RETRENCHMENT

Retrenchments, transfer of business and insolvency:

A reason to initiate retrenchment, relating to the business's "operational requirements", must exist for a lawful retrenchment to take place under  South African law .  Employers are able to terminate the services of an employee (retrenchment) for one of the following reasons: economic, technical or structural reasons.  The procedure that needs to be followed for a dismissal based on "operational requirements" (retrenchments) is regulated in terms of section 189 of the Labour Relations Act.  The required procedure is as follows:

REQUIRED RETRENCHMENT PROCEDURE 

1. Consultation:  

Employees are entitled to the minutes of all meetings.

CCMA may be asked to intervene on request from employer.  

2. Retrenchment: Disclosing of information in writing:

When contemplating retrenchments, the organisation must issue letters to all employees in the affected unit, advising them of the pending retrenchment and the date when consultations will commence. Decisions concerning retrenchment cannot/ should not be made prior to the consultative process taking place.

An employer has to disclose relevant information in writing, including -  

• the reasons (eg economic, technical or structural) for retrenchment,

• alternatives considered to retrenchment and why those alternatives were rejected,

• the number of employees likely to be affected and their various job categories,

• proposed method of selection criteria,

• timing of the retrenchment ie the time when, or the period during which, the dismissals are likely to take effect,

• severance pay proposed, (the statutory requirement for severance pay is one week for every year of completed unbroken service. The amount of severance pay is however subject to consultation and can be increased by agreement between the parties.)

• assistance that the employer will be offering (examples could include offering employees time off to attend interviews, early release should a new job be found, issuing letters of reference, psychological counseling etc),

• possibility of future re-employment and issues around re-employment.

Should there be a dispute about information provided, it will be up to the employer to show why information is not relevant. Disclosure of information disputes can be decided by either the Labour Court or the CCMA.  

3. Opportunity for Feedback

The employer must give the other consulting party an opportunity to make presentations. Representations must be considered and be responded to by the organisation.

4. Criteria for selection

If no agreement is reached on the criteria for selection, criteria must be fair and objective. (The LIFO [last in first out] principle is often applied at the time of retrenchment, but is not the only consideration. Employees with key established skills or who occupy a specific specialized position may be retained, and a poor performance record may be taken into consideration.)  

Offers of alternative employment should be made known and offered to all employees. Voluntary retrenchment offers must be considered initially during consultation before being offered to employees.  The terms must be clearly defined to ensure that there is no dispute thereafter.

Statutory notices of termination of services are handed to those employees who are to be retrenched once the consultation process has been completed and all employees' counter proposals, questions and concerns have been addressed in writing.

LARGER RETRENCHMENTS

The following provisions apply if an employer with fifty or more employees contemplates retrenching either -

• ten employees - if the employer employs up to 200 employees

• twenty employees - if the employer employs between 201 and 300 employees

• thirty employees - if the employer employs between 301 and 400 employees

• forty employees - if the employer employs between 401 and 500 employees

• fifty employees - if 500 and above

• or, if in the twelve-month period preceding notice of retrenchment, the employer contemplates retrenching a total number of employees falling into any of the above categories.

Part-time workers and casual workers are employees for the purposes of the statute. In this regard, the new section 200A presumes other categories of persons to be employees, unless the contrary is established.

Once retrenchments are contemplated, the employer must deal with an identified consulting partner according to the following hierarchy: -

• parties identified in a collective agreement;

• a workplace forum and any registered union with affected members;

• any registered union with affected members; and

• the affected employees and their representatives.

Section 189(3) requires the employer to issue a notice in the form of an invitation to begin a consultation process to the relevant consulting parties. When notice is given, the employer is required to disclose all relevant information and in the event of a dispute regarding disclosure, the onus will now be on the employer to show the information sought is not relevant.

A process of consultation needs to be embarked on which is defined as "an engagement in a meaningful joint consensus seeking process" in an attempt to reach consensus on issues such as measures to avoid or mitigate retrenchment; selection criteria; and severance pay.

After the conclusion of the sixty day facilitation process, and if there is no consensus between the parties, the employer is then entitled to give notice of termination of contracts of employment in terms of section 37(1) of the Basic Conditions of Employment Act and a registered union or the employees who have received notice of termination may either -

• give notice of a strike in terms of section 64(1)(b) or (d) of the LRA; or

• refer a dispute on the reason for the dismissal to the Labour Court for adjudication.

If neither party requires the appointment of a statutory facilitator, the parties may not dismiss or engage in industrial action or refer a dispute to the Labour Court respectively, for an equivalent sixty day period.

If any consulting party wishes to challenge the fairness of a consultation process, it may challenge the outcome in the Labour Court. Any application in this regard must be brought within thirty days of the issuing of a notice of termination of employment. 

HANDLING A DISPUTE ON RETRENCHMENT

Workers may elect after the consultation process to either strike, in certain circumstances, or refer the matter to the Labour Court for adjudication.  Strikes should be conducted in terms of section 64, essentially like all other strikes. Secondary strikes are permitted on 14 days notice.

If you want to challenge the lawfulness of a retrenchment, you should immediately refer this matter to the CCMA for conciliation.  You should consider approaching a labour attorney/ expert for assistance to ensure that your rights are protected... (Call Labour Protect on 0860 522687 to arrange to consult with the nearest labour expert on the network.)

If a retrenchment dispute is not resolved in conciliation, then the matter may be referred either to arbitration  or to the Labour Court.  Previously a retrenchment matter not resolved at conciliation had to be referred to the Labour Court.  However now section 191(12) of the Labour Relations Act seeks to lessen the Labour Court's work load in that individual employees who have been retrenched will have an election to refer the dispute either to arbitration or to the Labour Court. (It may be more expeditious with regard to time and cost savings to arbitrate, rather than proceeding to the Labour Court.)

Relevant Legislation: Labour Relations Act 1995 (section 189) and Basic Conditions of Employment Act 1997 sections 35, 37 and 41.  This document is based on literature available from the CCMA  

Labour Law useful links advice payment on retrenchment   conciliation formal grievance procedure remuneration definition   UIF payments UIF benefits  Pension Fund Disputes  jobs in South Africa

For employers:

• Call us on 0860 522687;
• Join on-line
• We will call you: