EMPLOYMENT RETRENCHMENT GUIDELINE - Cliffe Dekker Hofmeyr
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EMPLOYMENT RETRENCHMENT GUIDELINE
RETRENCHMENT FAQS
CONSULTATION
WHAT ARE THE CATEGORIES OF PEOPLE WITH WHOM
AN EMPLOYER MUST CONSULT WHEN CONTEMPLATING
DISMISSAL ON THE BASIS OF OPERATIONAL REQUIREMENTS?
In terms of s189(1) of the Labour Relations Act, No 66 of 1995
(LRA), an employer must consult with:
THE S189(3) NOTICE ∞∞ any person an employer is obliged to consult with in terms of
a collective agreement;
IS A WRITTEN NOTICE ∞∞ if there is no collective agreement, a workplace forum (if in
ISSUED BY THE EMPLOYER existence) and any registered trade union whose members are
likely to be affected by the proposed dismissals;
THAT DISCLOSES ∞∞ if there is no workplace forum, any registered trade union
whose members are likely to be affected by the proposed
ALL RELEVANT INFORMATION dismissals; or
AND INVITES THE OTHER PARTY ∞∞ if there is no such trade union, the employees likely to be
affected by the proposed dismissals or their representatives
TO CONSULT WITH nominated for that purpose.
THE EMPLOYER MUST AN EMPLOYER CONSULT WITH MINORITY TRADE
UNIONS IN CIRCUMSTANCES WHERE IT HAS CONCLUDED
A COLLECTIVE AGREEMENT CONCERNING WHO IT WILL
CONSULT WITH IN THE RETRENCHMENT PROCESS?
No. In the recent case of AMCU and Others v Royal Bafokeng
Platinum Limited and Others (JA23/2017) [2018] ZALAJHB 208,
the employer concluded a collective agreement pertaining to who
it would consult with in respect of retrenchments. The agreement
was extended in terms of s23(1)(d) of the LRA.
AMCU sought an order that the employer was obliged to consult
with trade unions whose members were likely to be affected
by the retrenchment and not only the unions in the collective
agreement. The court disagreed. The retrenchment provisions
in the LRA require an employer to consult with a person that it is
required to consult with in a collective agreement and only if there
is no such a agreement must the employer consult according to
the hierarchy of consulting parties set out in the LRA.
In the decision of Ketse v Telkom SA SOC Limited (P400/14)
[2014] ZALCPE 38 (5 December 2014) the Labour Court was
called upon to interpret s189(1) of the LRA and determine the
extent of the employer’s obligation to consult with an individual
employee affected by a retrenchment in circumstances in which
the employer had concluded a collective agreement with four
trade unions dictating that the employer consult with the four
trade unions prior to retrenching employees. In dismissing Ketse’s
application, the Labour Court held that s189(1) has always been
interpreted strictly by acknowledging the hierarchy governing the
consultation process prior to retrenchment. Where the employer
has concluded a collective agreement with a trade union which
requires the employer to consult with that trade union prior to
retrenchment, the employer has no obligation in law to consult
with an individual employee who is not a trade union member.
RETRENCHMENT GUIDELINE | cliffedekkerhofmeyr.com
If an employer elects to consult with a non-unionised individual WHAT IS THE MAIN PURPOSE OF S189A?
in such circumstances then, despite having no legal obligation
∞∞ To facilitate and protect job security.
to do so in terms of s189(1), the employer would be obliged to
∞∞ To effectively resolve disputes in large scale retrenchments
see its decision through by holding proper consultation with that
and to provide speedy remedies, especially where procedural
employee.
defects occur in the retrenchment process.
DOES AN EMPLOYER HAVE TO CONSULT WITH INDIVIDUAL WHAT IS THE BASIC PROCESS AN EMPLOYER MUST FOLLOW
EMPLOYEES IF IT HAS CONSULTED WITH THE EMPLOYEE WITH REGARD TO A LARGE SCALE RETRENCHMENT (WITH
REPRESENTATIVES? FACILITATION)?
