Section 189 of the Labour Relations Act (LRA) requires employers, before making any decision to retrench, to consult with the affected employees on a number of issues, the most important of which is any means of avoiding job losses.

The employer’s duty to consult before retrenching lies at the heart of its duty to ensure procedural fairness. The employer is likely to find that failure to consult (or to consult properly) extremely costly from a legal point of view.

Although the LRA is silent about voluntary retrenchments, common law permits such agreements where they have been properly and fairly implemented. The best place for considering voluntary retrenchment agreements is during consultations on alternatives to forced retrenchment. For example, where the parties have already exhausted all other alternatives to statutory retrenchment, it would be acceptable to consider voluntary retrenchment as an alternative.

Unfortunately, many employers misuse voluntary retrenchments by implementing them prematurely and/or by foisting them on the employees. But employers are warned that this is not an easy way out. 

In the matter between Merafi and five others vs Ithuba Holdings (Lex Info 26 May 2026. Labour Court case no JS112/2021) the employer conducted a retrenchment consultation process with six employees. However, instead of consulting on the issues prescribed by section 189, it confined the meeting to the topic of voluntary retrenchments. More seriously, the employer pressured the employees into signing voluntary retrenchment agreements by withholding their salaries.

The Court noted that the employer’s defence was that the Court could not adjudicate the matter because the employees had signed voluntary retrenchment agreements. As the terminations had been voluntary, there had been no dismissal. The Court rejected this argument because the evidence showed that the employees had not signed the purported agreements voluntarily. Furthermore, although alternative positions existed, none of these were offered to the six employees. The employer’s fresh recruitment exercise was a means towards getting rid of the six complainants. In addition, the employer had failed to inform the employees of alternatives to their retrenchment, which is a statutory requirement. The employer neither applied a fair criterion for selecting the retrenchees nor proved that it had a valid reason for the need to retrench. The Court concluded that the employer had misused the employees’ purported voluntary agreements to deprive them of their right to a fair process.

The Court therefore found the retrenchments substantively and procedurally unfair and ordered the employer to pay each of the six employees eight months’ remuneration in compensation.

This costly outcome is a strong message to employers to ensure that those responsible for conducting processes covered by labour law are made aware of the requirements of the law and of the danger of trying to evade it.

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Written by lvan lsraelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or on e-mail address: ivan@labourlawadvice.co.za. Go to: www.labourlawadvice.co.za

To access our groundbreaking video series: WALKING THE NEW LABOUR LAW TIGHTROPE please go to www.labourlawvideos.co.za or contact Ivan on ivan@labourlawadvice.co.za