RETRENCHMENTS IN SOUTH AFRICA

As a result of a tough and unstable economy, the reality of retrenchments has hit South Africa once again with the crisis affecting both major and minor industries to a large extent.

The news of retrenchments over the past few months have caused much concern as no practical solution has been implemented to deal with our already struggling employment rate. Although retrenchment is a process that has been followed by many employers, employees are unfortunately left in the dark with little to no knowledge on the topic. What follows is what you need to know when facing a possible retrenchment.

Retrenchment is a process by which the number of unsustainable employees is reduced to ensure that the business operation is financially viable. Although retrenchment packages are made available to those affected, the reality is that people will be unemployed in an already volatile financial environment.

Although the Labour Relations Act, 66 of 1995, (“LRA”) provides for retrenchment due to operational requirements, there are certain processes and procedures which need to be followed for the dismissal to be fair. Section 189 of the LRA deals with the process which an employer must follow in order for a dismissal to be fair.

When an employer considers dismissing one or more employees for operational requirements, the employer must consult with all relevant parties to reach a collective agreement. If there is no collective agreement that requires consultation, a workplace forum or trade union whose members are likely to be affected. If there is no such union, the members affected by the proposed dismissal or their representatives.

The purpose of the consultation is to reach consensus on appropriate measures to:

  1. Avoid dismissals;
  2. Minimize the number of dismissals;
  3. Change the timing for the dismissals; and
  4. Mitigate the adverse effects of the dismissal.

The purpose is furthermore to reach consensus on the method of selecting employees to be dismissed and the severance pay for the dismissal of employees. Written notice should be given to consulting parties to disclose all information, for example, the reasons for the dismissal, alternatives that have been considered and the reasons why they have been rejected.

The employer must allow the consulting party to make representations and the employer should consider the representations made. The employer must then select employees to be dismissed by a selection of criteria that has been agreed to or if no criteria has been agreed to, then criteria that are fair and objective.

If there is a dispute regarding the fairness of a dismissal, the party that has been dismissed may refer the dispute in writing to a council or a commissioner. In the matter of SACTU & others v Discreto, the court held that ‘’for employees, fairness is found in the requirement of consultation prior to a final decision on retrenchment’’ and “that purpose is to ensure that ultimate decision on retrenchment is properly and genuinely justifiable by operational requirements”.  

This indicates that retrenchment is always the last decision to be made when dealing with this process. The above case further indicates that the courts are strict when dealing with matters of this nature and that the decision will be scrutinized to ensure that the retrenchment is properly and genuinely justifiable.

Author: Shiraiz Potgieter