Acts

Author : Millers Attorneys

Retrenchments

If you are reading this you are either an employer or an employee, and in the event that you are considering the possibility of retrenching, or should have recently been on the receiving end, take a few moments and consider the following.

Sections 189 and 189A of the Labour Relations Act 66 of 1995 deal with dismissals based on operational requirements – retrenchments being one of them. S.189 deals with the situation where the employer wants to single out employees “here and there” as it were, and S.189A deals with the situation where the employer wants to retrench at least 10 or more employees, and employs more than 200 employees. We will only be dealing with the more common type, being S.189 retrenchments, as S.189A scenarios, are less commonplace and more complex.

Section 189 states (inter alia) that when an employer contemplates dismissing one or more employees for reasons based on the employer`s operational requirements, the employer must consult with either the employees who are to be affected; their representatives or the trade unions involved, depending on the situation. (In a nutshell, as soon as it becomes a reality that retrenchments are on the table, the obligation to consult arises.)

The employer and the other consulting parties must engage in a meaningful joint consensus-seeking process and attempt to reach consensus on appropriate measures to avoid the dismissals; to minimise the number of dismissals; to change the timing of the dismissals; and to mitigate the adverse effects of the dismissals; the method for selecting the employees to be dismissed; and the severance pay for dismissed employees.

The employer must issue a written notice inviting the other consulting party (i.e. employee or representative party if applicable) to consult with it and disclose in writing all relevant information, including, but not limited to the reasons for the proposed dismissals; the alternatives that the employer considered before proposing the dismissals, and the reasons for rejecting each of those alternatives; the number of employees likely to be affected and the job categories in which they are employed; the proposed method for selecting which employees to dismiss; the time when, or the period during which, the dismissals are likely to take effect; the severance pay proposed; any assistance that the employer proposes to offer to the employees likely to be dismissed; the possibility of the future re-employment of the employees who are dismissed; the number of employees employed by the employer; and the number of employees that the employer has dismissed for reasons based on its operational requirements in the preceding 12 months.

This must take place BEFORE the decision is taken to retrench, and NOT AFTER!

In disclosing all relevant information that may assist the parties in trying to reach consensus on alternatives etc, the employer will be obliged to disclose any information that is relevant – this may include information on the employer`s financial status, if finances are quoted as being the primary reason. The Act specifically states that disclosure in terms of section 16 is required, and section 16 again states that only the following information may be withheld, namely: Information that is legally privileged; that the employer cannot disclose without contravening a prohibition imposed on the employer by any law or order of any court; that is confidential and, if disclosed, may cause substantial harm to an employee or the employer; or that is private personal information relating to an employee, unless that employee consents to the disclosure of that information.

The employer must: Allow the other consulting party an opportunity during consultation to make representations about any matter dealt with above as well as any other matter relating to the proposed dismissals; consider and respond to the representations made by the other consulting party and, if the employer does not agree with them, the employer must state the reasons for disagreeing (if any representation is made in writing the employer must respond in writing); and must select the employees to be dismissed according to selection criteria-

that have been agreed to by the consulting parties; or
if no criteria have been agreed, criteria that are fair and objective.

There are literally dozens of reported judgments dealing with retrenchments. (Probably because it is one of few types of dismissals where the aggrieved party is entitled to refer the matter directly to the Labour Court and not first to conciliation or arbitration.) Many of these judgments have confirmed that the purpose of the consultation process is not so much aimed at helping employers make up their minds whether or not to retrench, but to examine whether a basis for changing that resolve might possibly exist, and to see how and where this can be avoided.

Fairness (which is the underlying concept of our Labour Law) dictates a sensitive and considerate approach by an employer – a “surprise” announcement to retrench, must always be deemed to be at the very least, prima facie, unfair. In this regard, one must also bear in mind that any employer who dismisses, for any reason, bears the onus of proof that it was fair. So, if the employer decides to “jump” such a decision on an employee, that s/he has been retrenched without there having been any form of notification previously or any attempt to consult, such an employer could very well find itself on the receiving end. The most basic and primitive of rules in Labour Law, is this: Irrespective of the reasons for dismissal, as good as they may be, the employer must always and without exception, follow a fair procedure. Failing this, in the case of dismissals for operational reasons, the employer may be ordered to pay the employee up to one year`s salary as compensation.

A case in point is Johnson v Anglo Operations Ltd t/a Boart Longyear Operations [2005] 10 BLLR 959 (LC). Notwithstanding the judge`s acceptance that there existed a sufficient reason for retrenching the employee, the retrenchment was held to be procedurally unfair.

In the letter given to Johnson, she was also given 21 calendar days for her to think of any possible way of saving her position. The learned judge had the following to say: In my view, to have given the applicant 21 days to save her own position was very unfair in the circumstances. It is the respondent [i.e the employer] who bears the onus of proving that its retrenchment was fair. In this letter the applicant was given the entire initiative and responsibility to provide alternatives to her redundancy, which was already decided upon. Johnson was awarded six months` remuneration.