Retrenchment:  process and reason

Retrenchment: process and reason

Retrenchment: process and reason

It happens that an employer is in financial trouble, has to develop strategies to limit losses, or has to deal with a drastic change in the market that disrupts the entire business. These are good examples of situations in which retrenchment may be necessary. In a nutshell, the substantive requirement is completely justified: one cannot draw blood from a stone if the business simply does not have enough funds. But the second aspect of a legal retrenchment is the procedural requirements. When a dispute arises over retrenchment, both substantive and procedural requirements are considered.

Substantive requirements (the facts)

In terms of Section 189 of the Labour Relations Act (LRA), there are specific criteria that employers must meet before layoffs begin. These criteria include:

 

  • Operational requirements: Employers must show that there are genuine operational reasons necessitating retrenchment. These may include economic factors such as a decrease in revenue, technological advances resulting in restructuring, or changes in market conditions.

 

  • Selection criteria: Employers must establish fair and objective criteria for selecting employees for layoffs. This may include factors such as, among others, skills, qualifications, or years of service. Discrimination based on factors such as race, gender or trade union membership is strictly prohibited.

 

  • Alternative measures: Employers should explore alternatives to layoffs, such as offering voluntary severance packages, implementing shorter working hours, or moving employees to other positions within the business.

 

Dealing with the substantive issues requires consideration and planning from employers. It is essential to assess the business’s financial situation, explore all available options, and ensure transparency and fairness throughout the process.

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Procedural requirements

The procedural requirements with retrenchment refer to the steps that employers must follow when considering layoffs. Legislation sets out a detailed procedure that employers must follow, which includes:

 

  • Notice and consultation: Employers must notify the affected employees and relevant trade unions or employee representatives of the proposed layoffs. This notice must include, among other things, the reasons for layoffs, the number of employees involved, and the expected timeline.

 

  • Consultation process: Employers must engage in a meaningful consultation process with affected employees and their representatives. This entails that relevant information is provided, alternative measures are considered and that there is sufficient time for discussions.

 

  • Joint decision-making: Employers and employee representatives are encouraged, where possible, to engage in joint decision-making regarding the retrenchment process. This may include: negotiating severance packages, investigating relocation opportunities, identifying training and other support for affected employees, and so on.

 

  • Notice and severance packages: Employers must notify the affected employees in writing of the layoff, as well as provide severance packages in accordance with the Basic Conditions of Employment Act. The notice period and severance packages are determined based on the employee’s years of service: one week’s wages for each completed year of service.
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By following the prescribed procedural steps, employers can ensure that they comply with legislation and reduce the risk of disputes. Effective communication, transparency and empathy are essential components of the procedural aspect of layoffs. Retrenchment is a complex and challenging process for both employers and employees. By understanding and addressing both the substantive and procedural issues set out in Section 189 of the LRA, employers can deal with retrenchment in a fair and responsible manner.

 

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Final payments due upon termination of employment

Final payments due upon termination of employment

Final payments due upon termination of employment

There are different ways in which an employment contract may terminate. It can either be by way of the employee resigning, reaching the retirement age set in the workplace, the employee being dismissed for misconduct or retrenched due to operational reasons. There are certain requirements for the employer under each of these circumstances and it is important for an employer to understand what payments should be made to an employee upon termination to avoid non-compliance with legislation.

Resignation by the employee

If an employee resigns, it should preferably be in writing. If the employee resigns with immediate effect, the employer may institute civil action for any damages suffered as a result of the employee not working a notice period. The employer does not have to remunerate the employee for the notice period when an employee resigns with immediate effect, but the employer cannot withhold the employee’s final salary under these circumstances.  Payment for days worked and accumulated leave will be due to the employee.

Employee reaching retirement age

It is of paramount importance for an employment contract to be clear on the retirement age within the business. If there is no retirement age, the employer should institute a retirement policy. The statutory notice period is still applicable when an employee retires. The employee is paid for the notice period that they work. Accumulated leave will also be due to the employee. An employee is not paid for years of service. Any ex gratia (out of goodwill) payment is solely at the discretion of the employer and is not a legal requirement.

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Dismissal of an employee

Firstly, before any form of dismissal may take place, a disciplinary hearing must be held. Once the employee has been found guilty and there are sufficient grounds to proceed with a dismissal, an employer may proceed with a sanction of this nature. When an employee is dismissed, the employee should receive his/her salary up to the last working day, including the finalisation of the disciplinary hearing. Accumulated leave will also be due to the employee. No notice period is applicable when an employee is dismissed for misconduct.