No. The duty of an employer to consult with individual employees
has been removed in situations where consultation has Notice in terms of s189(3)
taken place with the employees’ representatives (Baloyi v
M & P Manufacturing [2001] 4 BLLR 389 (LAC)). Employers will
consult directly with individual employees where the body First facilitation meeting
representing them no longer exists.
NOTE: Failure to consult will render a retrenchment procedurally Second facilitation meeting
unfair (Aunde SA (Pty) Ltd v National Union of Metalworkers SA
[2011] 32 ILJ 2617 (LAC)).
Third facilitation meeting
WHAT IF ONE PARTY FRUSTRATES THE CONSULTATION
PROCESS?
Fourth facilitation meeting
Consultation is a joint consensus seeking exercise and mutual
60 Days
cooperation is required from both parties. In Association of
Mineworkers and Construction Union and Others v Tanker Notice of termination
Services (JS148/16) [2018] ZALCJHB 226, the court held that
where the union fails to engage in the consultation process it Union/employees may give notice
cannot later rely on a claim that the process was inadequate. of strike or refer dispute to Labour Court
Similarly, in Tirisano Transport and Services Workers Union
and Others v Putco (Pty) Ltd (J1879/18) [2018] ZALCJHB 207,
NOTE: The consultation period must continue for a minimum of 60 days.
the court dismissed the union’s application in which it sought
reinstatement of the retrenched employees and extension
of the consultation process, on the basis that the union
frustrated the consultation process. FACILITATION VERSUS
NON-FACILITATION
LARGE SCALE RETRENCHMENTS HOW CAN THE INTERVENTION OF A FACILITATOR BE
SECURED?
WHEN DOES S189A OF THE LRA APPLY TO A RETRENCHMENT
There are three ways in which the intervention of a facilitator may
PROCESS?
be secured:
Section 189A(1) applies to employers that employ 50 or more
∞∞ the employer may request the appointment of a facilitator by
employees and intend to retrench the following number of
the Commission for Conciliation, Mediation and Arbitration
employees: (CCMA) in its notice in terms of s189A(3)(a) of the LRA;
∞∞ 10 employees, if the employer employs up to 200 employees; ∞∞ within 15 days of receiving the s189(3) notice, consulting
∞∞ 20 employees, if the employer employs more than 200, but parties representing the majority of the employees whom
not more than 300, employees; the employer contemplates dismissing, may request the
appointment of a facilitator and notify the CCMA; or
∞∞ 30 employees, if the employer employs more than 300, but
not more than 400, employees; ∞∞ the parties agree to appoint a facilitator.
∞∞ 40 employees, if the employer employs more than 400, but NOTE: If the 60 day period lapses before consultations are
not more than 500, employees; completed, the employer may not give notice of termination until
∞∞ 50 employees, if the employer employs more than 500 the consultation process has been exhausted.
employees; or
∞∞ if the number of employees that the employee intends
to retrench, together with the employees that have been
retrenched in the 12 months prior to issuing the s189(3)
notice, is equal to or greater than the relevant number
specified above.
NOTE: The s189(3) notice is a written notice, issued by the
employer, that discloses all relevant information and invites the
other party to consult with the employer.
RETRENCHMENT GUIDELINE | cliffedekkerhofmeyr.com
WHAT IS THE PRIMARY PURPOSE OF A FACILITATOR?
∞∞ Their role is not to actually consult with the employees, but to
facilitate consultations. The duty to consult rests primarily with
the employer and not the facilitator.
∞∞ The facilitator has certain obligations contained in the
Facilitation Regulations that have been issued by the Minister
of Labour in terms of s189A(6) of the LRA. This includes an
obligation to hold at least four facilitation meetings.
∞∞ The facilitator has a minimum of 60 days, from the date that the
s189(3) notice is issued, to invite employees to consult so as to
promote agreement between them.
CAN PARTIES AGREE TO THE APPOINT AN INDEPENDENT
FACILITATOR?
