Background facts

The dispute arose from Mass Discounters’ large-scale restructuring of its Game business in 2020 and 2021, following sustained financial losses, increased market competition, technological inefficiencies and shifts in consumer behaviour, which were accelerated by the COVID-19 pandemic.

Game adopted a new store model aimed at improving operational efficiency, reducing administrative duplication and repositioning the business to remain commercially viable in a rapidly changing retail environment. The restructuring resulted in a number of existing roles becoming redundant, reduced or repurposed.

The South African Commercial, Catering and Allied Workers Union (SACCAWU), acting on behalf of affected employees, challenged the substantive fairness of the retrenchments. Although the litigation originally involved 210 employees, the dispute before the Labour Court was ultimately narrowed to 154 unfair dismissal claims and 19 severance pay claims.

The union’s pleaded case was that the retrenchments lacked a valid commercial rationale, that Game had failed properly to consider alternatives to dismissal and that the employees had been selected for retrenchment unfairly because they refused to accept new contracts of employment.

The employees, however, led no evidence at trial. Game called two witnesses and closed its case on the basis of the pleaded issues.

The legal framework

The case required the Labour Court to consider the substantive fairness of retrenchments under sections 189 and 189A of the Labour Relations Act 66 of 1995, and the extent to which a party may expand or reformulate its case beyond the pleadings and the pre-trial minute.

The court reaffirmed the principle that the pleadings and pre-trial agreements define the parameters of the dispute to be adjudicated, and that neither the parties nor the court may stray beyond those issues.

In the retrenchment context, this was important because the union sought in argument to advance a materially different case from the one it initially pleaded.

On substantive fairness, the court applied the established principle that an employer must show a genuine operational requirement and that the decision to retrench was a rational and reasonable response to that operational need. The court also had to consider section 41(4) of the Basic Conditions of Employment Act 75 of 1997 (BCEA), which disentitles an employee to severance pay where the employee unreasonably refuses an offer of alternative employment.

The Labour Court’s application of the law

The Labour Court dealt first with the pleaded case and the pre-trial minute. It stressed that the litigation had to be decided on the issues that had actually been pleaded, namely the commercial rationale for the retrenchments, the consideration of alternatives and the fairness of the selection criteria.

During cross-examination and argument, SACCAWU sought to introduce a different case: namely that the retrenchments were in truth a mere “re-papering exercise”, that existing contracts already gave Game sufficient flexibility and that no new contracts were operationally necessary.

The court held that this was not the case pleaded and could not be entertained. In doing so, it reaffirmed the established principle that litigants are bound by their pleadings and that a court may not decide a matter on factual issues not properly pleaded or defined in the pre-trial process.

On the commercial rationale, the court accepted Game’s evidence that the restructuring was driven by genuine operational requirements. The evidence showed substantial financial losses, an outdated store model, changing customer behaviour, the impact of e-commerce and the commercial disruption caused by the pandemic. The court was satisfied that the move to a new store model was neither irrational nor a farse, but rather a rational and reasonable response to a difficult commercial environment.

Importantly, the union did not meaningfully challenge this evidence, and the employees adduced no evidence to support the pleaded contention that the restructuring lacked a valid business rationale.

The court also found that Game had properly considered alternatives to retrenchment. A detailed mapping process had been undertaken over an extended period to place affected employees into roles within the new Game structure or elsewhere within the wider Massmart Group. Vacancies were frozen and reserved for affected employees, and specific mechanisms were agreed to identify suitable roles within a defined geographical radius and, where necessary, across other Massmart businesses.

The evidence showed that the overwhelming majority of employees accepted alternative placements.

On the pleaded case, the contention that Game had failed to consider alternatives was therefore unsustainable.

As to selection criteria, the court rejected the contention that employees were selected unfairly merely because they refused to sign new contracts. On the evidence, the restructuring abolished or materially altered existing roles, and employees were identified through the agreed mapping exercise for placement into suitable alternative roles. Those who unreasonably rejected reasonable alternative offers were retrenched because their existing roles had become redundant and they had declined available alternatives.

The court held that conventional criteria such as last in, first out were not part of SACCAWU’s pleaded case and, in any event, were not applicable to the restructuring model under consideration.

The severance pay claims of the remaining 19 employees also failed. The court held that section 41(4) of the BCEA applied because those employees had rejected reasonable offers of alternative employment without placing evidence before the court to justify their refusal. In the absence of any evidence from the employees themselves, there was no basis on which the court could find that the refusals were reasonable or that severance pay remained due.

The court’s findings and order

The Labour Court held that Game had discharged the onus of proving that the retrenchments were substantively fair. It found that the business restructuring was supported by a genuine commercial rationale, that reasonable alternatives to dismissal had been considered and offered, and that the pleaded challenge to the selection criteria lacked merit. The court dismissed SACCAWU’s unfair dismissal claims and the severance pay claims, and made no order as to costs.

Key takeaways

The judgment offers several practical lessons for employers.

First, it underscores the importance of ensuring that pleadings and pre-trial minutes accurately define the issues in dispute, particularly in complex retrenchment litigation.

Second, it confirms that an employer will be well placed to defend a restructuring where it can demonstrate a genuine operational rationale supported by evidence, rather than mere assertion.

Third, it highlights the evidential significance of a substantive “alternative to retrenchment” process, including documented efforts to redeploy affected employees into suitable alternative roles.

Finally, it serves as a reminder that employees who unreasonably refuse reasonable alternative employment may forfeit any entitlement to severance pay under section 41(4) of the BCEA.