Employers may find it hard to use performance ratings to justify retrenchments as a recent labour court judgment highlights.

The Labour Court recently ruled in the favour of an employee who challenged being retrenched based on his performance rating.

When South African Breweries restructured its organisational structures‚ Rudolf Louw’s position was made redundant. Louw then unsuccessfully applied for a position in the new structure‚ but after an alternative to place him in the company could not be reached‚ he was retrenched.

SAB used a selection criterion to evaluate which employee would be retrenched‚ looking at their “skills‚ historically agreed performance ratings‚ qualifications and experience and thereafter length of service”.

Kirsten Caddy‚ a senior associate for Employment Law at Cliffe Dekker Hofmeyr‚ says by law‚ employers and consulting parties must either agree on the method of selection for retrenching employees‚ but if the parties cannot

agree‚ the employer has a right to adopt a selection criterion that is fair and objective.

Caddy said the use of performance ratings as a selection criterion is not objective.

“This is because [performance ratings] involve the scoring or rating of an employee’s performance by their manager which entails the exercise of a discretion. The exercise of a person’s discretion includes an element of subjectivity‚” said Caddy.

She said the process was problematic because it lays the fault with the employee‚ whereas our labour law considers retrenchments as ‘no fault” dismissals.

But SAB argued the inclusion of performance ratings was fair because Louw had not appealed against his performance assessment. The court found it irrelevant‚ as Louw had made his unhappiness about his performance ratings known.

Caddy said a fair and objective method often used as a selection criterion for retrenchments was the “last in‚ first out”.

“It’s without favour or bias‚ and that makes it fair and objective‚” said Caddy.