Opposed Application
MAKONESE J: The applicants
seek a declaratory order that the termination of their contracts of
employment by the respondent was unlawful. Upon the granting of such
a declaratory order, the applicants seek an order for their
reinstatement to their posts without loss of salary and benefits.
The application is resisted by
the respondent who contends that the basis of the order is flawed.
Further, and in any event, it is
argued on behalf of the respondent that the applicants were offered
new contracts where their remuneration would be related to their
performance. The applicants refused to sign these new contracts.
A dispute arose and subsequently,
the respondent terminated the applicants contracts of employment.
The applicants argue that the
purported termination is an unlawful circumvention of the Labour Act
(Chapter 28:01) and its regulations relating to retrenchment.
Background
All the applicants were employed
by the respondent on contracts without limit of time as defined in
section 12 of the Labour Act.
A dispute has arisen between the
applicants and the respondent.
On the 10th
and 11th
June 2015 the respondent wrote to each of the applicants indicating
an intention to terminate their contracts and to replace them with
new contracts. The letters which were similarly worded were crafted
in the following terms:
“NOTICE
OF TERMINATION OF CURRENT CONTRACT AND OFFER OF NEW CONTRACT
The
macro-economic challenges facing the country are seriously hampering
the viability of the company.
Particular
reference is made to the poor performance of the company as reflected
by the month on month sales figures from last year to date. The sales
figures are well below operating costs. These figures show that it is
impossible for the economy to maintain a fixed or invariable salary
structure. It is therefore, important for the company to adapt the
way it does business to its operating environment to ensure that it
survives. The costs of the company must be aligned and positively
correlated to productivity.
Your
current contract of employment was concluded when the environment was
not as hostile on manufacturers as it is now.
At
the time that we concluded the employment contract, we agreed that
the contract can be terminated on notice other than through
dismissal.
Because
we still require your services, we now wish to terminate your
contract on notice and replace it with one that provides for
remuneration based on productivity.
We
hereby give you three months notice for the termination of your
current contract of employment.
At
the same time, we hereby offer you a new performance contract which
aligns your remuneration to your productivity.
Your
new contract if accepted, shall become effective on the date that the
termination of your current employment contract becomes effective.
Should
you want to bring forward the effective date of your new contract,
you will be required to waive the notice required to terminate your
current contract of employment.
During
that period of notice, you shall not enter into any other employment
on a full time, part time or consultancy basis.”
The applicants did not accept the
offer of the new contracts, which they viewed as an attempt to
retrench them without following the rules and regulations on
retrenchment.
In a letter dated 23 June 2016,
the applicants instructed their legal practitioners to reject the
offer. The letter reads in part in the following terms:
“Our
clients view is that since you are terminating more than 5 employees,
you are obliged to comply with the provisions of section 12C of the
Labour Act (Chapter 28:01). In this regard, you cannot purport to act
in terms of section 12(4) of the same Act because in your letter
giving notice of termination, you specifically advise the employees
that you are terminating employment due to the unfavourable economic
conditions. It is clear therefore that the termination is being done
on an individual basis per se with respect, the Labour Act provides
in section 12D, thereof that were an employer is facing financial
challenges, the options available to them are to:
(a)
place employees on short-time work; and/or
(b)
institute a system of shifts.
It
is clear, with respect, that the employer is not at liberty to simply
terminate all its employees and thereafter offer to them fixed term
contracts. That is not a special measure contemplated by section 12D
of the Act …
In
the result, the termination of the employees employment contracts in
the manner that you have done is manifestly unlawful and liable to be
overturned by a competent tribunal. It is clear that your true
intentions are to vary the employees contracts without their consent
…”
The letter by the applicants
legal practitioners encapsulates the legal arguments that are being
put forward by the applicants in this matter.
The issues for determination by
this court are essentially these:
(a) Whether or not the relief
sought in paragraph 1 of the applicant's draft order is sensu
stricto for a
declarator.
(b) Whether or not the
termination of the applicants employment contracts was an unlawful
circumvention of the provisions of the Labour Act and its regulations
relating to retrenchment.
(c) Whether or not the respondent
was entitled to terminate the applicants on the grounds of
repudiation.
Declaratory Order
In determining whether the order
sought is strictly a declarator
it is necessary to have regard to the provisions of section 14 of the
High Court (Chapter 7:06). It is provided under this section as
follows:
“The High Court may, in its
discretion, at the instance of any interested person, inquire into
and determine any existing, future or contingent right or obligation,
notwithstanding that such person cannot claim any relief
consequential upon such determination.”
In Johnsen
v AFC 1995 (1) ZLR
65 (H) it was held as follows:
“The condition precedent to the
grant of a declaratory order under section 14 of the High Court Act
1981 is that the applicant must be an 'interested person' in the
sense of having a direct and substantial interest in the subject
matter of the suit which could be prejudicially affected by the
judgment the court. The interest must concern an existing, future or
contingent right…”
I am satisfied that the
circumstances of this particular application would warrant the
granting of a declarator, in the exercise of my judicial discretion.
