WBHO Construction v Masenya N.O. and Others

Citation: [2026] ZALAC 10

Presiding Judges: Djaje AJA (Mahalelo ADJP and Waglay AJA concurring) 

Court: Labour Appeal Court of South Africa, Johannesburg

Nature of the Appeal

[1] This was an appeal against the judgment of the Labour Court, where the appellant's review application was dismissed. The appellant filed a review challenging an arbitration award which determined that the appellant had unfairly dismissed the third respondent. The Labour Court ordered reinstatement.

Factual Matrix

[2]–[3] The third respondent commenced employment with the appellant on 18 April 2018 as a Final Level Grader Operator. In November 2020, Mr Peter Gray, the appellant's Operator Training Manager, approached the third respondent regarding operational needs and a possible transfer to Postmansburg in the Northern Cape. The third respondent declined the transfer as he did not wish to be away from his family. He testified that Gray told him the appellant intended to retrench him, and that if he refused the retrenchment, he would be dismissed. Gray testified that the third respondent asked to be retrenched due to financial difficulties at home.

[3] On 3 December 2020, the parties signed a document titled "Mutual Separation Agreement," and the third respondent received severance pay of R181,541.75. The third respondent referred an unfair dismissal dispute to the Bargaining Council, culminating in an arbitration award dated 28 May 2021, which found that the agreement was not a Mutual Separation Agreement but that the appellant retrenched the third respondent and failed to comply with section 189 of the Labour Relations Act 66 of 1995. An order reinstating the third respondent was issued.

Arbitration Award and Labour Court Judgment

[4]–[5] The arbitrator determined that the document signed was more of a retrenchment letter outlining the retrenchment package. Although titled "Mutual Separation Agreement," its contents focused solely on retrenchment and associated benefits. The arbitrator found that no retrenchment process occurred despite the parties signing a document stating the third respondent had been retrenched. The dismissal was found procedurally and substantively unfair.

[6]–[9] The Labour Court found that the parties signed a mutual separation agreement to end their employment relationship due to operational requirements, but that the LRA requirements for retrenchment had to be complied with. The Court held that the appellant's failure to comply with section 189 was fatal and made the dismissal unfair. The Court relied on the wording of the agreement, which specified terms of a retrenchment package, indicating the appellant intended to retrench the third respondent.

Grounds of Appeal

[10] The appellant challenged the Labour Court's judgment on several grounds, including: (i) error in concluding no mutual separation agreement was concluded; (ii) error in finding the appellant unfairly retrenched the third respondent; (iii) error in applying the reasonableness test instead of the legal correctness test; (iv) error in concluding the parties were precluded from negotiating a mutual separation agreement after commencement of section 189 consultations; and (v) misconstruction or failure to apply its mind to the grounds of review raised.

Submissions

[11]–[14] The appellant argued that parties are not barred from signing a mutual separation agreement during a section 189 process, and that the Labour Court erred in concluding that discussion of operational requirements required compliance with section 189 before a mutual separation agreement could be concluded. The appellant contended that if the Court found retrenchment, there must have been a valid operational reason. The third respondent argued that no meeting of the minds occurred when the agreement was signed, as it mentioned a retrenchment process, and that discussions centred on operational needs requiring section 189 compliance.

Applicable Legal Principles

[15] Section 189 of the LRA outlines the process for dismissals based on operational requirements. Failure to comply renders the dismissal unfair. Specifically, section 189 (2) and (3) require a meaningful joint consensus-seeking process and disclosure of relevant information.

[16]–[17] On privity and sanctity of contract, the Court cited Mohamed's Leisure Holdings (Pty) Ltd v Southern Sun Hotels Interests (Pty) Ltd 2018 (2) SA 314 (SCA):

"[16] In dealing with the privity and sanctity of a contract, the Supreme Court of Appeal in Mohamed's Leisure Holdings (Pty) Ltd v Southern Sun Hotels Interests (Pty) Ltd stated that: '[23] The privity and sanctity of contract entails that contractual obligations must be honoured when the parties have entered into the contractual agreement freely and voluntarily. The notion of the privity and sanctity of contracts goes hand in hand with the freedom to contract. Taking into consideration the requirements of a valid contract, freedom to contract denotes that parties are free to enter into contracts and decide on the terms of the contract' [17] Again, in Wells v South African Alumenite Company the court held that: 'If there is one thing which, more than another, public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts, when entered into freely and voluntarily, shall be held sacred and enforced by the courts of justice.'"

Judicial Analysis

[18]–[20] The Court found the agreement was properly entered into:

"[18] It is well established that the third respondent and Mr. Gray discussed the appellant's operational needs during the site visit. Additionally, following that discussion, the third respondent and the appellant entered into a mutual separation agreement. The agreement outlines the payment of severance pay to the third respondent, along with a bonus, leave pay, travel expenses, payout of shares if applicable, and the transfer or payout of the Provident fund. The third respondent acknowledged and accepted the terms of the agreement in full and final settlement of 'all or any claims' against the appellant. [19] In his testimony, Mr. Gray stated that during a site visit to see the third respondent, they had an informal discussion about the operational needs of the appellant. He also mentioned a project in the Northern Cape where the third respondent could be assigned. The third respondent indicated that he could not go to the Northern Cape; it would be better for him to be retrenched, as he was busy with a home construction project and preferred not to be away from home. This conversation led to the agreement between the appellant and the third respondent. (to terminate the employment) [20] As stated in Universal Church of the Kingdom of God v Myeni and Others that: '.......For a valid contract to exist, each party needs to have a serious and deliberate intention to contract or to be legally bound by the agreement, the animus contrahendi. The parties must also be ad idem (or have the meeting of the minds), as to the terms of the agreement. Obviously, absent the animus contrahendi between the parties or from either of them, no contractual obligation can be said to exist and be capable of legal enforcement.'"