Yes, they may do so in terms of s189A(4) of the LRA. The section
states that an agreement can be concluded to appoint a facilitator in
circumstances not contemplated by in S189A(3). This means that the
facilitator does not need to be appointed by the CCMA and that the
facilitation process can be conducted privately by someone other
than a CCMA appointed facilitator. This has been confirmed by the
Labour Court. There are advantages to appointing an independent
facilitator, for example, the consultation process can be expedited
as there are no delays relating to availability of CCMA resources.
WHEN CAN AN EMPLOYER GIVE NOTICE OF TERMINATION?
In terms of s189A(7)(a) of the LRA, an employer can only give a
notice of termination once the 60 day period for consultation
has lapsed and provided that the consultation process has been
exhausted.
WHAT IS THE PROCESS IF NO FACILITATOR HAS BEEN
APPOINTED?
∞∞ The parties must consult for a minimum period of 60 days
before any notice of termination can be issued.
∞∞ Prior to issuing any notice of termination, the parties must refer
the dispute to the CCMA. This can only be done after a period
of 30 days from the date of issuing the s189(3) notice.
HOW CAN EMPLOYEES CHALLENGE THE FAIRNESS OF A
RETRENCHMENT PROCESS?
∞∞ Employees can challenge the procedural fairness of the
retrenchment process by way of an urgent application to the
Labour Court (s189A(13)).
∞∞ Employees can challenge the substantive fairness of the
termination of their employment by referring a dispute to the
Labour Court or by engaging in industrial action.
WHERE PRIOR TO DISMISSALS, THE CCMA FACILITATED THE
RETRENCHMENT CONSULTATIONS, MUST THE SUBSEQUENT
UNFAIR DISMISSAL DISPUTE ALSO BE REFERRED TO THE CCMA
OR BARGAINING COUNCIL BEFORE THE LABOUR COURT CAN
DETERMINE THE DISPUTE?
Yes. Facilitation and consultation are two different processes.
Despite the CCMA facilitating the retrenchment consultations, an
unfair dismissal dispute must still be referred to CCMA or bargaining
council before the Labour Court will determine the unfair dismissal
dispute.
RETRENCHMENT GUIDELINE | cliffedekkerhofmeyr.comWHEN DO WE START CALCULATING THE 60 DAY WHAT SELECTION CRITERIA ARE CONSIDERED TO BE LEGALLY
CONSULTATION PERIOD? ACCEPTABLE?
The 60 day period in any large scale retrenchment commences ∞∞ Section 189(7) recognises two types of selection criteria that
once a notice in terms of s189(3) has been issued. the employer may use to select the employees to dismiss:
∞∞ one that has been agreed to by the consulting parties; or
WHAT HAPPENS IF THE NOTICE OF TERMINATION IS ISSUED ∞∞ one that is fair and objective if no selection criterion has
PRIOR TO THE 60 DAY CONSULTATION PERIOD? been agreed upon.
∞∞ The court in Chemical Workers Industrial Union and Others
∞∞ Previously, and as held in De Beers Group Services (Pty) v Latex Surgical Products (Pty) Ltd, held that what s189(7)
Limited v National Union of Mineworkers, a dismissal was means is that where the consulting parties have agreed upon
declared to be invalid if the employer did not comply with selection criteria, the employer is obliged to use such criteria.
the requirements of s189A(8) of the LRA, more particularly, Where there is no agreed selection criteria, the employer is
the issuing of a notice of termination prior to the 60 day obliged to use only fair and objective criteria.
consultation period ending. ∞∞ Section 187(7) is consistent with the view that parties are not
∞∞ In the recent Constitutional Court case of Steenkamp and obliged to agree on the selection criterion and caters for a
Others v Edcon Ltd [2016] [ZACC1] the Constitutional Court situation where the parties do not agree on the criteria. In
found that the failure to comply with s189A(8) may impact on such a case the employer has an obligation to show that the
the procedural fairness of the dismissals, but not their validity. selection criteria adopted were fair and objective.
