Mendel Ramolobane Langa and Jeffrey Bonginkosi Dhludhlu v Smollan Sales and Marketing (Pty) Ltd

The Respondent, a company providing sales and marketing services to various clients in the FMCG sector, initiated a section 189A restructuring process during 2020. The restructuring was motivated by the need to remain competitive in the industry, particularly in responding to tenders from clients every three years. The existing 45-hour contracts did not allow for flexibility and did not provide for weekend work, particularly Sunday coverage. Research showed that the busiest trading days were Thursday through Sunday. The Respondent proposed implementing a 40-hour flexi-contract that would provide full weekend coverage while reducing service on lower trade days. The restructuring was also necessitated by economic pressures from COVID-19 and the need to reduce costs by R18 million to avoid financial risk to the business. The Applicants, Langa and Dhludhlu, were employed as Field Marketers/Merchandisers on 45-hour contracts. During consultations (three consultations were held with each employee), the 40-hour flexi-contract was explained, including reduced working hours and reduced salaries. The Applicants refused to accept the new terms because the reduction in hours would result in reduced salaries. Their main objection was the salary reduction, not the working hours or restructuring itself. Following the Applicants' refusal of alternatives offered, their employment was terminated.

• Whether the dismissal of the Applicants for operational requirements was substantively fair
• Whether the Respondent demonstrated a genuine operational reason for the restructuring and dismissal
• Whether the Respondent's decision to retrench was a reasonable option in the circumstances
• Whether alternatives to retrenchment (specifically maintaining the same salary for reduced hours) were viable

The Applicants' unfair dismissal claim was dismissed. The dismissal for operational reasons was found to be substantively fair. No order as to costs was made.

Where an employer demonstrates a genuine operational requirement for restructuring based on economic, structural or similar needs (such as the need for weekend coverage in response to changing industry requirements and economic pressures), and the decision to retrench is a reasonable option in the circumstances, the dismissal for operational requirements will be substantively fair even if it results in reduced remuneration for employees. Courts will not second-guess the commercial efficacy of such decisions. An employee's objection to salary reduction resulting from a genuine operational restructuring does not render the dismissal substantively unfair where the operational rationale itself is not disputed. Parties are bound by common cause facts agreed in a pre-trial minute, and the court will enforce such agreements in determining the genuineness of the operational requirements.

The Court made observations about the consultation process undertaken by the Respondent during the COVID-19 pandemic, noting that over 500 consultations were conducted with employees across 3000-4000 stores nationally, using MS Teams for virtual participation by HR representatives while line managers met employees in person. While not central to the decision (as procedural fairness was no longer in dispute), the Court's detailed recording of these consultation processes suggests approval of such hybrid consultation methods during exceptional circumstances like the COVID-19 pandemic. The Court also noted, without deciding, the Applicants' request for financial statements during consultations, and the Respondent's explanation that the main motivation was remaining competitive rather than financial distress per se, suggesting that disclosure of financial statements may not always be required where the operational requirement is based on competitiveness rather than financial difficulty.

This case illustrates the application of the test for substantive fairness in operational requirements dismissals (retrenchments) under section 189A of the Labour Relations Act. It confirms that courts will not second-guess the commercial or business efficacy of an employer's restructuring decisions, but will examine whether the operational reasons are genuine and whether retrenchment was a reasonable option in the circumstances. The case demonstrates the binding nature of pre-trial minutes in labour disputes and how agreements reached by parties on common cause facts will be enforced by the court. It also clarifies that where employees' primary objection is to reduced remuneration flowing from a genuine operational restructuring (rather than the operational rationale itself), this will not render the dismissal substantively unfair. The case provides guidance on operational requirements dismissals in the context of industry changes requiring greater flexibility and weekend coverage, particularly relevant to the retail and FMCG sectors.