The challenging macro-economic backdrop has led to a major increase in retrenchments and the need for the courts to answer a number of key legal questions.

It is becoming more important for employees and employers to understand the processes involved.

The Commission for Conciliation, Mediation and Arbitration (CCMA) has reported a rise in small scale retrenchments of 13 020 in the past 2 years, while a mammoth 40% rise in retrenchment cases was seen in the first quarter of the year.

While an employer is under an obligation to search for alternatives for employees prior to retrenchment, there is no absolute obligation on it to find, or create, alternatives. Let’s explore this aspect further.

The obligation, or duty, we are speaking about requires an employer to identify alternative options to retrenchment; apply objective selection criteria when deciding who to retrench; and to consider “bumping” long-serving employees into positions where they are capable of rendering services. They must also consult on all these issues before dismissal with a view to reaching a consensus.

What can happen if the employer does not “bump” existing employees into other positions as part of the retrenchment process?

The court may find that fair selection criteria were not applied and that the retrenchment process was procedurally unfair.

“Bumping” is based on the LIFO (last in first out) principle, which is a fair selection criterion to apply, as it rewards employees who have served the employer for a longer period of time.

Depending on the circumstances of a case, bumping can take the form of vertical displacement or horizontal displacement.

Vertical bumping means that the employee is transferred to a position with a less favourable status, conditions of service and pay. Horizontal bumping, however, means that the employee is transferred to a position of similar status, conditions of service and pay.

An employer should first attempt to bump employees horizontally before bumping them vertically.

Vertical bumping should only take place where there is no suitable candidate to ‘bump’ horizontally (into another position).

In the case of large-scale bumping, also called “domino bumping”, which could cause vast dislocation, inconvenience and disruption, the consultation process must be fair towards employees while minimising the disruption to the employer.

Ultimately, a balance must be achieved between the competing interests of the employees and the employer.

For a full breakdown of all the pertinent points to be aware of when faced with, or embarking on a retrenchment process CDH’s employment department has development a full retrenchment guideline, which includes a number of frequently asked questions.

Written by Aadil Patel, director & employment practice national head, Cliffe Dekker Hofmeyr