What are the requirements for large scale retrenchments?


The Labour Relations Act (LRA) allows employers to dismiss employees for reasons of operational requirements (retrenchment). However, the LRA’s provisions make the implementation of retrenchment, especially large scale retrenchments, extremely difficult. Section 189 of the LRA lays down a number of strict requirements, the breach of which would normally place the employer in hot water. These provisions require that the employer must:

  • Have a good reason for the need to retrench,
  • Use fair criteria in deciding which employees are to be retrenched,
  • Follow an intricate consultation procedure aimed primarily at seeking ways of avoiding retrenchment. This process is started off with a section 189(3) notification to employees that the employer is contemplating retrench-ments. The intricate requirements of this procedure make speedy retrenchments extremely difficult if not impossible.

Despite the existence of these stringent restrictions section 189A of the LRA [read together with section 64 (10(a)] contains additional far reaching provisions that further delay the completion of the retrenchment process. Section 189A applies only where the employer has more than 50 employees, and:

  • where there are up to 200 employees employed, the employer contemplates retrenching at least 10 employees;
  • where there are up to 300 employees employed, the employer contemplates retrenching at least 20 employees;
  • where there are up to 400 employees employed, the employer contemplates retrenching at least 30 employees;
  • where there are up to 500 employees employed, the employer contemplates retrenching at least 40 employees;
  • where there are more than 500 employees employed, the employer contemplates retrenching at least 50 employees.

The number of retrenchments is calculated by adding the number of retrenchments over the previous 12 month period to the number of retrenchments currently contemplated.

Section 189A allows employees wishing to dispute the fairness of the retrenchments, to either challenge them in court, or to go on strike. The section also requires that the CCMA must provide a facilitator to help with the retrenchment consultations should either party request this.

Whether or not a facilitator is requested the employer is not entitled to finalise the retrenchments before 60 days from the date on which it gave the employees the section 189(3) notification.

While section 189A has been written in a very confusing and unclear manner it appears that, where the employees have neither lodged a dispute with the CCMA, nor applied for a facilitator, the employer must either lodge a dispute in terms of section 64(1) of the LRA or apply for a facilitator. However, this can only be done 30 days after the 189(3) notification has been issued. It seems (although there is no clarity) that this needs to be done even if the parties are in full agreement on all aspects of the retrenchment.

Case law appears to have confirmed some, but not all of these complex, confusing and extremely peculiar legal provisions.

In the case of Leoni Wiring Systems (Pty) Ltd vs NUMSA & others (September 2007, CLL Vol. 17 No. 2) the Labour Court found that, if a facilitator has been appointed, there is no need for a dispute to be lodged. It appears that the application for and appointment of a facilitator takes the place of the dispute referral.

In the case of NUM vs De Beers Consolidated Mines (Pty) Ltd (September 2007, CLL Vol. 17 No. 2) the Labour Court found that, if the employer wanted to complete the retrenchment process within 60 days of the date of issue of the section 189(3) notification, it would need to lodge a dispute to the CCMA itself as soon as the law allowed it to do so.

It appears that the law relating to large scale retrenchments is not only complex but is also incomplete. This is because it does not specify whether a dispute must be referred even if the parties are in full agreement on all issues. The result is that employers will end up either lodging disputes, where there are none just in order to err on the side of caution, or leaving out this step and taking the risk of being penalized for committing a procedural irregularity.

Due to the onerous, complex, and dangerous nature of the requirements of the LRA employers should not take any steps towards retrenchment before obtaining advice from a labour law expert.

By lvan lsraelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or on e-mail address: [email protected]. Go to: This article first appeared in The Star.
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