RETRENCHMENT (LAYOFFS)

Employers should consistently evaluate all factors that can have an influence on the long term success of the business in order to create a cost effective environment enabling the business to stay competitive within the market.   In the current economic climate, many employers struggle and consider different options to adjust to a changing environment.  Retrenchment is a dismissal of an employee(s) based on the operational requirements of an employer.  It is vital that employers take the legal route to avoid costly mistakes, as the retrenchment process can be a minefield for the layperson.

SECTION 189 OF THE LRA

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

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.

SUBSTANTIVE FAIRNESS – 3 BASIC REASONS THAT CAN LEAD TO RETRENCHMENT

• Economic reasons – This refers to when a business is no longer in the financial position to employ all current employees any longer due to a variety of reasons that can include the national minimum wage, economy, recent drought, amended legislation impacting on the cost of doing business, entry of competitors into the market, etc.

• Technological reasons – Progress in a sector often introduces new technology that can result in making existing jobs redundant.  Progress can refer to new techniques and methods of completing tasks quicker, technological inventions, new machinery and mechanisation that can have a direct impact on the number of employees needed.

• Structural reasons – For a business to adjust to a changing environment whether due to challenges or progress, restructuring takes place regarding changes in the workforce, which can lead to positions becoming redundant.  Structural changes can also follow when a business makes strategic changes in terms of its vision and goals.  When a business makes structural changes, these changes are reflected in the organogram or organisational chart.

REASONABLE ALTERNATIVES

The retrenchment process entails that all reasonable alternatives must be exhausted in order to try and prevent any retrenchments, and the Courts have stated that retrenchment of any employee must be the last resort.

Employers must consider any and all reasonable alternative that can be implemented within the workplace to try and avoid retrenchments.  These alternatives can include short time, reduction in salaries, transferring employees to other departments, lay-offs, reducing overtime, bumping, voluntary separations, just to mention a few.  It is important for employers to discuss the alternatives with employees in order to obtain their consent to same before it can be implemented.

PROCEDURAL FAIRNESS

Steps to be followed when the possibility of retrenchment is contemplated by an employer, should always include:  notifying employees, consultation during which specific details required by law should be discussed and agreed on, and implementation after consensus.

Keep in mind that retrenched employees are entitled to the following payments:  severance pay according to their sector, notice pay, outstanding leave, and any other outstanding amount as agreed upon in the employment contract that the employee is entitled to.

TAKE NOTE

Most cases referred to the Commission for Conciliation, Mediation and Arbitration (CCMA) pertain to unfair dismissal.  Employees are more informed about their rights and the procedures to follow when they feel they have been wronged by the employer.  In general arbitration awards in favour of the employee are due to the lack of following correct procedure on the employer’s behalf.