Please note this article covers the process for small scale retrenchments, large scale retrenchments (Section 189A) where an employer employs more than 50 employees incorporate many more complexities, the process is far more onerous, there are many more stakeholders, steps, remedies, and prescriptive timeframes.
Considering the backdrop of ongoing COVID as well as the recent unrest in KZN and Gauteng retrenchment has become a hot topic in the HR and labour law sphere once more.
Before considering retrenchments and employer needs to look at alternatives, these could include short-time or reduced working time, temporary lay-offs where these have been considered or already implemented and are not yielding the desired outcomes the employer can consider retrenchments.
What is a retrenchment as defined by the law? Retrenchment is a dismissal for operational requirements meaning it is a dismissal based on factors that are not linked to an employee but rather the employer’s business. Reasons for embarking on a retrenchment process in terms of the law would be financial and economic factors that affect the sustainability of a business, structural changes when you may be restructuring your workforce or technical reasons which may be a result of technological changes and certain previous positions may become redundant.
The Labour Relations Act requires an employer to consult with employees as soon as the employer contemplates that retrenchment is to take place.
As is the case with any dismissal there are very specific procedures required for retrenchment as well. Section 189 is very prescriptive in terms of the process that needs to be followed which covers the aspects of procedural fairness. Substantive fairness covers the reasons behind the dismissal and as mentioned above these are financial, technical and structural reasons. In many instances, I receive many requests to retrench a poor performer as the employer is at their wit's end and has not followed the incapacity (poor work performance route) and has drawn a line in the sand that enough is enough and wants a retrenchment this would immediately be an unfair dismissal and cost employer at the CCMA as the wrong reason and wrong procedure would have been used.
In terms of procedural fairness there are very specific requirements that need to be followed:
1. Once the employer has contemplated that retrenchments are a possibility the employer needs to consult with employees. A notice of an intention to consult must be issued to employees in writing, the contents of this document are very specific and if not done properly would backfire on an employer.
2. The consultation process itself aims to facilitate joint consensus-seeking between the parties and will cover the following: reasons for retrenchment, selection criteria, severance pay, proposed timing of the retrenchment, notice pay, alternatives to consider amongst others. A key aspect of the consultation is to hear any proposals from employees where they may have alternatives as to the retrenchment, can avoid the retrenchment, minimise the number of affected employees or delay or change the timing of the retrenchment. The employer is obliged to obtain these proposals and consider them properly and respond back to employees. Retrenchment is not to be a rushed process where the outcome is predetermined by an employer. The employer must allow time for proper consultations and hence the law requiring an employer to initiate the process as soon as they contemplate retrenchments. There may be additional considerations if your business is unionised or if your are member of a bargaining council.
After the conclusion of the consultation process if alternatives have been agreed upon these would need to be signed off, these may include new terms and conditions of employment and new employment contracts may need to be signed. If the employer could not implement the employee’s proposed alternatives a written notice of retrenchment needs to be issued to the affected employees and settlement agreements need to be drafted for the retrenched employees.
It must be noted that although the employees were consulted, this is still a dismissal and the employee has every right to refer the matter to the CCMA for Section 189 retrenchments and should the employer fail to meet the necessary requirements they may be liable to pay up to 12 months salary to the employee in compensation which would be a very expensive mistake for a company who has retrenched multiple employees and are on their knees financially. Even if you have followed the correct process the likelihood of employees taking the employer to the CCMA is very high as it’s their last bite at the ‘proverbial cherry’, they were not at fault in the dismissal and they have nothing to lose.
It is important to note that if a business is closing down this does not automatically mean that employees no longer have a job, to terminate the employment contract retrenchments need to be effected.
Retrenchments are a complex legal process that should be facilitated by a professional. If you are in the unfortunate position where you need to contemplate retrenchments please get in touch so I can assist.
Call Infinity HR Consulting on 087 073 6940 or 083 305 6219.