[21]–[24] On the applicable test:

"[21] The appellant submitted that the arbitrator's award is unreasonable and should have been reviewed and set aside by the Labour Court. On the issue of reasonable awards, the Labour Appeal Court in Fidelity Cash Management Services v Commission for Conciliation, Mediation and Arbitration and Others held that: 'The test enunciated by the Constitutional Court in Sidumo for determining whether a decision or arbitration award of a CCMA commissioner is reasonable is a stringent test that will ensure that such awards are not lightly interfered with. It will ensure that, more than before, and in line with the objectives of the Act and particularly the primary objective of the effective resolution of disputes, awards of the CCMA will be final and binding as long as it cannot be said that such a decision or award is one that a reasonable decision maker could not have made in the circumstances of the case. It will not be often that an arbitration award is found to be one which a reasonable decision maker could not have made but I also do not think that it will be rare that an arbitration award of the CCMA is found to be one that a reasonable decision maker could not, in all the circumstances, have reached.' [22] The award found that there was no mutual separation agreement; instead, a letter of retrenchment was issued to the third respondent. The court a quo, however, held that a mutual separation agreement existed, with terms of retrenchment, and that by signing the agreement, the appellant avoided the objectives of section 189 of the LRA. The court a quo held that: '[39] In my view, the applicant cannot use a mutual separation agreement to circumvent the procedure set out in section 189 of the LRA and therefore, the first respondent's decision, that the procedure for retrenchment was not followed and that the dismissal was procedurally and substantively unfair, is one that a reasonable decision maker would have arrived at.' [23] Regarding the applicable test during arbitration, the arbitrator had to determine whether the parties' agreement was properly entered into and enforceable. This would be the determining factor in whether the third respondent was dismissed and whether it was unfair. In Johnson Uniform Solutions (Pty) Ltd v Brown and Others the Labour Appeal Court, in addressing the applicable test in disputes, held that: '[34] In assessing whether the CCMA or the Bargaining Council had jurisdiction to adjudicate a dispute, the correctness test should be applied. The court of review will analyse the objective facts to determine whether the CCMA or Bargaining Council had the necessary jurisdiction to entertain the dispute. See SARPA v SA Rugby (Pty) Ltd and Others; SA Rugby (Pty) Ltd v SARPU. [35] The issues in dispute will determine whether the one or the other of the review tests is harnessed in order to resolve the dispute. In matters where the factual finding of an arbitrator is challenged on review, the reasonable decision-maker standard should be applied. Where the legal or jurisdictional findings of the arbitrator are challenged the correctness standard should be applied. There will, however, be situations where the legal issues are inextricably linked to the facts so that the reasonable decision-maker standard could be applied. [36] It is therefore important to determine whether the dispute, between the parties, is a jurisdictional one or not. The dispute to be resolved determines the test to be applied. In this matter, the dispute between the parties was whether there was in fact a dismissal. If there was no dismissal the Bargaining Council would not have jurisdiction. If there was a dismissal the Bargaining Council would have jurisdiction. The existence or otherwise of a dismissal is therefore a jurisdictional issue. The correctness standard and not the reasonableness standard should therefore be applied. The court a quo, as both parties agreed, applied the wrong standard.' [24] The dispute in this case concerned the validity of the agreement between the parties. The question was whether the court a quo's reasonableness test should have been applied. The validity of an agreement is a legal matter that does not require a reasonableness test as established in Sidumo and Another v Rustenburg Platinum Mines Ltd and Others, but rather a correctness test. Therefore, the arbitrator lacked the necessary jurisdiction, and the court a quo should have reviewed the award and set it aside."

[25]–[26] The agreement was valid and enforceable:

"[25] There was no finding that the third respondent was coerced into signing the agreement. It is a fact that both parties entered into and signed the agreement voluntarily. The third respondent received his severance package as agreed. The conclusion that the appellant avoided the section 189 processes is unfounded, as there is nothing preventing parties from entering into a mutual separation agreement at any time when operational requirements are discussed. The parties' agreement was consensual, and there is no evidence of coercion; therefore, the mutual separation agreement is valid and enforceable. The agreement being valid, there is no question of dismissal, and as such, the first respondent had no jurisdiction to entertain the dispute. [26] Even if the unfairness of the dismissal were to be considered, the appellant's operational requirements were discussed with the third respondent, albeit informally. An alternative, his relocation to the Northern Cape, was considered but found unsuitable by the third respondent. Additionally, this does not make the dismissal procedurally or substantively unfair."

Costs and Order

[27]–[28]

"[27] Labour courts are courts of equity and costs do not ordinarily follow the result. Nothing in casu warrants a departure from that principle. Accordingly, there will be no order as to costs in this appeal. [28] In the premise the following order is made:

Order:

1. The appeal is upheld.

2. The judgment of the Labour Court delivered on 30 July 2024 is set aside and substituted with: '(a) The arbitration award dated 28 May 2021 is reviewed and set aside. (b) The appellant did not dismiss the third respondent; (c) There is no order as to costs.'

3. There is no order as to costs in this appeal."