Why is it easy to mess up retrenchments?

We have regularly reminded employers of the factors that render dismissals for operational requirements (retrenchments) fair and unfair. Despite this employers continue to get it wrong and land up paying a very heavy price.

To win a retrenchment case at the CCMA or Labour Court, the employer must fulfil its onus of proving that the retrenchment was fair in all respects. That is, it is the employer who has the duty of proving that:

• There was a genuine and valid reason for retrenching;

• The employees chosen for retrenchment were fairly chosen;

• The retrenchment procedure as laid down in the Labour Relations Act (LRA) has been followed properly and in good faith by the employer; and

• The employer has shared with the targeted employees (or their representatives) all documentary and other information pertinent to the retrenchment.

Even though retrenchment procedure is spelt out employers are still being caught out at the CCMA and in the Labour Court for failing to follow procedure. For example, in the case of NUMSA and others vs Dorbyl Ltd and another (2004, 9 BLLR 914) 176 employees embarked on a protected strike. After that, the plant at which they worked was closed down and 122 employees were retrenched. The employees claimed that the retrenchments were unfair because (amongst other reasons) they had not been properly consulted by the employer before being retrenched.

The court found that:

• The decision to retrench was taken at an executive meeting held before the employer consulted with the employees regarding the retrenchments;

• This rendered the consultations meaningless as the employer had already made up its mind and went into the consultations with a foregone conclusion; and

• The employer was required to pay each of the 122 retrenchees two months’ remuneration in compensation.

In Nkopane & others vs the Independent electoral Commission (2007, 2 BLLR 146) the employees were employed based on fixed-term contracts. However, before the natural expiry date of the contracts, they were retrenched. The Labour Court found that it was a breach of the contract for the employer to terminate it before the expiry date and the employer was ordered to pay all the employees out up to the date of the expiry of their contracts.

In Long v Prism Holdings Ltd & another [2012] 7 BLLR 672, the Labour Appeal Court found that the reason for Long’s retrenchment after a merger was entirely fair but that the employer had to compensate him because it had failed to consult with him before retrenching.

There are some possible reasons for the fact that employers are still not complying with dismissal law, including:

• Employers know the law but do not believe it will be applied to them;

• They hear about the law but do not believe it;

• The operational circumstances of the employer are so dire that the pressure distracts the employer from the legal aspects of the retrenchment;

• The mistaken belief that, if there is a good reason for retrenchment, the court will be lenient on the procedural side of the case;

• Employers misuse so-called retrenchments to get rid of undesirable employees. As their priority is getting shot of such undesirables the legal requirements are given little consideration; and

• Employers are given poor legal advice regarding retrenchment law and implementation strategy.

Although the courts have become stricter over time in applying retrenchment law employers still implement retrenchments without giving thought to labour law compliance. As I have repeatedly warned employers, the courts see retrenchments as no-fault terminations. This means that the employee is losing his/her job through no fault of his/her own. Also, the unemployment rate in South Africa is extremely high and it is very difficult for retrenchees to find new jobs. For this reason, the courts have no hesitation in protecting the rights of retrenchees and making employers pay heavily where they deviate from the law.

Ivan Israelstam is the Chief Executive of Labour Law Management Consulting, www.labourlawadvice.co.za. To view Labour Law Management Consulting’s Q & A page, please click here.

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