Retrenchment of an employee

Correct procedures have to be followed before an employee may be retrenched. A retrenched employee is entitled to accumulated leave, notice pay (if applicable) and severance pay. If an employee is not required to work a notice period, the employee should be paid for this period. An employer must pay an employee severance pay equal to at least one week’s remuneration for every completed year of service. Only when an employee is retrenched, is it a legal requirement for the employer to pay for years of service.

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The employer has an obligation to provide an employee with a certificate of service and final salary advice upon termination of employment. A UI19 document has to be completed and submitted to the Department of Employment and Labour.

 

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Desertion:  follow the correct procedure

Desertion: follow the correct procedure

Desertion: follow the correct procedure

Employers are often faced with employees who simply stay away from work. The question then, is how to deal with it. If an employee does not report for work, the employer has an obligation to take all reasonable steps to determine why the employee is absent.

THE FIRST STEP

The employer’s first step is to contact the employee on all numbers available. If the employee does not answer, attempt to contact the employee again at a later stage.  If this remains unsuccessful, send the employee a message informing him that he is absent without permission, and if his absence is due to an illness, he must confirm this as soon as possible.

The second step

The second step is to inform the employee that he must report back for work as he is absent without permission and/or a valid reason. Provide the employee with a specific date and time when he must report back. Generally, the date will be the next business day.

 

If the employee still does not report for work, and no communication is received regarding his absence, contact the employee again to warn him that he is still absent without permission and/or a valid reason.

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An ultimatum

If the employee is absent for five consecutive days/shifts, send the employee an ultimatum with the following information:

 

  • the date from when he is absent without permission and/or a valid reason;
  • that he is absent for five consecutive days/shifts, which is an indication of his desertion with no intention of returning to work;
  • that the employee is given an ultimatum to return to work;
  • specified date and time at which the employee must report back for work;
  • a warning that further disciplinary action may be taken, which includes a disciplinary hearing and possible dismissal.

NOTICE of hearing

If the employee does not comply with the ultimatum, and still does not report back for work, serve the employee with a notice of disciplinary hearing. The notice can be served by hand, email or electronic message (“SMS” or “WhatsApp”). The notice must also specifically warn the employee that the hearing may continue in his absence if he chooses not to attend.

 

The general rules regarding a disciplinary hearing are valid and must still be followed, even if an employee fails to attend the hearing. If the employee is found guilty of desertion during the disciplinary hearing, this can lead to his immediate dismissal.

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What the High Court’s parental leave ruling means for employers

What the High Court’s parental leave ruling means for employers

What the High Court’s parental leave ruling means for employers

On October 25, 2023, a groundbreaking legal development unfolded in the Gauteng High Court with the case of Van Wyk and Others v Minister of Employment and Labour [2023]. In a pivotal judgment, specific sections of the Basic Conditions of Employment Act, 1997 (BCEA), and the Unemployment Insurance Act, 2001, were declared unconstitutional and null. The focus of these contested sections was on matters of maternity, parental, adoption, and commissioning parental leave. The court’s verdict was firmly rooted in the argument that these provisions infringed upon the fundamental rights to equality and dignity, as protected by sections 9 and 10 of the Constitution of the Republic of South Africa, 1996.

The driving force behind the court’s decision rested on the assertion that the BCEA unfairly differentiates between parents based on their roles, whether mothers or fathers, adoptive parents, or those with children through surrogacy. Crucially, the court took a holistic view, considering the best interests of the child and stressing that caregiving leave entitlements under the BCEA aim not only at the physiological recovery of the birthing parent but also at nurturing a newborn or toddler.

 

It is essential to note that the court clarified that while certain aspects were deemed unconstitutional, provisions addressing the physiological recovery of a birthing mother were exempt from this ruling.

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Questions and answers

  • Status of parental leave: Families would now have the choice to designate the primary caregiver. The four months of parental leave, formerly known as maternity leave, can be shared between parents if they so choose.

 

  • Duration of leave for each parent: Contrary to the assumption that each parent receives a four-month leave individually, the four-month leave period is per family and can be distributed between parents based on their agreement.

 

  • Administrative burden: The Department of Employment and Labour is yet to provide guidelines regarding the administrative aspects of implementing the new parental leave arrangements.

 

  • Implementation timeline and employer status: As of now, the High Court judgment has not triggered immediate changes. The order has been referred to the Constitutional Court for validation, currently in the process. The Constitutional Court is scheduled to hear the case, with a potential timeline placed in the third term of 2024. Should the order be upheld, parliament will have two years to draft legislation aligning with the ruling.

 

  • Impact on UIF parental and maternity leave benefits: Under interim relief, all parents are entitled to a continuous four-month parental leave. Parents of a qualifying child have the flexibility to decide how to divide this period between them. Notably, any portion of the four months taken as leave by a parent, regardless of their role in childbirth, is eligible for UIF benefits.
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In conclusion

In conclusion, the High Court judgment does not change anything at this time, however, once legislation is potentially drafted depending on the Constitutional Courts outcome the Van Wyk judgment could reshape the landscape of parental leave in South Africa.