Whether or not the applicants
termination on notice is unlawful
It is clear that the starting
point is to examine the meaning and purpose of the respondent's
letter dated 10 June 2015.
It is evident from the preamble
to the letter that in consequence of economic factors affecting the
viability of the company and poor sales, a fixed salary structure was
no longer tenable. Respondent required salaries to be linked to
productivity and performance.
The applicants placed reliance on
the authority of Mutare
Board Paper Mills (Pvt) Ltd v Kodzanai
2000 (1) ZLR 641 (S).
In this matter, the management of
the appellant company decided that it had to reduce its work force.
This decision was considered to be necessary as a cost-cutting
measure that was essential to maintain the financial viability of the
company. It decided that it would reduce the workforce by retiring
all its male employees who were 55 years of age or over.
The respondent, along with
several other employees of the appellant, was compulsorily retired
after reaching the age of 55.
The rules of the pension fund
provided that the normal retirement was at the age of 65, but an
employee could retire early or be retired at the employer's
instance. The respondent argued that what was being effected was
retrenchment and the procedures applicable to retrenchment should
have been followed.
The court ruled that it was clear
that the object of the exercise was retrenchment. This was shown by
the fact that the employer suddenly and simultaneously required large
numbers of employees of the same class by age to proceed to early
retirement, and the fact that the reason given for this step was the
need to reduce the strength of the workforce.
It is my view that the
termination of the employees contracts of employment, and the
proposed replacement with new contracts was informed by the alleged
macro-economic challenges. The fact that the company was
re-organising its workforce is also evident in the notice of
termination of current contracts.
The definition of retrenchment as
set out in the Act is as follows:
“retrench, in relation to an
employee, means terminate the employee's employment contract for
the purpose of reducing expenditure or costs, adapting to
technological change, re-organising the undertaking in which the
employee is employed, or for similar reasons, and includes the
termination of employment on account of the closure of the enterprise
in which the employee is employed.”
It is my view, that whatever name
the respondent has chosen to call the wholesale termination, it is
apparent, that in terms of the law it was conducting an unlawful
retrenchment exercise.
In the case of Mutare
Board Paper Mills (Pvt) Ltd v Kodzanai, (supra) the
Supreme Court held that:
“Even though an employer may
have the right to resort to termination… if the object and effect
of such action is to retrench, then the applicable regulations must
be complied with.”
It is not disputed that the
respondent terminated or sought to terminate its employees contracts
en masse citing
viability and re-organisation as its reasons.
In its letter dated 14 August
2015, the respondent made it clear that the applicants employment
would end on 12 September 2015. The new contracts offered were
separate contracts from the contracts sought to be terminated. This
is more evident in that the “new” contracts would replace the
“old” contracts.
The applicants were advised that
they would serve three months notice.
If it was intended to be
continuous employment, then the employee would not have been required
to serve notice.
I am satisfied that the actions
of the respondent amounted to an unlawful termination of the
applicants contract of employment.
Whether or not the respondent
was entitled to terminate the contracts on grounds of repudiation
The respondent contends that the
applicants have repudiated their employment contracts by failing to
report for work and making themselves available for work.
This is denied by the applicants
who allege that the argument of repudiation is merely based on
letters written by applicants dated 19 and 21 September 2015. The
applicants contend that these letters were written after the
applicants had issued their application and served it on the
respondent. These letters are worded in the following terms:
“Repudiation
of Contract
At
the closure of your Branch you rejected our offer of a new contract
in line with our branchless strategy. We would have expected you to
continue rendering your services pending determination of the
legality of the termination of your old contract. You neither
tendered nor rendered your services.
Your
actions constitute repudiation of your employment contract. We hereby
accept the repudiation. In the result you have ceased to be our
employee with immediate effect.”
In support of its argument that
the applicants had repudiated their contracts by failing to make
themselves available to perform their services, the respondent relied
on the case of Zimbabwe
Sun Hotels v Lawn
1988 (1) ZLR 143.
I am not satisfied, on the facts,
that the applicants repudiated their contracts. The letters addressed
to the applicants were authored after this application had already
been instituted.
Disposition
The applicants seek a declaratory
order to the effect that the termination or variation of the
applicants contract is unlawful.
I have already come to the
conclusion that the purported variation or termination was not done
in terms of the law. The applicants have established that the
respondent sought to retrench each of the applicants. The conduct of
the respondent amounts to an illegality. The variation of the old
contract with a new “performance” based contract was designed to
circumvent the retrenchment regulations.
In the result it is ordered as
follows:
1. The termination or variation
of the applicants contracts of employment by the respondent be and is
hereby declared unlawful.
2. The respondent be and is
hereby ordered to reinstate the applicants to their employment
without loss of salary and benefits.
3. In the event that
reinstatement is no longer an option, the respondent be and is hereby
ordered to pay the applicants damages to be determined by an
arbitrator appointed by a Senior Labour Officer.
4. The respondent is ordered to
pay the costs of suit.
Calderwood Bryce Hendrie &
Partners, applicants legal practitioners
Mtetwa & Nyambirai,
respondent's legal practitioners
