FAIR REASONS

An employer is allowed to retrench employees for ‘operational requirements’ based on the employer’s ‘economic, technological, structural or similar needs’.

ECONOMIC REASON: The employer says the business is losing money.

TECHNOLOGICAL REASONS: The employer is getting a machine to do work that employees did by hand before, or the employer’s new machines need different skills to operate them than the existing employees’ skills.

STRUCTURAL REASON: The employer is restructuring the business by combining two departments so has not further need for two Heads of Departments.

FAIR PROCEDURES

When an employer considers retrenchment, they must consult:

• Whoever a collective agreement says must be consulted, for example, a trade union, or if there is no trade union:
  • The workplace forum, or if none exists:
    • The union, or if none exists:
      • The employees themselves

The employer must issue a written notice in terms of Section 189 of the Labour Relations Act inviting the other party to consult with it and make all the relevant information available in writing at the consultations, including:

• Reasons for the proposed retrenchment
• Alternatives to retrenchment considered including redeployment
• Proposed number of employees to be retrenched
• How it will be decided which employees to retrench
• When the dismissals will take place
• Severance pay to be paid to any employee retrenched
• What other help the employer will give to the employees who will be retrenched
• Possibilities of future re-employment for these employees
• Number of employees employed by the employer
• Number of employees the employer has retrenched during the past 12 months

The employees who are being consulted must be allowed to have their say and make suggestions on any of these issues. If the employer rejects what the employees say, they must give reasons in writing if the employees have submitted their representations in writing.

The consultation process is a ‘joint consensus-seeking’ process. In other words the parties try and reach an agreement on the different issues, such as:

• Whether retrenchment is justified and ways to avoid retrenchment
• Ways to reduce the number of people retrenched
• Ways to limit the harsh effects of retrenchment
• The method and criteria for selecting employees to be retrenched; if there is no agreement, the employer must use fair and objective criteria
• Severance pay: employees can negotiate for higher severance pay than the Basic Conditions of Employment Act prescribes (which is 1 week’s pay for every completed year of continuous service)

If employees and the employer cannot agree, disputes over the procedures for retrenchment can be referred to the CCMA for conciliation and thereafter the Labour Court. If the retrenchment involves a single employee, or where the employer employs fewer than ten employees, the employee can challenge the fairness of the dismissal at the CCMA rather than the Labour Court, if they wish to do this. A dispute about the amount of severance pay, is finalised at the CCMA by arbitration. Section 189A of the Labour Relations Act, has special provisions for retrenchments in companies that employ more than fifty employees and where the proposed number of employees to be retrenched is more than a specified limit. This is referred to as ‘Large Retrenchments.’

The provisions can be used by either party to help them reach an agreement. The provisions allow for an outside facilitator from the CCMA to help facilitate the process and the right to strike over retrenchments as a final resort. (See Problem 5: Retrenchment)