What are the consequences if an employer uses retrenchment to resolve performance issues?



 As a result of South Africa’s highly restrictive labour legislation employers threaten to close down their businesses. But it is not necessary for employers to take such drastic steps merely because the labour law interferes with their right to make business decisions.

This is because every employer has the ability and opportunity to acquire the expertise necessary to implement business decisions without transgressing the law and still maintain a viable business.

Employers too often make the mistake of retrenching problem employees because they perceive the disciplinary process as being too drawn out and complicated. However, they are not allowed to use retrenchment to get rid of ‘deadwood’, trouble makers, poor performers or other undesirables. Retrenchment only becomes a possible option if the job is truly redundant.

Employers are not required to negotiate retrenchments but only to consult with the trade union or other employee representatives (if these exist) or with the employees themselves. The difference between consultation and negotiation is most important:

Negotiation means that the parties must reach agreement before any idea can becomes a decision or is implemented. This is not required in retrenchment law although the trade unions are pressing hard for this to be legislated.

On the other hand, the law of consultation provides that, as long as the employer can prove that it disclosed relevant information and tried thoroughly and in good faith to reach consensus, it does not have to actually reach agreement with the employees/representatives.

The halls of the CCMA and Labour Court echo endlessly with the groans of many thousands of employers (and some ex-employers) who refused to believe the labour law requiring fair or agreed retrenchment criteria, and who failed to acquire the knowledge and expertise necessary to reconcile business pressures with legal requirements.

Countless cases have been decided at the CCMA and Labour Court where employers have either had to reinstate retrenchees and/or have had to pay huge amounts in compensation. This is often a disaster for the employer because the biggest reason for retrenchments is financial weakness and these awards against employers can place an unbearable burden on the already strained finances of the employer.