Retrenchment

The COVID-19 pandemic has had a devastating effect on the financial wellbeing of various companies worldwide. South Africa has not been spared the wrath of the virus and as such employers are being called upon to take drastic measures to save their businesses and the jobs of thousands of workers.One of the processes to be considered by employers is retrenchment. Retrenchment is a form of dismissal that is not based upon any fault of an employee and is a process in terms of which an employer reviews its business needs in order to increase profits and limit its losses, which process could include the reduction of the employer’s staff compliment.

Employers are allowed to retrench employees due to operational requirements which can be based upon the economic, technological or structural needs of employers. The COVID-19 pandemic has no doubt caused many employers to suffer economic losses and accordingly they need to restructure their business.The retrenchment process is regulated by Section 189 of the Labour Relations Act 66 of 1995 (Hereinafter referred to as “the Act”).

Section 189(1) as read with Section 189(2) of the Act requires the employer to arrange consultations with certain interested parties with the view of reaching consensus on aspects such as measure to avoid possible dismissals, minimise the number of dismissals, change the timing of dismissals and mitigate the adverse effect of dismissals.

Section 189(3) of the Act requires to employer to issue a written notice inviting the other consulting parties, which would include employees, to consult with the employer. The notice must be in writing and disclose all relevant information including, but not limited to, the following information:

1. The reasons for the proposed dismissal;
2. The alternatives the employer considered before proposing the dismissals and the reasons for rejecting the alternatives;
3. The number of employees likely to be affected and the job categories in which they are employed;
4. The proposed method for selecting which employees to dismiss;
5. The time when, or the period during which, the dismissals are likely to take effect;
6. The severance pay proposed;
7. Any assistance that the employer proposes to offer to the employees likely to be dismissed;
8. The possibility of future re-employment of the employees who are dismissed;
9. The number of employees employed by the employer; and
10. The number of employees that the employer has dismissed for reasons based on operational requirements in the preceding 12 months.

The employer, in terms of Sections 189(5), 189(6) and 189(7) must allow any consulting party to make representations during the consulting process, respond to the representations made especially in the event that an employer does not agree with the representations and must select the employees to be dismissed based on selection criteria.

The selection criteria must:

1. Be agreed to by the consulting parties; or
2. If no criteria has been agreed, the criteria must be fair and objective.

In the event that an employer employs more than 50 employees the retrenchment process is categorized as a large scale retrenchment and is also regulated by Section 189A of the Act.

In terms of the aforesaid Section a facilitator needs to be appointed to facilitate the consultation process of the consulting parties.

A facilitator can be appointed by:

1. The employer by way of a request to the Commission for Conciliation, Mediation and Arbitration (Hereinafter referred to as “the CCMA”) in the employer’s notice in term of Section 189A(3)(A) of the Act;
2. Within 15 days of receiving the Section 189(3) notice, the representative of the majority of the employees who the employer contemplates dismissing, may request the appointment of a facilitator and notify the CCMA; or
3. The parties can agree to the appointment of a facilitator.

In terms of Section 189A(7) of the Act, the employer would only be able to give notice of termination once a period of 60 days has lapsed, which is calculated from the date upon which a notice in terms of Section 189(3) is issued. It should however be noted that if the 60 day period lapses before the consultations have been completed the employer may not provide notice of termination until such a time as the consultation process has been exhausted.

The requirements as addressed in this article are not an exhaustive list and we would accordingly advise employers to contact our offices and utilise the services of one of our specialist attorneys to assist with this often complex process.

The requirements of the Act have not been suspended due to the COVID-19 pandemic and as such employers are still required to comply with the procedures pertaining to retrenchments. The failure to do so could lead to a wave of unfair dismissal claims against the employer which would only further impact on the employer’s precarious financial position.

Should you require our assistance you are welcome to contact one of the following attorneys:

Pieter Walters                                                                                            Nel de Jager

Cell:  0828583817                                                                                        Cell:  0826856212

E-mail:  pieter@nvsinc.co.za                                                                     E-mail:  dejager@nvsinc.co.za

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)