The court highlighted that the LRA does not provide for
invalid dismissals and that the employees should have sought WHICH SELECTION CRITERIA TO UTILISE?
relief in terms of the LRA and not the common law. The ∞∞ The LRA only facilitates the consultation process and does not
relief they could have sought included embarking on strike prescribe the selection criteria to be used, instead leaving it to
action, referring a dispute to the Labour Court seeking, for the parties to agree on the selection criteria.
example, an order compelling the employer to comply with ∞∞ The generally accepted selection criteria according the
a fair procedure, interdicting the employer from dismissing CCMA Co de of Good Practice on Operational Requirements
employees prior to complying with a fair procedure, or include “last in first out” (LIFO), the length of service, skills and
directing the employer to reinstate employees until it had qualifications.
complied with a fair procedure. ∞∞ LIFO is the criterion associated with the least risk as long as it is
∞∞ The following status quo remains: an employer can only issue fairly applied.
a notice of termination once the periods referred to in s64(1)(a) ∞∞ In NUM and Others v Anglo American Research Laboratories
of the LRA have expired. In other words, an employer cannot
(Pty) Ltd [2005] 2 BLLR 148 (LC) and Singh and Others v
issue notices of termination until a further period of 30 days Mondi Paper [2000] 4 BLLR 446 (LC) it was accepted that
from the date on which the dispute is referred to the CCMA or performance could be used as a criterion for selection
the date on which the dispute is conciliated, which ever occurs provided it was objectively applied.
first, has lapsed.
∞∞ In this regard the parties may agree on selection criteria in a
∞∞ It is, however, important to note that the decision in Edcon collective agreement or during the consultation process. In the
provides that issuing a notice of termination before this time, absence of such an agreement the employer must apply fair
does not render the dismissal invalid. and objective criteria.
WHAT MUST AN EMPLOYER DO TO DETERMINE THE
SELECTION CRITERIA SELECTION CRITERIA FOR RETRENCHMENT?
∞∞ To the extent that agreement on selection criteria proves
illusive, the employer may have no option but to unilaterally
CAN AN EMPLOYER UNILATERALLY CHOOSE A SELECTION
impose selection criteria. However, this option exposes the
CRITERION ON WHICH TO BASE A DISMISSAL FOR employer to the risk of the criteria being disputed later.
OPERATIONAL REQUIREMENTS?
∞∞ The safest approach would be to negotiate the selection
∞∞ Section 189(2) requires an employer and the other consulting criteria with the relevant unions, and conclude a collective
parties to engage in a meaningful, joint consensus-seeking agreement recording the criteria. This will make it more
process and attempt to reach consensus on the method for difficult for the unions to raise a dispute later, because the
selecting the employees to be dismissed. selection criteria were mutually negotiated.
∞∞ After the consultation, the employer must consider and
respond to the submissions made by the other consulting WHICH IS THE BEST SELECTION CRITERION?
parties and, as required by s189(3), must state reasons if it ∞∞ This is a difficult question to answer in the abstract, but the
disagrees with the representations. This was confirmed by the LIFO method (last in, first out) is widely recognised as being
court in Chemical Workers Industrial Union and Others the most objective criterion to select the employees to be
v Latex Surgical Products (Pty) Ltd (JA31/2002) [2005] retrenched. It is all the more objective because it tends to
ZALAC 14. If the consulting parties made written submissions retain the most experienced employees, which is a valid goal
then the employer’s response to these submissions must also when considering operational requirements.
be in writing.
∞∞ The FIFO (first in, first out) method is dangerous because it has
∞∞ The essence of sections s189(2) and s189(6) is that an
the indirect effect of discriminating on the basis of age.
employer cannot decide on the criteria to use, without
consulting the other consulting parties.
∞∞ To the extent that the consultation on selection criteria does
not result in an agreement, it is then open to the employer to
unilaterally decide on a selection criteria to be used, provided
that the employer will then have to prove that the criteria used
was fair and objective.
