The most feared word in South Africa besides COVID-19 is RETRENCHMENT

“When we are no longer able to change a situation, we are challenged to change ourselves.”  – Victor Frankl

Introduction

The reality of the situation, for the majority of South Africans, is that employees earn wages or salaries, whereby they are forced to live from hand to mouth, from pay cheque to pay cheque.  Very little employees are able to afford to be short paid or not to receive a salary (not even for a single month).

When COVID-19 lockdown started in March 2020 and employees received no or less salaries, caused a ripple effect throughout households; on average persons and households were left to survive on Temporary Employer/Employee Relief Scheme (TERS) monies. 

Thereafter, once the lockdown was lifted, the first round of retrenchments began and every industry, including the Motor Industry, was hit very hard.  In most cases both employers and employees are still struggling to recover!

If you still have employment, you can count yourselves as blessed; however, in this current climate, the word retrenchment created a very scary reality.  Below we explore the nature of the process and look at some possible pitfalls.

Section 189 of the Labour Relations Act

Section 189, Labour Relations Act 66 of 1995 (LRA) provides a clear process to be followed and employees need to familiarize themselves with the processes, so as to ensure that you know your rights and possible options available to you.

It is notable to draw your attention to the fact that a retrenchment is a “no fault dismissal”, meaning that neither the employer nor the employee did something wrong. 

The LRA places a high value on both the procedural and substantive fairness of the retrenchment process as a whole, with strong emphasis placed on parties to explore joint consensus-seeking consultations in order to minimise the number of employees to be retrenched, the effects of the retrenchment on employees and to seek and explore possible alternatives.   

The Bill of Rights, (sections 7-39), as contained in Chapter 2 of the Constitution of the Republic of South Africa, 1996, (The Constitution) clearly defines the rights of all South African Citizens and stipulates in Section 7(1) Rights:

“This Bill of Rights is a cornerstone of democracy in South Africa.  It enshrines the rights of all people in our country and affirms the democratic values of human dignity, equality and freedom”. 

Section 23(1) of the Constitution deals with Labour Relations as follows:

“Everyone has the right to fair labour practices”

Section 189 (1) of the LRA is very clear that employers need to consult with:

• any party or Institution that the employer is required to consult with as per collective agreement;
• In the absence of such an agreement the employer needs to consult with workplace forums if need be;
• registered unions that represent effected employees;
• if there is no unions or workplace forum the employer must consult with his employees that are likely to be effected.

Consultations with such parties should not be seen as a once-off need for consultation, as the Section 189(2) of the LRA prescribes parties to engage in meaningful consultations, to address the following topics during a ‘’joint consensus seeking process’.

• Possibilities to avoid dismissals;
• Measures to minimize dismissals;
• Measures to change the timing for such dismissals;
• Measures to mitigate the effect of such retrenchments;
• The selection criteria to be used to select the effected positions (such as LIFO – last in first out, skills retention or qualifications);
• Severance Pay.

Sec 189 (3) of the LRA requires the employer to disclose in “writing” all relevant information relating to:

• Reasons for the retrenchments;
• Alternatives considered and reasons why such alternatives cannot be accepted;
• Number of employees likely to be effected (and the relevant departments);
• Selection criteria that the employer proposes;
• Severance pay proposed;
• The assistance that the employer plans to offer;
• Possibility of re-employment;
• Number of employees retrenched in during the preceding 12 months.

In the matter of SASBO The Finance Union obo Fourie v Nedbank Limited (J2011/19) [2019] ZALCJHB 317; (2020) 41 ILJ 500 (LC) (28 October 2019) the court found that S189 (3) notice is more than an informal notice to participate in a consultation process. “Section 189(3) provides that an employer intending to consult must issue a written notice inviting the other consulting party to consult.  This section is peremptory, the employer’s failure to issue the notice is procedurally unfair.”

Section 213 of the LRA gives a very clear definition of retrenchment:

‘’Operational Requirements means requirements based on the economic, technological, structural or similar needs of an employer’’.

