If retrenchments are the only option left?
We’ve had various of calls and strategic discussions with clients and business colleagues, to look at the ‘new way of operating’ and there was some amazing ideas that came to light, and some of the ideas even originated from their staff. Heartwarming to see how people can come together to secure not only their own future, but that of others as well. Unfortunately, in some cases especially as seen in the tourism and aviation industries (to name just a few), the last words that was said as we were leaving the boardroom was:
- “We believe that retrenchments are the only option left”
Should this be the case in your specific scenario; how do you go about this and what needs to be considered before embarking on this process?
There are four grounds on which one can retrench and such forms the first leg of the substantive fairness of a retrenchment. These grounds are:
1. Economic: This may include an attempt to reduce costs, increase profits and to adapt to changing business requirements. There is a common misconception that one can only retrench when a company is struggling financially. A company does however also have the right to consider retrenchments in the best of times when they merely wish to increase their profits.
2. Technological: General Food Industries Ltd v Food & Allied Workers Union (supra) reasons: “refer to the introduction of new technology which affects work relationships either by making existing jobs redundant or by requiring employees to adapt to the new technology or a consequential restructuring of the workplace”
3. Structural: Where the restructuring of a business based on certain operational requirements creates the need for certain employees to be retrenched/positions to become redundant. Also refer to General Food Industries Ltd v Food & Allied Workers Union (supra).
4. Similar: A reason which is based on anything else which is considered to be an operational requirement of the company.
These all form part of the one leg of substantive fairness (the rationale). The second leg includes the specific selection criteria, in other words you should firstly ensure that you have a proper reason for the retrenchment as a whole and secondly be able to justify why certain specific employees are selected for retrenchment. This is seen as a general and specific question. Also refer to Chemical Workers Industrial Union & Others v Latex Surgical Products (Pty) Ltd (2006) 27 ILJ 292 (LAC).
If the decision of the employer makes common sense or is simply logical, vis-à-vis the business concerned, any Court would be unlikely to interfere. This does give a lot of flexibility to employers in this regard. The course of action “just have to be sensible, logical and genuine.”
In terms of Johnson & Johnson (Pty) Ltd v Chemical Workers Industrial Union (1999) 20 ILJ 89 (LAC), the nature of the consultation process should be one of a “joint consensus-seeking process”. In this case it was also found that both the employer and the other consulting parties have an equal duty to participate in the process in an attempt to reach consensus.
The ‘process’ format should not be mechanical as one only has to prove that all the relevant topics were consulted upon during the process. Thus, a duty to consult - the duty to consult arises when the employer starts to contemplate retrenchment. In Kotze v Rebel Discount Liquor Group (Pty) Ltd (2000) 21 ILJ 129 (LAC) it was found that “contemplate” shall mean that a provisional decision/decision in principle must have been taken. Frame of mind during consultations - in National Education Health & Allied Workers Union & Others v University of Pretoria (2006) 27 ILJ 117 (LAC) the following was found that there was nothing wrong with an employer coming to the consultation table with a predisposition towards a particular method of solving the problem which has given rise to the contemplation of dismissal of employees for operational requirements.
What is critical is that the employer should nevertheless be open to change its mind if a persuasive argument is presented, in that a selected method is wrong or is not the best or that there may be another one that can address the problem either equally well or even in a better way. The Employer should engage in a joint problem-solving exercise with the other consulting party or parties.
The two main procedural requirements therefore include the consultation process and the issuing of the notice of intention to retrench in terms of Section 189(3) of the Act. Such notice only must disclose the necessary information which allows the other parties to meaningfully consult (as stipulated in Section 189(3)).
SECTION 189(1)
This subsection provides us with the information we need to determine who the other consulting parties are. It is important to correctly identify the other consulting parties as the dismissal will still be considered unfair if we consult with the wrong parties, regardless of the rest of the procedures followed.
· You would first find out whether there is a collective agreement which stipulates which parties need to be consulted with. Should such an agreement exist one will consult with the stipulated parties.
· If there is no collective agreement stipulating the consulting parties, you will be required to consult with the workplace forum in the workplace where employees are likely to be affected, as well as any registered trade union which has members who are likely to be affected by the retrenchment.
· Should there be no workplace forum, you will consult with any registered trade union which has members who are likely to be affected.
· Should there be no such registered trade union, you will be required to consult with the employees likely to be affected themselves or their elected representatives.
