This article was written by Jonathan Jones, an associate at Norton Rose Fulbright South Africa
In South African employment law, there are only three fair reasons for a dismissal:
- the employee’s misconduct;
- the employee’s incapacity; or
- the employer’s operational requirements (retrenchments).
A dismissal for operational requirements is viewed as a “no-fault dismissal” as it can result in the dismissal of an employee who has committed no wrongdoing and is perfectly capable of performing his/her job. This principle of “no- fault” is key to the proper interpretation and application of the substantive and procedural requirements for a fair retrenchment.
First and foremost, a retrenchment must relate to the actual operational requirements of the employer and should not serve as an easy substitute for misconduct or incapacity proceedings.
Frequently, the need to retrench, or even the selection criteria for retrenchment, is manufactured by an employer who actually seeks to rid itself of problematic employees. Instead of “last in, first out” which is accepted as proper selection criteria, many employers use “poor performers out, good performers in”. This is not advisable.
Where employers are found to have abused a retrenchment process to target poor performing employees, the Labour Court may award significant compensation to the affected employees of up to twelve months remuneration. Where employers are concerned about misconduct or poor work performance, it is always advisable to institute the proper processes relating to these concerns and not to fall back on retrenchment as a cure-all.
A fair retrenchment process is also guided by the principle of “no-fault”. As a result, the whole process is aimed at firstly avoiding or minimising retrenchments or, as a last resort, minimising the effects of the retrenchments on employees. Too often employers adopt a checklist approach to the process – as set out in section 189 of the Labour Relations Act, 66 of 1995 – instead of complying with the spirit of the legislation. All alternatives to retrenchment should be examined very carefully and employers must ensure that proposals that could save jobs are not rejected lightly.
Finally, given the principle of “no-fault” and the fact that the employer bears the onus to prove that a retrenchment was fair, employers frequently find themselves faced with a very critical Labour Court when a dispute arises. As a result, a retrenchment exercise should always be conducted so as to ensure that both the reasoning and the process can withstand the highest level of scrutiny.