Retrenchment – not a one day process

Retrenchment is the no-fault termination of an employee’s services and is governed by Section 189 of the Labour Relations Act, Act 66 of 1995 as amended (LRA).  It becomes necessary when there are operational requirements to reduce the workforce.  Operational requirements are defined as requirements based on economic, technological, structural or similar needs of the employer.

The retrenchment process

The retrenchment process is clearly set out in Section 189 and 189A of the LRA and must be followed to ensure that such process is both substantively and procedurally fair.

It is important for employers to take note that the retrenchment process must be instituted as soon as it is contemplated. This process can take a considerable amount of time as it depends on various factors such as the number of employees involved and the scale of the intended retrenchment. Employers are therefore warned not to leave it to the last minute to commence with the process.

All reasonable alternatives

Employers are encouraged to commence with the process well in advance to establish if there are any actions that can be taken to avoid retrenching any employees.  The process entails that all reasonable alternatives must be exhausted in order to try and prevent any retrenchments, and the courts have stated that retrenching any employee must be the last resort.

Examples of reasonable alternatives can include short time, reduction in salaries, transferring employees to other departments, reducing overtime, bumping and voluntary separations just to mention a few.  It is important for employers to discuss the alternatives with employees in order to obtain their consent before it can be implemented.

Follow the procedure

The below procedure must be followed when the employer contemplates the possibility of retrenchment (for the purpose of this article we’ll only look at Section 189 and not Section 189A-large scale retrenchments).

1.  Issue a notice of possible retrenchment consultation in terms of Section 189 of the LRA

This notice must contain the date, place and time of the meeting and other specific details, which include:

• Reason for possible retrenchments
• Alternatives that have been considered by the employer
• Number of employees and job categories that will most likely be affected
• Proposed method of selecting employees to retrench
• When the retrenchment will most likely take effect
• Proposed severance pay
• Assistance that can be offered by the employer
• Possibility of future employment
• Number of employees employed
• Number of employees dismissed for operational requirements in the past 12 months

This notice must be issued to the following persons:

• All employees that are most likely to be affected by the retrenchment
• Any person whom the employer must consult with in terms of a collective agreement, if none the notice must be issued to the workplace forum
• The trade union representative if the employees are represented by a trade union

2.  Proper consultation

Proper consultation must be held with employees that will most likely be affected by the retrenchment, or with their trade union representative.  During the consultation, all aspects as contained in the notice must be discussed in full.  The employees, or representative, must be granted the opportunity to provide their feedback on all aspects, as well as alternatives that can be considered in order to prevent retrenchment.  This could entail that further consultations must be scheduled to continue discussing possible alternatives or any other aspect that must be clarified.

The retrenchment process is a consensus seeking process during which the parties must try and reach an agreement on how the retrenchments (and its effects) can be avoided and mitigated as far as possible.

If there are no reasonable alternatives that can be implemented, and retrenchments cannot be avoided, notice of retrenchment must be issued to the affected employees.

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