‘Bumping’ and an employer’s obligation to employees affected by retrenchments., Mphengoa Phooko

In the matter of Fischer Tube Technik SA v Bayene and Bokaba (“Fischer v Bayene”), the Labour Appeal Court (“LAC”) recently upheld an appeal against the Labour Court’s decision that the dismissal of the respondents (the employees), following a section 189 of the Labour Relations Act, 66 of 1995 (“LRA”) consultation process was substantively unfair.

In doing so, the LAC dealt with the concept of ‘bumping’, an employer’s obligations in this regard, and the fairness of same.

Background

The appellant is engaged in the motor industry and manufactures steel tubing, including exhaust pipes. The two affected employees previously worked in the appellant’s cutting and calibration departments. In 2013, the appellant secured business for “MIG welding” work. The two affected employees were appointed as welders in the welding department. The two employees continued to work in the welding department until 2016, when the client which provided welding work to the appellant closed its operations in South Africa. The appellant issued notices in terms of section 189 of the LRA to the affected employees and engaged in the consultation process with the employees’ union, being NUMSA.

During the negotiations, NUMSA on behalf of the employees requested that LIFO and bumping be applied as the selection criteria. The employer agreed. The positions identified were lower in rank to the positions previously held by the affected employees. The employees rejected the lower positions and salary cuts. The employer eventually decided to retrench the affected employees.

In 2023, the Labour Court found that the dismissal of the respondents was substantively unfair.

The matter was taken on appeal, where the LAC failed to appreciate how the appellant’s conduct could be considered unfair. The LAC confirmed that there had been an agreement with NUMSA regarding vertical bumping, and when NUMSA later demanded that the employees’ existing salaries be retained, it was not unfair for the employer to refuse same.

The principle of ‘bumping’

The principle of ‘bumping’ or ‘transferred redundancy’ contemplates the dismissal of an employee not initially selected for retrenchment to make way for another employee, usually an employee with longer service, whose position has become redundant.

The Labour Court’s finding

The Labour Court held that in general terms, an employer is obliged to attempt to find alternative positions for employees whose positions have become redundant. The Labour Court referenced the concepts of vertical and horizontal bumping and referred to the Labour Court in Porter Motor Group v Karachi (“Karachi”),^[1] who found that employees may refuse vertical bumping and if this is then imposed on them, the dismissal becomes unfair. Horizontal bumping arises where an employee whose position has become redundant, displaces another employee with a shorter service period, at a similar post/level. Vertical bumping arises when an employee in a redundant post displaces an employee with a shorter service period and holding a junior post.

The Labour Appeal Court’s finding

On appeal, the LAC had to determine whether the Labour Court had erred in finding that the appellant ought to have applied the principle of horizontal bumping and whether to compensation awarded was excessive.

The LAC, after confirming the Labour Court’s definition of bumping, stated that it usually arises when LIFO is applied as a selection criterion, and distinguished between horizontal and vertical bumping.

The LAC emphasised that bumping is an integral part of the application of the Last In, First Out Principle (“LIFO”), and whilst there is no absolute obligation on an employer applying LIFO to bump, it is a matter that ought to be properly canvassed during the consultation process when LIFO is agreed upon.

In the matter at hand, the appellant agreed to apply bumping based on NUMSA’s proposal. Two employees were bumped, and their positions were offered to the affected employees at the applicable rates for the job. The employees refused to accept this, demanding their existing salaries, saying they would forgo a wage increase the following year. The LAC found that the Karachi judgment was misread by the Labour Court and confirmed that whilst the employee has the right to refuse an offer of vertical bumping, this does not render any consequent dismissal unfair.

The LAC further reiterated that although vertical bumping is inevitably accompanied by a diminution in salary, bumping is a concept related to the employer’s organisational structure, and not the effect that the placement in an alternative position may have on the salary of the employee who benefits from bumping.

The LAC upheld the appeal and declared that the dismissals were both procedurally and substantively fair.

Ultimately, authorities require that an employer applying LIFO must raise and discuss bumping with parties during the consultation process. Without an agreement between the parties on this issue, the employer must be able to justify its decision not to bump, or to bump either horizontally or vertically. A requirement to bump is a matter of fairness in relation to employer, employee, and displaced employee.

[1] Karachi v Porter Motor Group (C635/99) ZALC 64 (19 July 2000)