This article was written by Yusuf Peer, an associate designate at Norton Rose Fulbright South Africa

In South African law an employer is permitted to retrench employees due to economic and business conditions, provided that the employer follows the correct consultative procedure and the dismissals are based on fair and justifiable reasons

An employer employing less than 50 employees must commence consultations as soon as he contemplates dismissing one or more employees. The purpose of consultations are to encourage a consensus seeking process where the employer and employees (or their representatives) try to either prevent retrenchments, or at least minimise the impact of retrenchments on employees.

This consultation process should start with the employer giving the affected employees written notice about the contemplated retrenchments and inviting them to consult and make representations. The employer should consult the parties stipulated in a collective agreement. If there is no such agreement on who to consult, the employer should consult a workplace forum established in the workplace where the affected employs work. If no such forum exists, the employer should consult with a registered trade union whose members may be affected. If no such union exists, then the employer should consult the affected employees directly or consult the employees’ nominated representative.

This written notice should invite the employees to consult with the employer, and should set out the following information:

  • reasons for the proposed retrenchments;
  • the alternatives which the employer has considered before deciding on retrenching employees;
  • the reasons why the considered alternatives were not accepted by the employer;
  • the number of employees likely to be affected by the retrenchments and the job categories within which they are employed;
  • the proposed method for selecting employees to be dismissed;
  • the time periods during which the retrenchments are likely to take place;
  • the severance packages proposed;
  • any assistance which the employer would be willing to offer affected employees;
  • whether there is any possibility of employees who are dismissed being reemployed by the employer in the future;
  • the total number of employees employed by the employer; and
  • the number of employees which the employer has retrenched in the preceding 12 months.

It is accepted that an employer may not have all the answers and information pertaining to the above and in certain circumstances it may only arrive at such answers during consultations with employees. The employer should however try to deal with the above issues as best as possible, and provide the employees with sufficient information so that they can make a meaningful contribution to the consultation process.

Once this notice is given to employees, they should be given a reasonable amount of time to consider the information. Thereafter they should be consulted on the appropriate measures which could be taken in order to completely avoid retrenchments. If it is not possible to avoid retrenchments, the parties must consult on ways to minimise the number of employees to be retrenched. If it is appropriate, the parties must also discuss the possibility of changing the timing of dismissals. This is important in instances where certain alternatives to retrenchments have been suggested, and time is needed to see if these alternatives would work. The employer however is not obliged to perpetually delay the retrenchments in order to test these alternatives. If retrenchments are inevitable, the parties should consult on ways to soften the adverse effects of retrenchment on those employees who would be dismissed. For example, employees can be given paid time off to seek alternative employment, or be given free counselling and other assistance to soften the harsh reality that they would be losing their jobs as a result of circumstances beyond their control.

The parties should also consult on the proposed severance pay to be paid to retrenched employees. While there is a prescribed minimum severance package of one weeks’ pay for each year an employee has been employed with the employer, the parties can negotiate a better package which will assist the affected employees once they are dismissed.

This consultation process is not expected to go on indefinitely. Once the various topics for discussion have been exhausted, the employer is entitled to make a final decision. The employer however must not do this arbitrarily, but must consider all the representations made by the employees, respond to such representations, and make a genuine effort to avoid or minimise the retrenchments. Once this has been done, then the employer can go ahead and give the affected employees notice of termination of their employment.

In deciding on which employees to dismiss, the employer should use the selection criteria agreed to in the consultation process. If no such criteria has been agreed to, then the selection criteria used by the employer must be fair and objective. An employer must not use a selection criteria which results in a particular group of employees being targeted (such as pregnant employees, females or employees of a particular race). This could result in employees claiming unfair discrimination.

In large scale retrenchments where an employer employs more than 50 employees, the dispute resolution procedure is slightly different. Employers falling into this category should consult their advisors before commencing with the process since there are certain tricky time lines that employers must bear in mind.

In accordance with the above, an employer contemplating retrenchments should always follow the prescribed consultation process, and ensure that if it does retrench employees it does so based on justifiable reasons. Through the consultation process the employer may be able to minimise the impact of retrenchments, and even get the employees’ buy-in and co-operation. Furthermore an employer will be able to defend any claims brought by employees alleging that their dismissal was procedurally or substantively unfair.

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