should not exacerbate the loss of
     affected as it has been found to be procyclical with both          foreign exchange reserves. Unlike in advanced economies,
     donor and recipient incomes. The actual decline in foreign         government purchases of the machinery and equipment
     direct investment and portfolio inflows could also exceed          associated with infrastructure spending is likely to have a heavy
     current expectations, and                                          import component that could cause leakage of foreign reserves.
    Spending pressure might rise more as the economic                  The slowdown in demand does not also originate domestically
     slowdown continues. Pressures for added social spending            as in advanced countries, but externally. Given the region’s
     and an increase in debt-servicing costs associated with            heavy reliance on commodity exports, an expansionary fiscal
     currency depreciation and higher borrowing costs in both           policy cannot substitute for the decline in external demand. In
     domestic and international markets could be greater than           any case, spending priorities and effectiveness should be
     expected. Contingent liabilities associated with support for       reassessed to achieve maximum value for money.
     domestic financial institutions and depositors could also be
     higher.                                                            In other countries, however, the scope for countercyclical fiscal
                                                                        policies is limited. It depends critically on their macroeconomic
What should be the policy response?                                     and debt conditions and on the financing available. As in the
                                                                        case of many advanced economies, any discretionary
Macroeconomic stability and steady progress toward medium-              measures should be timely, targeted, and temporary and
term development goals are both vital for sustaining growth in          accompanied by a definite exit strategy for reducing debt as the
Africa. Thus, in responding to the crisis countries should strive       crisis eases.
to maintain stability and consolidate their hard-won gains while
being mindful of general development goals. Countries should            In designing the fiscal response, country authorities should also
also seize the opportunity to advance their structural reform           assess the impact on debt sustainability. Over the past decade,

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debt relief initiatives have significantly reduced external debt        been ineffective even in normal conditions. Nevertheless, each
and improved debt indicators in Sub-Saharan Africa. Recent              country’s own circumstances should be independently
debt sustainability analyses have found that almost two-thirds of       evaluated as it is conceivable that some controls could make
Sub-Saharan African countries now have low or moderate                  sense in specific circumstances.
levels of debt distress. However, higher borrowing to help offset
the impact of the crisis could reverse these gains and pose             Financial sector policies
risks, in particular in countries that are at higher risk of debt
distress.                                                               There is a need to strengthen supervision and enhance
                                                                        contingency planning. Sub-Saharan Africa has not faced a
To support growth and create fiscal space, all countries would          systemic financial crisis in recent months and its banks have
be well-advised to persevere with structural fiscal reforms.            few direct linkages with the toxic assets affecting major financial
Broadening the tax base would allow growth boosting                     centers. However, as the slowdown continues, monetary
reductions in the most distortionary tax rates, efficiency-             authorities need to safeguard against financial vulnerabilities
enhancing tax administration reforms would reduce both                  like rising credit risk and possible cross-border contagion.
collection costs for the state and compliance costs for the             Considering that, many financial institutions in Africa are
private sector. Better cash and debt management would also              foreign-owned. Moreover, supervisory and regulatory oversight
provide fiscal savings.                                                 should be extended to encompass the entire financial sector.

