Employers must discuss retrenchments with workers

Lavery Modise and Sian Wilkins

Lavery Modise and Sian Wilkins

The current economic climate has resulted in many retrenchments worldwide and employees are now asking questions about employers' obligations to employees in a retrenchment process.

In South African law, small-scale retrenchments are governed by section 189 of the Labour Relations Act 66 and large-scale retrenchments by section 189A. An employer is entitled to retrench employees for "operational requirements", meaning requirements based on the economic, technological, structural or similar needs of the employer.

A retrenchment needs to be both substantively and procedurally fair. There should be a valid reason for the retrenchment and the correct procedure should be followed. The employer is required to show that the employee's position has become redundant.

In terms of section 189 of the Act, an employer must enter into consultation with employees likely to be affected by the proposed retrenchments (or with the employees' workplace forum, registered trade union or nominated representative).

Consultation must take place before the employer decides to retrench and as soon as the employer foresees the possibility of retrenchments.

The employer and the employee are required to attempt to reach consensus on a number of issues such as:

l Appropriate measures to avoid the dismissals, to minimise the number of dismissals, to change the timing of the dismissals and to mitigate the adverse effects of the dismissals;

l The method for selecting employees to be dismissed; and

l The severance pay for dismissed employees.

In terms of the Basic Conditions of Employment Act, apart from notice pay, an employer must pay a retrenched employee severance pay equal to at least one week's remuneration for each completed year of continuous service with that employer.

There is no legal requirement for an employer to actually reach consensus on the above mentioned issues. The mere process of seeking consensus is sufficient.

In order for the consultation process to be fair, an employer must allow enough time for the parties to reach consensus.

In the matter of Dlamini & Others vs Faraday Wholesale Meat Supply, the employer consulted twice with its employees, each "consultation" lasting between five and 10 minutes. The Labour Court found it "totally inconceivable to consult in any meaningful fashion with approximately 40 people in a time span that ranges between five and 10 minutes" and decided that "there was no attempt to reach consensus".

The Labour Court has previously found an employer's haste in finalising retrenchments unjustified, and the subsequent retrenchment of a number of employees unfair, when the employer insisted that the consultation process be finalised on Freedom Day, a public holiday.

The employer must furthermore disclose relevant information to the employee and allow the employee an opportunity during the consultation to make representations about any matter on which they are consulting.

The employer must consider the representations and if it does not agree with them, it must give reasons for the disagreement.

Retrenchments are complex and it is suggested that employees obtain proper advice before retrenchment consultations.

l The writers are director and senior associate at Routledge Modise in association with Eversheds