Retrenched Edcon workers lose their case

More than 3 000 former retrenched Edcon employees have lost their case to be reinstated with full back pay.

Johannesburg - More than 3 000 former retrenched Edcon employees have lost their case to be reinstated with full back pay.

The Constitutional Court last week ruled, by a majority, that retrenchment notices issued by Edcon, one of South Africa’s largest clothing retailers, to more than 3 000 employees were valid, although issued unprocedurally.

This means that Edcon does not need to reinstate the former employees nor does the company have to pay any of the employees further money other than that already paid in terms of the retrenchment process.

The matter concerned the interpretation of a provision of the Labour Relations Act (LRA), which regulates large-scale retrenchments for operational requirements.

During 2013 and 2014, Edcon, the owner of the Edgars and CNA brands, retrenched more than 3 000 employees.

These job cuts came amid Edcon’s battle to survive as it is now saddled with R26.7 billion in non-current debt. The retailer has also been clocking up billions in losses and at the end of September the company’s total retained loss was R19.3bn.

Before the dismissals were affected, Edcon gave the employees notices of termination of their contracts of employment. However, these notices were given prior to the expiry of the periods prescribed by section 189A(8) of the LRA, and therefore were in breach of the legislation.

The main issue in the Labour Appeal Court was whether Edcon’s failure to comply with the prescribed procedures in the legislation meant the dismissals were invalid.

The court overruled its earlier decisions, which had held premature termination notices result in invalid dismissals.

It held that although Edcon had not complied with the requirements of the LRA, the dismissals were not invalid.

Reinstatement

Before the Constitutional Court, the former Edcon employees and their representative, the National Union of Metalworkers of SA, challenged the Labour Appeal Court’s decision and sought reinstatement with full back payment.

They argued that the LRA used the word “must”, which indicates an employer is obliged to comply with the prescribed procedures before dismissing the employees, and failure to do so resulted in invalid dismissals.

Edcon argued that the fact that there was no compliance with prescribed procedures meant the dismissals may be unfair, but not invalid.

The minority judgment held that flowing from its interpretation of section 189A it agreed with the applicants’ contention that the 30 days to 60 days period allowed under the legislation suspends the employer’s power to dismiss and relegate the relief available.

It said the time period mandated under the act created a “dismissal-free” zone during which employees must be safe from dismissal until the statutory periods had lapsed.

The minority judgment concluded the dismissals outside of the time periods in section 189A were without effect in law and thus a nullity. The majority judgment disagreed that dismissals effected in breach of section 189A resulted in invalid dismissals. It took the view that the LRA did not contemplate invalid dismissals and that the procedures with which Edcon failed to comply constituted requirements for the procedural fairness aspects of dismissals and, as such, related to unfair dismissals.

The majority judgment said the concept of an invalid dismissal was foreign to the current LRA, and the applicants should have used the mechanisms provided under the act to deal with the dismissal dispute instead of seeking to have the dismissals declared invalid.

Therefore, the dismissals could be unfair but not invalid.

Edcon is owned by Bain Capital Partners, which bought the retailer for about R25bn in 2007.

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