The effect of the global recession continues to stifle the growth and profitability of a copious numbers of corporate entities which is evident from the restructuring and retrenchment schemes which continue to move through various business sectors countrywide. Employees must equip themselves with the requirements prescribed by the Labour Relations Act 66 of 1995 (the “Act”), to ensure that they can safeguard themselves against unfair retrenchment practices and other illegalities which their employers may implement. Inherent in labour relations is the disproportionate spread of power between employers and employees and as a result many employers unilaterally implement retrenchment schemes which are contrary to the Act and others may do so simply in ignorance of employee rights.

Retrenchments are known as no-fault dismissals because the employment relationship is terminated as a result of the employer’s operational requirements and not due to any fault on the part of the employee. Operational requirements include the economic, technological and structural needs of the employer which may necessitate the retrenchment of employees. In addition to the existence of operational requirements, the employer can only lawfully embark on retrenchment schemes if the retrenchment is a measure of a last resort. The courts have adopted a firm approach when adjudicating upon unfair retrenchment claims and therefore the employer must be able to show that there were no reasonable alternatives available to it, but retrenchment.

Once the employer encounters true operational requirements and takes a general decision to embark on retrenchment procedures, the employer is obliged to issue a written notice to all the contemplated and affected employees. The retrenchment notice should contain the following information:

o the reasons for the proposed retrenchments;
o the alternatives considered by the employer and the reasons for rejecting those alternatives;
o the number of employees likely to be affected by the proposed retrenchments;
o the selection method of employees;
o the time when the retrenchments are likely to be effected;
o the severance pay proposed;
o any assistance that the employer offers the employees facing retrenchment;
o the possibility of future employment;
o the number of employees that the employer has retrenched in the preceding 12 months; and
o the date, time and place when consultations will take place.

After the retrenchment notice is sent out the employer is obliged to consult with the affected employees or their trade union representatives. It is important that although the employer foresees the need to retrench, the employer should not prematurely make the decision to retrench a specific employee or group of employees until the consultation process is completed and the employee has been given an opportunity to be heard and make representations. This is due to the fact that the employee may put forward proposals or alternatives to retrenchment which were not considered by the employer and which may result in the retrenchment process being restructured or even cancelled, partly or entirely. The failure by employers to engage in consultations with its employees as contemplated by the Act, will undoubtedly result in the retrenchment being procedurally unfair. The purpose of the consultation is to enable both the employer and the employee to embark on a joint consensus seeking effort in order to reach consensus on measures aimed to:

o avoid the retrenchments;
o minimise the number employees to be retrenched;
o change the timing of the retrenchments;
o mitigate the adverse effects of the retrenchments;
o select an objective method for the selection of employees to be retrenched (eg. last in first out principle: LIFO);
o negotiate the severance pay for retrenched employees.

Prior to the consultation process the employee should be afforded a reasonable time within which to consider the retrenchment notice and formulate representations and proposals. The employer must afford the employee ample opportunity during the consultation process to make representations and put forward proposals about the proposed retrenchments. The parties should investigate all possible ways of avoiding or limiting the number of retrenchments. The employer must consider and respond to the representations made by its employees and if the employer does not agree with the representations put forward, then the employer must state the reasons for disagreeing. It is often advisable for an employee to confirm his/her representations and proposals in writing to the employer and for the employer to confirm its response thereto in writing during or after the consultation process.

Due to the fact that retrenchments are no-fault dismissals, the Act provides for the payment of severance benefits to retrenched employees. Employees are entitled to (1) one weeks remuneration for each and every completed year of continuous service. Nothing prevents an employer from paying severance packages to its employees which are more favourable than the statutory prescribed minimum. Employees facing retrenchment should also be cautioned that if they are offered reasonable alternative employment and they refuse such alternative employment, then the employee will forfeit their right to severance pay. Employees should also be aware that where an employer employs more than (50) fifty employees, the retrenchment may qualify as a large scale retrenchment and the Act prescribes additional requirements in this regard.

It is imperative that employees who are treated contrary to our employment laws, should consult attorneys swiftly before consultations to avoid litigation or after retrenchment when litigation is inevitable as disputes over retrenchments need to be referred to the Commission for Conciliation Mediation and Arbitration (“CCMA”) within 30 days from the date of that retrenchment. Should the employee be out of time in referring their dispute, they may still refer the dispute but will have to show reasons for the delay and make an application for condonation requesting the CCMA to accept the late referral. In the same regard it is also imperative for employers to consult attorneys before embarking on the retrenchment process to ensure that they comply with our employment laws from the commencement and throughout the process.
 

Written by Nic Preston of Bouwer Kobeli Morabe Attorneys