The retrenchment process can be a traumatic experience for employers and employees alike. Melanie Hart spoke to Sheena Carnie about how employers can avoid some of the legal pitfalls of a retrenchment process.
Under South African law, employees have the right not to be unfairly dismissed. Melanie Hart, Director at Beech Veltman Inc explained that in order for a dismissal to be fair, it must be for a fair reason and must be effected in accordance with a fair procedure.
The Labour Relations Act permits an employer to dismiss employees if the reason for dismissal is based on the employer’s operational requirements, and these are defined as “requirements based on the economic, technological, structural or similar needs of an employer”.
“As far as the procedure is concerned, employers must follow a consultation process with real efforts being made to attempt to reach consensus on the various issues,” Hart clarified.
“Employers should also consider alternatives to retrenchment prior to initiating the process – for example instituting short time or temporary lay-offs. They must be prepared to disclose the outcome of those deliberations to employees,” said Hart.
She also explained that if employees put forward alternative proposals during the consultation process, these must be considered and the employer must remain open to persuasion.
In order to ensure compliance and effective management of the retrenchment or restructuring processes, employers must clearly define the reasons for the restructuring and the commercial objectives they wish to achieve. “These reasons must be capable of withstanding scrutiny,” Hart emphasised. “The court will not defer to the employer, and closely scrutinises the reasons for the retrenchment, requiring proof of the economic rationale and evidence that there was no alternative available that would not result in retrenchments.”
She also stressed that retrenchment should not be used for some ulterior motive such as a tool to terminate employees for poor work performance.
“There are some fundamental principles involved in the process of consultation,” Hart explained. “The process of consultation must start before any final decisions have been taken, employers must distinguish between the decision to make a position redundant and the decision on who is to be retrenched as a result, and employers must always comply with any internal procedure in place or any other agreed procedure such as that laid down in a collective agreement.”
In terms of the Basic Conditions of Employment Act, employees dismissed for operational requirements are entitled to a minimum of one week’s severance pay per year of continuous and completed service with the employer – unless they have unreasonably refused an offer of alternative employment.
Hart also emphasised that it’s vital that both sides engage openly during the process. “In one case, an employee was retrenched from his post in Port Elizabeth,” she said. “During the retrenchment consultation process, the employer offered him alternative employment at the same level in East London. The employee rejected this offer without giving reasons for this refusal. The employer refused to pay the employee his severance pay because he had unreasonably refused the offer of alternative employment.”
The employee lodged a dispute with the Commission for Conciliation, Mediation and Arbitration, but his application was dismissed on the grounds that he had unreasonably refused the alternative offer of employment by the employer. The Labour Court also dismissed his application but the employee was granted leave to appeal to the LAC.
The LAC eventually agreed with the employer’s arguments and dismissed the appeal based on the fact that the employee did not engage sufficiently with the employer during the consultation process and failed to explain why he couldn’t accept the alternative position.
To join Africa Legal's mailing list please clickhere
Copyright : Re-publication of this article is authorised only in the following circumstances; the writer and Africa Legal are both recognised as the author and the website address www.africa-legal.com and original article link are back linked. A bio for the writer can be provided on request.