- The Labour Court says retrenchment selection criteria must be objective and fair where parties cannot agree.
- NUMSA argued Sodexo should have applied LIFO with horizontal bumping across comparable general workers.
- Seven former employees were awarded 12 months’ remuneration after their dismissals were found to be substantively unfair.
The Johannesburg Labour Court has ruled that while employers may retrench for genuine operational reasons, they must still prove that the method used to select employees for dismissal is fair.
The dispute began in September 2020 when Procter & Gamble (P&G) terminated part of its facilities management contract with Sodexo Southern Africa after deciding to bring its end-of-line splicing operation in-house.
The contract ended on 22 October 2020, leaving 16 employees in the splicing department without work and triggering a Section 189A retrenchment process. Although the splicing operation had ended, the affected employees continued working by filling in for absent workers while consultations took place.
NUMSA challenged the consultation process
NUMSA objected to Sodexo’s initial retrenchment process after the company issued notices directly to employees instead of the union. Sodexo withdrew the original CCMA facilitation process and restarted consultations with the union.
During negotiations, NUMSA proposed enhanced severance pay, retrenching fixed-term employees before permanent staff, and applying the last-in-first-out (LIFO) principle across the broader P&G workforce. Sodexo disclosed that it employed 147 permanent employees and 36 fixed-term employees at the site, figures that became central to the union’s argument that the retrenchment pool had been drawn too narrowly.
The process ended in dispute after Sodexo sent NUMSA a draft settlement agreement on 28 January 2021. The union requested time to obtain a mandate from its members, but the affected employees were subsequently notified of their dismissals by SMS before that process was completed.
LIFO with horizontal bumping
NUMSA accepted that Sodexo had a legitimate operational reason to reduce staff after losing the P&G contract. Its case focused on who should have been selected.
The union argued that the affected employees had originally been employed as end-of-line general workers before being assigned to the splicing section. It proposed horizontal bumping, allowing longer-serving employees to move into comparable positions occupied by less senior workers, while fixed-term employees should have been retrenched before permanent staff.
Sodexo rejected the proposal, maintaining that the retrenchment should remain confined to the splicing department because that was where the redundancy arose. The company also argued that the employees had become specialised and were not interchangeable with workers in other departments.
Judge Lagrange clarifies the legal test
Judge J Lagrange held that the central issue was not whether Sodexo needed to reduce its workforce, but whether its selection criteria complied with Section 189(7)(b) of the Labour Relations Act. The judge said the crux of the substantively unfair dismissal dispute lies in the failure to agree on selection criteria.
The court found that Sodexo failed to provide concrete evidence showing that placing the affected employees into other end-of-line general work positions would have caused material operational disruption. It also accepted evidence that the workers had initially performed general duties and continued filling in for absent employees after the splicing operation ended.
Judge Lagrange said Sodexo had failed to provide concrete reasons why the affected employees in the splicing department could not perform the work of other general workers at the P&G site. He concluded that the company had not demonstrated that limiting the retrenchment pool to the splicing department was fairer than NUMSA’s proposed application of LIFO with horizontal bumping.
Seven workers awarded compensation
The Labour Court found the dismissals of the seven NUMSA members were substantively unfair. However, reinstatement was not reasonably practicable because Sodexo no longer provides labour services to P&G after its remaining contracts were transferred to another service provider.
Instead, the court ordered Sodexo to pay each of the seven former employees compensation equal to 12 months’ remuneration. No order as to costs was made.
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