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Incompatibility in the workplace

Incompatibility in the workplace

Incompatibility in the workplace

Unity in the workplace is one of the many requirements that are essential to maintaining a successful business. Employees of a business are considered to be a team that should work together to achieve the business’s goals and overcome challenges. This implies that employees should get along with each other at least to such an extent that the employer’s operations are not negatively affected by conflict between employees and/or with the employer’s customers.

A diverse environment

The workplace is a very diverse environment in terms of culture, religion, beliefs, values, political views, frames of reference, work ethics, opinions, communication skills etc.  Not everyone will always get along and the potential for conflict and disagreement in the workplace is always a risk. In extreme cases, these conflicts and clashes can lead to incompatibility.

 

Incompatibility in the context of the workplace and labour law is not defined by the Labour Relations Act or any other South African legislation. It is therefore a difficult concept to define with certainty. Incompatibility can be due to, among other things, an employee’s attitude, temperament, unique way of working, temper, impatience, interference, manipulation, lack of communication skills, as well as the employee’s behaviour in general that interferes with the effectiveness of the employer’s operations.

Case law

As incompatibility is not defined by legislation it is necessary to look to case law for guidance when dealing with cases of incompatibility. According to case law, an employer is entitled to insist on a working environment that is peaceful. It is an implied condition of an employee’s employment contract that the employee will not conduct himself or herself in a way that could lead to disagreement and conflict in the workplace.

 

However, the reality is that, just as in the case of any other relationship, the possibility exists that the relationship between the employer and employee or between a specific employee and fellow employees, conflict may arise in the form of incompatibility.

 

The concept of incompatibility can be seen as a form of incompetence: the employee does not fit in with the employer/business’s culture, or just does not get along with management, fellow employees or customers.

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How should the employer deal with this?

A distinction must first be made between incompatibility and misconduct. Misconduct in the workplace is addressed by applying discipline, usually in the form of written warnings. Incompatibility cannot be addressed through disciplinary measures because the incompatibility is not necessarily intentional or attributable to misconduct.

 

When an employee’s behaviour leads to incompatibility, the employer must undertake a consultation and counselling process. It is extremely important to take into account that even though incompatibility is not specifically defined in the Labour Relations Act, the dismissal of an employee can ever only take place after a procedurally and substantively fair process was held.

 

The employee must therefore at all times be afforded the opportunity to state his/her side. The employer also has the obligation to make reasonable efforts to try to resolve or at least improve the incompatibility, and to offer the employee the opportunity to try to change or adapt. Sometimes incompatibility can be resolved by, for example, moving the employee to another department or offering the employee counselling.

Take note

Dismissal must always be considered as a last resort and will only be appropriate if there are no other reasonable alternatives available, and the relationship between the employer and employee, or between the employee and fellow employees, has broken down beyond repair.

 

It is essential to thoroughly document the process followed in trying to resolve incompatibility. This protects the employer in case the employee is dismissed after the process is concluded, in that the record of this process is available to prove that the dismissal was fair.

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    What is a policy?

    A policy informs employees of the rule/s in respect of a certain topic. The employer puts these rules in place in order to ensure the smooth and efficient running of his/her business operations. Policies are not underwritten by labour legislation, but define the employer’s own rules, which must be reasonable, for the workplace. We strongly advise employers to implement the following policies in the workplace:

    Code of conduct

    A code of conduct states the employer’s own rules specific to his/her business and industry. These rules should refer to, for example, general rules in the workplace, hygiene, salary advances, safety regulations, use of company property, clothing, etc.

    Smoking policy

    A smoking policy firstly states whether smoking is allowed and secondly if so, the designated areas and specific times allocated for smoking. In the policy the employer can state the times allocated during the day that employees are allowed to smoke, as well as the duration of these breaks, e.g. 10h00, 12h00 and 14h00 for 10 minutes each.
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    Sick leave policy

    Leave matters are regulated by Labour Legislation and refer to annual, sick, family responsibility and maternity leave. It is a good idea to incorporate this into leave policies, but take care that the policy is not less favourable than the applicable legislation which should be adhered to. The aim of a sick leave policy is to regulate the amount of sick leave employees are legally entitled to, as well as the reasonable requirements set by the employer for sick leave to be approved. This can include timeous notice of intended sick leave to the relevant person (management), when a sick note must be presented and the disclosure of the period that the employee will be unfit for duty. This gives the employer time to make other arrangements to ensure sustainable productivity.

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