RETRENCHMENT GUIDELINE | cliffedekkerhofmeyr.comCAN THE EMPLOYER USE MORE THAN ONE SELECTION IS THERE A DUTY ON THE EMPLOYER TO CONSULT WITH
CRITERION? EMPLOYEES WHEN OFFERING ANY OF THESE PACKAGES
AS A PRECURSOR TO DISMISSALS FOR OPERATIONAL
Yes. The employer may opt not to use LIFO, and instead decide on
REQUIREMENTS?
a host of other criteria (for example skills, performance, personal
circumstances and family commitments). Again, the safer, more The offering of a voluntary severance package as a precursor to
conservative approach would be to arrive at these criteria by retrenchment does not relieve the employer of its obligations
agreement with the relevant union. in terms of s189 of the LRA to consult with an employee on the
matter.
CAN THE EMPLOYER INVITE RETRENCHED EMPLOYEES TO
RE-APPLY FOR THEIR JOBS? WHEN IS AN EMPLOYER OBLIGED TO CONSULT WITH
Yes. The employer must just be careful to ensure that it follows an EMPLOYEES?
objective and fair process by placing the onus on the employees In terms of s189 of the LRA, an employer is obliged to consult
to re-apply for their own positions. with employees when it contemplates dismissal for operational
reasons. This is a factual question.
CAN MISCONDUCT, POOR WORK PERFORMANCE OR PAY
INEQUALITY BE USED AS A SELECTION CRITERION? CAN AN EMPLOYER OFFER VOLUNTARY SEVERANCE
The Labour Appeal Court in Food and Allied Workers Union on PACKAGES OUTSIDE OF THE S189 PROCESS, THEREBY
behalf of Kapesi and Others v Premier Foods t/a Blue Ribbon Salt NEGATING ITS OBLIGATION TO CONSULT?
River [2012] 33 ILJ 1729 (LAC) found misconduct to be an acceptable The only time an employer may offer any of the above packages,
method. outside of the s189 process, is when it can be shown that when
However, the employer would do well to remember that such offer was made, the employer was not contemplating
dismissals for operational requirements are not fault-based. Since retrenchments.
misconduct is fault-based, the employer must not conflate the
issues, and must rather keep them separate. Even though prior WHEN WOULD IT BE PERMISSIBLE FOR AN EMPLOYER TO
misconduct is being considered as a factor, the employee is OFFER THE ABOVE PACKAGES TO EMPLOYEES, WITHOUT
not being dismissed for misconduct, but rather for operational FOLLOWING THE S189 CONSULTATION PROCESS?
reasons, with their prior misconduct being the determining factor
The only circumstances that would enable a departure from this
of whether they are dismissed.
process are:
In terms of case law, employers are not permitted to use a
∞∞ if the offering of such alternative packages would avoid the
retrenchment procedure to eliminate pay inequality. Accordingly,
possibility of retrenchments altogether at a later stage; and
pay inequality is not an objective selection criteria.
∞∞ if the employer did not contemplate that the refusal of the
Furthermore, in the decision of Louw v South African Breweries offer could precipitate retrenchments.
(Pty) Ltd (C285/14) [2016] ZALCJHB 156, the Labour Court However, even in these circumstances, it is advisable to consult
held that where selection criteria based on factors such as with the employees as the offering of voluntary severance
performance are used, employees should be given an opportunity packages, early retirement or redeployment may amount to a
to make representations against the negative conclusion that may change in terms and conditions of employment.
be drawn against them.
VACANCY BUMPING
VOLUNTARY SEVERANCE PACKAGES
DOES AN EMPLOYER HAVE A DUTY TO FIND ALTERNATIVE
WHAT IS A VOLUNTARY SEVERANCE PACKAGE? EMPLOYMENT FOR ITS EMPLOYEES PRIOR TO
A voluntary severance package is a financial incentive that is RETRENCHMENT?
offered to an employee in lieu of their resignation or retirement. Yes. The employer is under an obligation to search for alternatives,
but no absolute obligation rests on it to find (or create)
ARE THERE DIFFERENT TYPES OF VOLUNTARY SEVERANCE alternatives.
