This newsletter covers the bases for retrenchments, the parties who must be consulted, what you should and shouldn’t do prior to consultation, starting the consultation process and the application of section 189 and section 189A.  In the next newsletter we will deal with the disclosure of information; the topics for consultation – avoiding retrenchments, alternatives to retrenchments, selecting who will be retrenched, mitigating the adverse effects, severance pay, timing of retrenchments and future re-employment; and finalising the retrenchments.

 

What is the basis for a ‘retrenchment’?

Firstly it is important to be aware that when an employee is retrenched, they are ‘dismissed’.  It is called a ‘dismissal for operational requirements’. This form of dismissal is more ‘regulated’ than the other forms (for misconduct and incapacity) because often these dismissals are on a greater scale and therefore have a greater impact on society – if one considers the ‘laying off’ of 1000 or even 100 mineworkers or, in the current economic climate, investment professionals, and the impact this must have on many families and lives, one can appreciate the need to ensure that these ‘dismissals’ are not undertaken lightly.  This is also in view of the fact that the employees who are retrenched are in fact performing adequately and have not ‘done anything wrong’. These dismissals are therefore known as ‘no fault dismissals’.

 

A dismissal for operational requirements is, in terms of the Labour Relations Act, a dismissal of employees based on an employer’s economic, technological, structural or other similar reasons.  It is therefore NOT a dismissal based on the need to get rid of ‘dead wood’ or problem employees.  It is far better, and easier, to address the issues that you actually face – a retrenchment process is not any easy way to get rid of people, and it requires severance pay to be paid.  So, if you have ‘dead wood’ – pick up on your performance process, you will find it a lot easier than you think! Otherwise, give us a call, we’ll help you.

 

What are the ‘do’s and don’ts’ before you start consulting over possible retrenchments?

These are practical suggestions based on our experiences – of which we have had many!

Do:

·         Ensure that the reason you believe you need to reduce staff
numbers is based on your economic, technological, structural or ‘other similar’ operational reason;

·         Look at other options to achieve what you need to achieve….for
example, if it is a need to cut costs, is there another way of doing it?

·         Get all of your information, facts and figures together before
you start the retrenchment process;

·         Keep any decisions that you need to make around the
retrenchment process ‘interim decisions’ – you need to consult trade unions / affected employees over various issues – if you’ve made up your mind already, the consultation will be a farce;

·         Familiarise yourself with the legal requirements.

 

Don’t:

·         Put a list together of employees that you plan to retrench.
Unless this is a closure of the business, where everyone is retrenched, then the ‘who’ of retrenchments should only become clear after consulting with the trade union / employees / forum;

·         Make any definite decisions that will result in retrenchments.
Examples are – if you are thinking of bringing in new technology that will result in job losses, don’t make a final decision to get the technology until you have consulted the trade union / affected staff – otherwise it is ‘too late’ – they won’t be able to consult with you over why that technology may not be necessary.

·         Likewise, don’t make any definite / final decisions regarding
any of the other aspects that you have to consult over.

·         Use this exercise to get rid of people you don’t like.  It may
backfire, and you may well keep those very people who you don’t like, and lose people that you do like.

 

Who needs to be consulted?

If you as the employer have a collective agreement that sets out who needs to be consulted where retrenchments are contemplated, then you need to comply with this. If you do not have a collective agreement that requires consultation, then you must consult with a workplace forum (if you have one in your workplace) and any registered trade union whose members are likely to be affected by the retrenchments.  If you do not have a workplace forum then you must consult with the registered trade union.

 

If you have neither a workplace forum nor a registered trade union then you must consult with the employees who are likely to be affected by the proposed dismissals / retrenchments or their representatives nominated for that purpose.

 

Section 189 versus section 189A (‘mass dismissals’)

Section 189A applies to companies who employ MORE than 50 employees if –
(a)  The employer contemplates retrenching at least

(i)            10 employees if the employer employs up to 200 employees;

(ii)           20 employees if the employer employs more than 200 but
not more than 300 employees;

(iii)          30 employees if the employer employs more than 300
employees but not more than 400 employees;

(iv)         40 employees if the employer employs more than 400
employees but not more than 500 employees; or

(v)          50 employees if the employer employs more than 500
employees; OR

 

(b)  The number of employees that the employer contemplates retrenching TOGETHER with the number of employees that have actually been retrenched in the past 12 months prior to the employer issuing the notice of contemplation of retrenchment (see below for more information on this) is equal to or exceeds the relevant numbers specified in paragraph (a) above.

 

Therefore if you as an employer employ less than 50 employees, section 189A does not apply to you. But if you employ more than 50 employees, you need to establish up-front how many employees you are contemplating retrenching, and also how many you have retrenched in the past 12 months, and establish then whether section 189A applies to you.

 

It is recommended that you obtain advice in this regard, but very simplistically, the main differences between section 189 and section 189A is that section 189A has the additional requirements procedurally whereby the company or other consulting parties (employees / trade
union) can request that a facilitator from the Commission for Conciliation, Mediation and arbitration (CCMA) be appointed to chair the consultation meetings and the period between issuing the Notice of Contemplation of Retrenchments and issuing the employees with Notice of termination cannot generally be shorter than 60 days.  There are various provisions in this section of the Act regarding referrals to the CCMA, strike notices and referrals to the Labour Court, so if you are undertaking a retrenchment exercise that falls within section 189A it is advisable to either read this Section fully or get legal advice so that you are fully prepared.

 

Starting the Consultation Process

The consultation process commences (officially) with a written ‘notice’
(or letter) inviting the other consulting party to consult with it, and this letter must disclose ‘all the relevant information’ which includes, but is not limited to:

(a)  The reasons for the proposed dismissals / retrenchments;

(b)  The alternatives that the employer considered before proposing the retrenchments, and the reasons for rejecting each of those alternatives;

(c)  The number of employees likely to be affected and the job categories in which they are employed;

(d)  The  proposed method for selecting which employees to dismiss / retrench;

(e)  The time when, or the period during which, the dismissals are likely to take effect;

(f)   The severance pay proposed;

(g)  Any assistance that the employer proposes to offer to the employees likely to be dismissed;

(h)  The possibility of future re-employment of the employees who are dismissed;

(i)    The number of employees employed by the employer; and

(j)    The number of employees that the employer has retrenched in the
preceding 12 months.

In our next newsletter we continue with information on retrenchments, and we will also provide you with examples of what employers usually do in order to avoid retrenchments / minimise them, information on severance pay and what employers do to assist employees who may be retrenched.

 

IN OUR FEBRUARY NEWSLETTER we will continue with this topic.  For advice or assistance, please contact us on This e-mail address is being protected from spambots. You need JavaScript enabled to view it or on 086 0086 073, we always respond promptly.

 

 

This newsletter is intended as an information source for the clients of
Nth2 (Pty) Ltd.  The contents shall not be construed as legal advice, and readers should not act upon information in this publication without professional advice. 

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