The LRA further prescribes two different process to follow: a small-scale retrenchment process (section 189 of the LRA) or a large-scale retrenchment process (section 189A of the LRA).

Section 189A of the Labour Relations Act

The second process mentioned above, (the so-called large-scale retrenchment process) as defined by section 189A (1) of the LRA, is a process that should or could be applied to employers that employ 50 or more employees.

Section 189A (1) (a) of the LRA stipulates that:

“The employer contemplates dismissing by reason of the employer’s operational requirements, at least-

1. 10 employees, if the employer employs up to 200 employees;
2. 20 employees, if the employer employs more than 200, but not more than 300 employees;
3. 30 employees, if the employer employs 300, but not more than 400 employees;
4. 40 employees, if the employer employs more than 400, but not more than 500 employees, or
5. 50 employees, if the employer employs more than 500 employees.”

What this means is that once an employer employs 50 or more employees and contemplate dismissing at least 10 or more employees, Section 189A of the LRA is applicable.

The benefit of applying Section 189A of the LRA, is that a CCMA Commissioner may facilitate the process, providing the employer and employee with equal footing.  The second benefit is that the parties will need to consult for a period of 60 days, before a dispute can be declared (unless there is an agreement to reduce that period).  This will further assist the employee in looking for alternative employment in the market.

Section 189A (3) of the LRA describes that the “Commission must appoint a facilitator, if either of the parties:

1. the employer has in its notice in terms of section 189 (3) requested facilitation; or
2. consulting parties representing the majority of employees whom the employer contemplates dismissing have requested facilitation and have notified the Commission within 15 days of the notice.”

What is very important for employees to note is in terms of Section 189(6) of the LRA, when an employer proposes alternatives to retrenchments, such alternatives should be thoroughly considered and the employer should be provided with valid reasons why such alternatives cannot be accepted (the same, in turn, is expected from the employer). 

This above lesson was learned the hard way in the Supreme Court of Appeal (SCA) decision, of National Union of Metalworkers of SA v Fry’s Metals (Pty) Ltd (2005) 26 ILJ 689 (SCA), where Fry’s Metals’ case was solely based on the fact that the employees declined to accept the changes necessary for the company to implement to ensure that the business is efficient and to look after the business’ wellbeing.  Fry’s Metals’ action of dismissing employees that refused to accept such implementation was ruled to be fair.

Further rulings that point to changes that employers can effect in order to avoid retrenchments or to save jobs, was pointed out in the Labour Court decision of:

“ECCAWUSA v Shoprite Checkers t/a OK Krugersdorp (2000) 21 ILJ 1347 (LC), the Court found that employers are entitled to unilaterally change employees’ conditions of services in order to save jobs. This was confirmed in Media Workers Association of SA v Independent Newspapers (PTY) Ltd (2002) 23 ILJ 918 (LC), where the Court held as follows: –

“Implementation of section 189 often results in changes in terms and conditions of employment.  Such changes are justified if they are made in the course of a bona fide retrenchment exercise and as an alternative to retrenchment …In this case, they were not underpinned by the ulterior motive to dismiss for not acceding to a demand … merely because the dismissal was not considered as a probability does not mean that changes were not brought about in terms of section 189.  Dismissal is one, though not a necessary, consequence of restructuring.” (Emphasis added)

Conclusion

Although Section 189 of the Labour Relations Act 66, 1995 provides clear guidelines for the process to unfold, the courts place emphasis on a “joint consensus seeking process”.  It is further trite that dismissals based on operational reasons, as a result of this process, should always be the last resort.

It is therefore very important for members to inform MISA immediately once your employer issues you with a notice of intention to follow a retrenchment process. 

Remember MISA – Just a phone call or an e-mail away!

Kindly utilise the following e-mail addresses and links for assistance during this time:

Legal/Labour-related enquiries                      Legal@ms.org.za  

Legal Reception                                                011 476 3920

MISA Benefit claim-related enquiries            Claims@misa.org.za   

Any other enquiries                                          Info@ms.org.za  

Website                                                              www.misa.org.za    

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