PACKAGES?
Where a voluntary severance results in termination of employment, WHAT DOES THIS DUTY ENTAIL?
minimum severance benefits imposed by law cannot be An employer must:
contracted out of. However, additional benefits (in consequence
of the voluntary nature of the termination) may take a variety of ∞∞ identify alternative options to retrenchment;
forms, such as: ∞∞ apply objective selection criteria when deciding who to
retrench;
∞∞ a voluntary severance package;
∞∞ consider “bumping” long-serving employees into positions
∞∞ a retirement package; or where they are capable of rendering services; and
∞∞ a redeployment package. ∞∞ consult on all these issues before dismissal with a view to
reaching a consensus.
RETRENCHMENT GUIDELINE | cliffedekkerhofmeyr.comIS AN EMPLOYER REQUIRED TO CONSIDER THE ALTERNATIVES
TO RETRENCHMENT?
Yes. Employers must consider alternatives proposing dismissals
for operational requirements. If they do not do so the dismissals
will be found to be unfair. In the recent, Constitutional Court Case
of SACCAWU and others v Woolworths (Pty) Ltd [2018] ZA CC 44,
the employer decided to convert full-time workers to flexi-time
workers. It offered the full-time workers various incentives to get In terms of s189 of the LRA
them to agree to the conversion. All but 92 full- time employees
agreed. SACCAWU proposed that they convert to flexi-time but
AN EMPLOYER IS OBLIGED
retain their existing salary and benefits. It later proposed the to consult with employees
employee would in addition take a 11% salary decrease. Despite WHEN IT CONTEMPLATES DISMISSAL FOR
this, the employer retrenched the employees. The court found
that the employer had failed to properly explore the proposed OPERATIONAL REASONS
alternatives and alternatives such as natural attrition, wage freezes
or ring fencing and as a result the dismissals were substantively
unfair.
WHAT CAN HAPPEN IF THE EMPLOYER DOES NOT “BUMP”
EXISTING EMPLOYEES INTO OTHER POSITIONS AS PART OF
THE RETRENCHMENT PROCESS?
The court may find that fair selection criteria were not applied
and that the retrenchment process was procedurally unfair. (See,
for example, CWIU and Others v Latex Surgical Products (Pty) Ltd
[2006] 2 BLLR 142 (LAC) and Food and Allied Workers Union on
behalf of Kapesi and Others v Premier Foods t/a Blue Ribbon Salt
River [2012] 33 ILJ 1729 (LAC)).
WHAT ARE THE BASIC PRINCIPLES WITH REGARD TO
BUMPING?
In Porter Motor Group v Karachi [2002] 23 ILJ 348 (LAC), the court
set out the principles as follows:
∞∞ Bumping is based on the LIFO (last in first out) principle, which
is a fair selection criterion to apply, as it rewards employees
who have served the employer for a longer period of time.
∞∞ Depending on the circumstances of a case, bumping can take
the form of vertical displacement or horizontal displacement.
∞∞ Vertical bumping means that the employee is transferred to a
position with a less favourable status, conditions of service and
pay.
∞∞ Horizontal bumping means that the employee is transferred to
a position of similar status, conditions of service and pay.
A VOLUNTARY SEVERANCE PACKAGE
∞∞ An employer should first attempt to bump employees
horizontally before bumping them vertically.
∞∞ Vertical bumping should only take place where there is no
is a financial incentive
suitable candidate to bump horizontally (into another position).
that is offered to an employee
∞∞ In the case of large-scale bumping, also called “domino
bumping”, which could cause vast dislocation, inconvenience in lieu of their resignation
and disruption, the consultation process must be fair towards
∞∞
employees while minimising the disruption to the employer.
A balance must be achieved between the competing interests
OR RETIREMENT
of the employees and the employer.
These principles were also more recently applied in Oosthuizen v
Telkom SA Ltd [2007] 11 BLLR 1013 (LAC) and Super Group Supply
Chain Partners v Dlamini and Another 3 BLLR 255 (LAC).
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