What are the requirements for a fair & legal retrenchment process?

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Where there has been only one employee retrenched, the Labour Relations Act (LRA) allows the CCMA and bargaining councils to arbitrate the retrenchment dispute where conciliation has failed to resolve it. This has made it easier for employees to oppose retrenchments. That is, due to the quicker and simpler processes at the CCMA as compared to the Labour Court, employees are less likely to be put off by the intimidating prospect of taking their ex-employers to task for unfair retrenchments. 

 

Despite the strict and clear retrenchment legislation employers are still having to pay large sums of money to employees who have been retrenched incorrectly. Three areas where employers infringe the law on retrenchment are: 

  • Failing to follow the very detailed and rigidly enforced procedure for retrenchment. For example, many employers do not, during the lead up to the retrenchment decision, carry out genuine and comprehensive consultations aimed at trying to save the jobs of the targeted employees. 
  • Making the decision to retrench for the wrong reason. For example, it is illegal to retrench any employee for any reason related to a takeover of a business (or part thereof) as a going concern. And ‘business’ can mean any organisation whether it is a company, sole trader, welfare organisation, NGO, government department or other employer. 
  • Using legally unacceptable criteria for deciding on which employees to retrench. That is, targeting an employee for subjective reasons is unfair. For example, deciding to retrench Mr A because he is old, sick, injured, outspoken, strong-willed or performing badly would be considered unfair. An exception is where the employer can show that the work performance of all employees has been: 
  • Precisely, accurately and fairly measured
  • Recorded in writing
  • Used fairly in deciding on which employees should be retrenched.

 That is, the employer must: 

  1. Implement proper performance appraisal exercises
  2. Arrive at accurate measurements of performance of all employees whose jobs might become redundant
  3. Be able to show that the appraisal ratings were arrived at objectively rather than resulting merely from the manager’s feelings towards the employee or unreasoned opinion of the employee’s work performance
  4. Have made it clear at the outset of the retrenchment procedure that work performance was going to be the criteria for selecting retrenchees. 

In the case of Mokoena vs Power Man (2005, 10 BALR 1047) the employee, an electrician, was retrenched after the division he worked in was closed down. However, the employer failed to prove that there was a need to close down the division and retrench the employee. The employer also failed to follow the legally prescribed procedures for retrenchment. In addition, the employer was unable to explain why it had employed new electricians shortly before the employee’s retrenchment, and why the new employees had not been retrenched instead of Mokoena. Thus, in this case, the employer managed to infringe all three fairness criteria of procedure, fair reason and fair criteria for retrenchment. The arbitrator ordered the employer to pay the employee eight months’ remuneration in compensation. 

In the case of Esterhuizen vs Aluminium Granulated Products cc (2009, 10 BALR 981) the employer claimed that the arbitrator did not have jurisdiction to hear the matter because the employee was not the only one to be retrenched. However, the arbitrator dismissed this claim because no evidence had been led in this regard. In this case the employer was found to have failed to follow a fair retrenchment procedure and had also unfairly found the employee guilty of misconduct. The arbitrator therefore found both the retrenchment and the misconduct dismissal unfair and ordered the employer to pay the employee R255 150,00 in compensation. 

This case highlights the facts that employers should bring evidence at arbitration to prove all their claims, should not mix up misconduct issues with retrenchments and must follow proper procedures before dismissing employees.

New case decisions continue to refine and make subtle changes to labour legislation. This means that employers and employees cannot become complacent. Employees risk losing their jobs unnecessarily and employers run the very serious risk of having to reinstate employees and/or to pay huge amounts in compensation in addition to retrenchment packages.

 

To buy our E-book WALKING THE NEW LABOUR LAW TIGHTROPE please contact Ivan via ivan@labourlawadvice.co.za or 011-8887944 . 

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

 

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