· It should be noted that in terms of Molapo Technology (Pty) Ltd v Schreuder & others (2002) 23 ILJ 2031 (LAC) there is no need to consult with the individual employees if one consults with their registered trade union.
SECTION 189(2)
This subsection stipulates what the consultation should entail and the topics which must be discussed. This piece of legislation also makes use of specific wording when describing the consultation process, namely a “meaningful joint consensus-seeking process”.
The parties shall be required to consult on the following topics in terms of Section 189(2):
1. Avoiding dismissals: The parties should attempt to reach consensus on appropriate measures that might avoid dismissals. This could include several aspects. A typical way in which one can avoid dismissal is through alternatives.
2. Minimizing the number of dismissals: Should there be no way in which dismissals can be avoided, an attempt should be made to reach consensus on appropriate measures to minimize the number of dismissals. A typical example would be where one lowers salaries which results in the need to retrench less people.
3. Changing the timing of dismissals: Employees could for example be more adversely affected should they be retrenched in December just before Christmas. The parties will then consult on this issue and attempt to reach consensus on the date of dismissals.
4. Mitigating the adverse effects: This would typically include an attempt to reach consensus on the assistance offered by the employer.
5. Methods of selection: The selection of specific employees forms a very important part of the substantive fairness of the retrenchment.
6. Severance Payments: Legislation does stipulate the minimum amount of severance pay a retrenched employee is entitled to, but this does not mean it is not a topic on which one must consult. We therefore attempt to reach consensus on this issue and if we do not manage to do so, the employer has the right to decide on the amount of severance to be paid, provided it is equal or more to the minimum requirements of the applicable legislation.
SECTION 189(3)
This subsection stipulates what the notice of intention to retrench should consist of and which information is required to be disclosed. The notice should contain the following information, as stipulated in the relevant subsection:
1. The reason for the proposed dismissals. This must be based on one of the four grounds on which one can retrench and include the necessary information in support thereof.
2. When the employer contemplates dismissing. We propose the date on which we wish to finalise the consultation process.
3. Number of employees likely to be affected. We disclose the number of employees that are likely to be affected should the retrenchment take place. This does not have to be an exact number but rather an estimate.
4. Selection criteria. We propose selection criteria to be used.
5. Alternatives. We disclose any alternatives that we have already considered (if applicable) and our reasons for rejecting such alternatives.
6. Severance pay. We propose the amount of severance to be paid which should be in line with legislation. Section 41 of the BCEA stipulates that severance pay must be at least one (1) week for every completed year of service. The word “completed” means that it is not paid out pro-rata and therefore employees only receive severance pay for years they have completed. It is however important to note that collective agreements could stipulate different minimum requirements, and such will prevail. Should employees decline a reasonable alternative, they forfeit their automatic entitlement to severance pay. The word “reasonable” shall mean that the employee’s total remuneration with the alternative is at least seventy per cent (70%) of what it was prior to the retrenchment process. Factors that will also determine the reasonability of an alternative is the geographic location, the status of the new position, the duties associated with the alternative position, etc.
7. Assistance offered from the employer. Here we will propose certain forms of assistance from the employer’s side. Typical examples of assistance include: paid time off for interviews, paying out the notice period, typing CV’s, contacting employment agencies, letters of recommendation, contact and refer to employers in industry; send on training courses, etc.
8. Re-employment possibility. The Code of Good Practice states that “Employees dismissed for reasons based on the employer’s operational requirements should be given preference if the employer again hires employees with comparable qualifications, subject to:
a. The employee after having been asked by the employer, having expressed within a reasonable time from the date of dismissal a desire to be rehired.
b. A time limit on preferential rehiring. The time limit must be reasonable and must be the subject of consultation.”
9. Number of employees and (10) number retrenched in preceding twelve (12) months. This is of technical nature and allows the other consulting parties to determine whether the retrenchment should be considered a single or mass retrenchment.
In conclusion, the process should not be taken likely, as the effects in terms of the individuals, their families and for the staff that are left behind, will definitely leave a scar. Furthermore, the courts see retrenchments as no-fault terminations. In addition, the unemployment rate in South Africa is extremely high making it close to impossible for many retrenched individuals to find new jobs. For this reason, the courts have no hesitation in protecting the rights of retrenched individuals and making employers pay heavily where they deviate from the Law.
Should you require assistance in terms of the above or any other HR / Operational issues, you are more than welcome to contact our experts at info@grokon.biz or call me directly on 082 576 4525