May an employer automatically retrench employees when sales or profits drop?

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During 2018 we have received many dozens of calls from employers who have retrenched employees and are being taken to the CCMA, bargaining council or Labour Court. As the our economic downturn has deepened retrenchments are likely to spiral over the next year and beyond.

 

Exacerbating the effect of the economic downturn is the rampant culture of crime that our government only talks about addressing. In contrast to this ‘talk’ of addressing crime we have excessively high levels of violent crime and of corruption. We also have political leaders tainted with misdeeds and alleged misdeeds being allowed to run for election. These facts deter those foreign investors who might have considered bringing labour intensive projects to South Africa.

 

In the light of increasing workforce cut-backs it is more important now that ever before that employers become aware of the plethora of myths related to retrenchments. That is, too many employers operate erroneously and dangerously according to the following myths:

 

  1. Retrenchments are the only solution to the employer’s financial problems 
  1. Employers are allowed to retrench merely because profits have dropped slightly or are expected to drop slightly 
  1. Restructuring exercises automatically allow the employer to retrench 
  1. When new technology is introduced into the workplace the employer can immediately retrench those employees who have not been trained in the use of the new technology 
  1. The employer has the right to choose whatever criteria it prefers when deciding who to retrench 
  1. As long as the employer has a good reasons it can go ahead and retrench whenever it likes 
  1. Due to the fact that retrenchments need to be implemented urgently the employer is not obliged to follow retrenchment procedures 
  1. The employer is not obliged to find out whether the employees concerned belong to a trade union before beginning retrenchment consultations 
  1. Employers only have to consult on the issue of the amount of the retrenchment package 
  1. When a company is bought over or two entities merge the resulting rationalisation justifies the retrenchment of superfluous employees 
  1. Employers are entitled to decide to retrench employees before consulting with them on reasons why the retrenchments should not take place 
  1. Retrenchment is a golden opportunity to get rid of poor performers, bad eggs, trouble makers, pregnant women, elderly employees, members of unfavoured race groups, religions or tribal origins and employees who commit misconduct.

 

In the case of Janse Van Rensburg vs Super Group Trading (Pty) Ltd (2009, 3 BLLR 201) the employee was retrenched after the employer found itself in financial difficulties. The employer alleged that the employee had been retrenched due to the need for restructuring.

However, the Labour Court found that: 

  • The employer had chosen the employee for retrenchment before consulting with him on the matter 
  • The employer’s real reason for selecting the employee for retrenchment was the fact that it had received complaints from clients about his negative attitude, his lack of interpersonal skills, his disciplinary record and other allegations of misconduct

 

The retrenchment was both procedurally and substantively unfair and the employer was ordered to pay the employee the equivalent of 12 months’ remuneration in compensation.

 

Having been made aware of the above 12 myths and of the outcome of the Janse Van Rensburg case cited above employers need to: 

  • Train their managements as to the do’s and don’ts of retrenchment 
  • Use a reputable labour law expert to advise them before embarking on retrenchments and to carry out the necessary management training.

 

 BY   Ivan Israelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or via e-mail address: ivan@labourlawadvice.co.za. Website: www.labourlawadvice.co.za.

 

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