According to Statistics South Africa the unemployment rate in South Africa has reached its highest level in 2019 since comparable data began in 2008. The unemployment rate measures the number of people actively looking for a job as per the percentage of the existing labour force. One of the many reasons for the high unemployment rate is that large and small businesses can no longer financially afford to employ a certain number of workers and have no alternative but to resort to retrenching Employees.

Should Employers have no alternative but to resort to retrenching Employees then Employers must note that Employees cannot simply be retrenched with a minute’s notice. Employers who embark on a retrenchment process must be mindful that the retrenchment process must adhere to and comply with the labour laws of South Africa, in particular, section 189 of the Labour Relations Act 66 of 1995 (“the LRA”).

The Process of Retrenchment

Retrenchment must be a fair process and comply strictly with the provisions of section 189 of the LRA. If Employers do not go about the retrenchment process in a substantively and procedurally fair manner, the Employees being retrenched may refer an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (“the CCMA”) or the Labour Court. If the dispute cannot be resolved at the CCMA the Employer may end up having to pay a hefty price, literally, by having to defend the unfair dismissal dispute referral at Arbitration at the CCMA or at the Labour Court. Despite the Employer not having dismissed the Employee in the normal course, retrenchments if not conducted in compliance with section 189 of the LRA, are seen as unfair dismissals.

In order to win a retrenchment case at the CCMA or Labour Court, the Employer must prove that the retrenchment was fair in all respects, i.e. both substantively and procedurally. Substantively, this means that the Employer must prove that it had a valid reason for retrenching workers, for example, showing that the Employer is indeed undergoing financial strain and had no alternative but to cut costs in all areas of the business or organization including the workforce. Procedurally, it means that the Employer must prove that it conducted the retrenchment process fairly by adhering to the processes and rules as set out in section 189 of the LRA.

Section 189 of the LRA

Section 189 of the LRA allows the Employer to retrench employees if there is a good enough reason for retrenchment in respect of operational requirements and if the consultation process as described in the LRA has been conducted properly. Section 189 of the LRA lays down a number of strict requirements the Employer must comply with, failing which the Employer will undoubtedly open itself or themselves up to costly litigation. 

The LRA requires that the Employer must have a good, sound and lawful reason to retrench an Employee, use fair criteria in deciding which Employees may be retrenched and to implement a consultation process with those Employees which aims to seek ways of avoiding the retrenchment completely or at the very least minimizing the amount of Employees being retrenched.

The Process of Consultation

The Employer must consult with the Employees who have been selected as Employees who might be retrenched, and those Employees must be invited via writing to a consultation with the Employer on a date and time suitable to the Employer and Employee. There should be more than one consultation in order for the Employees to have time to consider the Employer’s reasons for retrenchment and to provide feedback and suggestions in respect of the Employer’s proposals.

The purpose of the consultation process is to canvass ways in which retrenchment can be avoided. If during the consultation process it becomes apparent that retrenchment cannot be avoided, then the Employer and Employee must canvass how to minimize retrenchments. Other items on the consultation agenda which must be discussed between the Employer and the Employee are the timing of the retrenchments, the method of deciding who should be retrenched (for example: last in, first out), the assistance the Employer will provide to Employees being retrenched (for example assisting Employees with securing alternative employment) and possible re-employment should the operational requirements or financial status of the business or organization positively change in the future.

A section 189 retrenchment process is concluded by a letter from the Employer giving the Employee notice of termination of employment on the grounds of retrenchment as well as ensuring that the Employee has been paid all his or her statutory monies owing as well as severance pay calculated at one week per one continuous year of service with the Employer being the minimum standard of severance pay.

If you as an Employee or Employer requires advice or assistance in respect of the retrenchment process, contact SchoemanLaw Incorporated for assistance in this regard.

Contact SchoemanLaw Inc for all your labour related legal needs.

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