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