Monetary and exchange rate policies                                     Monetary authorities should identify banking system
                                                                        vulnerabilities. For this, they should first identify the banks that
As inflation falls, monetary policy could be eased. The plunge in       are most likely to experience difficulties in the current
global fuel prices, along with the more modest decline in food          environment. Banking supervision should also insist on high-
prices, is providing a disinflationary impulse that in many             frequency data to continually assess bank liquidity and solvency
countries has reduced the need to tighten monetary policy and           and conduct credit risk diagnostics and stress testing.
in others has allowed monetary easing, as has happened in               Supervision should be as comprehensive as possible, covering
several advanced economies. On the other hand, countries still          foreign currency risk, bank risk management practices, lending
experiencing demand pressures and excessive inflation may               standards, and funding reliability. It should extend to all deposit-
need to tighten monetary policy.                                        taking and credit creating institutions, including nonbank
                                                                        financial institutions
Exchange rate changes may help to restore competitiveness
and growth should commodity price falls prove permanent. In             Procedures for handling a systemic crisis or failures within all
countries with flexible exchange rate regimes that have                 the financial services markets should be drawn up promptly in
experienced an adverse terms of trade shock, real exchange              preparation for contingencies.
rates should be allowed to depreciate to keep the economy
stable. Careful co-ordination with monetary and fiscal policy is        The region should track current Group of Twenty (G20)
needed to avoid a devaluation-inflation spiral. For countries           initiatives to strengthen regulation of cross border financial
such as those in the Franc of the French Colonies of Africa             flows and restore investor confidence in order to unfreeze
franc zone, the decline in the euro against the U.S. dollar has         international credit markets and encourage capital inflows and
already contributed to real effective exchange rate depreciation.       intraregional lending.
Countries should avoid sliding into protracted exchange rate
overvaluation, which would impair longer-term growth and could          How can the international community and the IMF help?
eventually trigger a disorderly adjustment.
                                                                        Now is the time for development partners to honour and even
Using reserves to support a fundamentally overvalued                    scale up aid commitments. Current financing constraints make
exchange rate would probably be futile. Where the capital               it even more important for donors to ensure, in keeping with the
outflow seems generalised or where a persistent current                 Paris Declaration, that aid is predictable, transparent, and
account deficit can no longer be financed by the inflows                aligned with the policy priorities of the recipients. Aid would be
available, a depreciation of the exchange rate would generally          particularly useful now as fiscal pressures are building up in
be necessary to help smooth the adjustment. However, this               order to prevent undue compression of investment budgets and
decision should be informed by an assessment of the possible            make it possible to maintain the scope and size of social safety
negative balance sheet effects should the exchange rate                 nets. Although many donor countries face problems of their
weaken suddenly. This might warrant implementation first of             own, aid flows are still a relatively small share of their budgets
measures to address weaknesses in bank balance sheets so                and can be accommodated even with the new competing
that the depreciation can support the adjustment. Introducing           demands. Stalled global trade talks need to be resumed to
new controls on capital outflows should generally be avoided as         stimulate global growth and welfare. Successful conclusion of
they are unlikely to be effective. Moreover, because                    the Doha Round would help to better integrate developing
circumventing them during the height of the crisis would have           countries, including those in Sub-Saharan Africa, into the global
high returns, they would be hard to enforce. In Sub-Saharan             trading system, which would spur global and regional growth
African low-income countries in particular, capital controls have       and facilitate African attainment of the MDGs. Temptations to

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respond to weakening balance of payments positions with                 Conclusion
protectionist measures need to be avoided. Less global trade
would likely harm all countries.                                        Sub-Saharan Africa has made major progress in strengthening
                                                                        its policies in recent years, but the continent remains vulnerable
How is the IMF playing its part?                                        to exogenous shocks. Sustaining that progress will be the major
                                                                        concern in coming years and international support will continue
    The IMF has increased its financial support to African             to be vital. It was strengthened that government funds should
     countries during last year’s food and fuel price crisis and        be used only to protect the safety and functioning of the
     remains a catalyst for critically needed donor support,            financial system. When a banking problem arises, the
    The Exogenous Shocks Facility was modified in                      authorities should first assess whether the institution is suffering
     September 2008 to provide assistance more quickly and in           liquidity or a solvency problem and what the systemic
     larger amounts to low-income countries dealing with                implications of failure would be. Individual banks facing
     exogenous shocks. Malawi was the first country to benefit          solvency problems should receive support when their failure
     from this facility, and since then Comoros, Senegal, and           would threaten overall financial stability either directly or
     most recently Ethiopia have accessed the facility. The IMF         because, in the judgment of the authorities, their failure would
     has also increased access to the poverty reduction and             undermine market confidence. Public funds should be provided
     growth facility for a number of countries,                         transparently and with a view to minimise moral hazard.
    To meet the diverse and evolving needs of low-income               Moreover, it would be useful for assistance to be provided in
     countries, the IMF is considering further major reforms of         ways that allow the public sector to benefit if asset prices
     the architecture of its financing facilities, higher access        recover.
     limits to fund resources, and additional concessional
     assistance, as well as more flexibility to finance                 References
     infrastructure projects and other critical investments, and
    The IMF will continue to provide extensive technical               Impact of the Global financial Crisis on Sub-Saharan Africa.
     assistance to strengthen public sector capacity in Africa          2009. International Monetary Fund.
     because over the long term, African countries will need            http://www.imf.org/external/index.htm. Published on 11 March
     efficient and careful public financial management to ensure        2009. Accessed in March 2009.
     that their development priorities can be met. To this end,         The Impact of the Global Financial and Economic Crisis on
     the IMF plans to add two new regional technical assistance         Developing Countries, in particular Africa, and the prospects for
     centers in Africa to the three that are already operational.       attaining the MDGs. Remarks by José Manuel Salazar-
                                                                        Xirinachs, Executive Director, Employment Sector, ILO.
                                                                        Published on 3 February 2009. http://www.unesco.org/en.
                                                                        Accessed in March 2009.




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