RETRENCHMENTS: THE EMPLOYER’S CONTINUING COVID HEADACHE

RETRENCHMENTS: THE EMPLOYER’S CONTINUING COVID HEADACHE

With the advent of Covid-19 more than two years ago, the financial strain on companies has forced many to restructure their businesses, impacting most significantly on their employees. As a result, the Commission for Conciliation Mediation & Arbitration (CCMA) has received thousands upon thousands of complaints from aggrieved employees seeking to challenge the fairness of their retrenchments.

It is thus important for employers to note that those who do not adhere to the laws governing retrenchment as stipulated in the Labour Relations Act (the LRA) may be faced with claims of unfair dismissals at the CCMA.

There are several important points to note when considering a retrenchment:

The general requirements for a fair dismissal based on an employer’s operational requirements are found in section 189 of the LRA. However, section 189A provides for specific procedures and remedies, should an employer embark on a large-scale retrenchment.

When contemplating a retrenchment, employers are required to issue a notice in terms of section 189(3) or section 189A of the LRA.

The written notice must set out, inter alia, the following:

  • the reason for the proposed retrenchment, the alternatives considered by the employer short of retrenchment and the reason for rejecting each of those alternatives;
  • the number of employees likely to be affected and the job categories in which they are employed;
  • the selection criteria when selecting which employees to retrench;
  • the time or period when the retrenchments are likely to occur;
  • the proposed severance package;
  • the number of employees that were dismissed as a result of operational requirements in the preceding 12 months.

Further to the aforementioned notice, the most important aspect of the retrenchment process is the consultation process. In this respect the employer is required to attempt to reach consensus with employees on appropriate measures to:

  • avoid or minimise retrenchments;
  • change the timing of the retrenchment;
  • agree on the selection criteria;
  • mitigate the adverse effects of the retrenchment; and
  • calculate  the necessary severance packages.

Although it is not a requirement,  the employer is strongly advised to attempt to reach consensus with the employee during the retrenchment process. Should the employer be faced with a claim for unfair dismissal, the employer will be called to show that he/she considered all issues raised by the employee before the retrenchment occurred. If it is shown that an employer had already made the decision to retrench prior to the consultation process, then the retrenchment will be considered unfair, and the employer stands to incur hefty penalties.

When selecting employees for retrenchment  the question has been raised regarding the best selection criteria. The most fair and objective selection criteria is the “last in – first out” principle, paired with the consideration of the employee’s skills and experience. This, however, may be deviated from in certain circumstances where a necessary or specific qualification is required for the job.

When considering severance pay, employees are entitled by law, in accordance with the Basic Conditions of Employment Act, to a minimum of one week’s severance pay for each completed year of service unless the employer has a more beneficial policy with regard to severance packages. 

Should a single employee wish to challenge his dismissal on the basis that such was unfair, both procedurally and substantively, such an employee has the election of either referring the matter to the CCMA for arbitration, alternatively to the Labour  Court.   The LRA makes specific provision for such an election, based on the rationale that a single employee who may not be able to afford the legal costs of Labour Court litigation, has the opportunity to have his/her unfair dismissal dispute resolved by arbitration.

Given the effects of the pandemic on the economy, there is an uptick of more large corporations commencing the process of large-scale retrenchments in terms of section 189A.

The difference between section 189 and section 189A is that:

  • Either the employer or employee may request facilitation from the CCMA, which means that a facilitator will be appointed to oversee the retrenchment process.
  • If a facilitator is appointed, a final notice of retrenchment may only be delivered to the employee after 60 days from the date on which the section 189 Notice was received by the employee. If no facilitator is appointed, either party may refer the matter to conciliation after 30 days from the date on which the section 189 Notice was received by the employee.
  • No final retrenchment notice may be delivered to employees before the 60-day period has lapsed.

In conclusion, it is important for employers as well as employees to be cognisant of the procedure that governs the retrenchment process in terms of the LRA and to keep in mind that employers may well be held liable for an unfair dismissal if the procedure in terms of section 189 or 189A is not adhered to.

 

  • On March 22, 2022
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