In situations where an employer is undergoing a retrenchment exercise, he/she will have to decide on which employees to retrench i.e. the employer will have to decide which employees job positions have become redundant. Selection criteria is one of the requirements that an employer may have to comply with in such an instance.
If one or more employees are to be selected for dismissal from a number of employees in retrenchment cases, section 189 (7) of the Labour Relations Act 66 of 1995 requires that the criteria for their selection must either be agreed by the consulting party or if no criteria has been agreed upon, to be a fair and objective criteria.
Where the employer and the employee are unable to reach agreement, the courts will look at whether the criteria used and applied was “fair and objective”. Examples of some selection criteria which employers may use and that are generally accepted to be fair include the following:
1) The employee’s length of service; or
2) Employees with key established skills ; or
3) a poor performance record may be taken into consideration; or
Please note that the above is not an exhaustive list.
In the case of Makgabo & others v Premier Food Industries (Pty) Ltd (2000) 21 ILJ 2667 (LC) at 2675 G, the court warned that an employer should not be allowed to abuse a retrenchment process to penalize employees for misconduct or substitute it for a disciplinary hearing.
In the case of Grieg v Afrox Limited (2001) 22 ILJ 2102 (ARB), the facts of this case involved a situation in which all positions in certain departments were declared redundant and all the employees in those posts were invited to apply for newly created posts. Those that were unsuccessful in being appointed were retrenched. The employer stated that each new job had its own pre-decided job requirements. The employer looked at what value the person could add to the company in the future. The arbitrator held that the retrenchment exercise could not be used to get rid of those employees who had not performed to the required standard. The arbitrator also found the dismissal to be substantively unfair because the employer had failed to show that there was an objective process of selection.
In most cases, the courts have regarded that the test for fair and objective criteria will be satisfied by the use of the "last in first out" (LIFO) principle. However, where the employee is required for the successful operation of the business, such employees may be retained. Employees who occupy a specific specialized position may also be retained. In NUMSA obo Members v Timken SA (Pty) Ltd  6 BLLR 548 (LC),the main issue on which the consulting parties could not agree was the criteria of selecting those who were to be retrenched.
The employer had proposed to apply the principle of last-in-first-out (LIFO), skills, competencies, attendance record, disciplinary record, qualifications, training and performance. The National Union of Metal Workers South Africa (NUMSA), on the other hand, proposed LIFO with retention of skills. The parties failed to reach consensus, and the company used a combination of years of service, attendance record, disciplinary record and tardiness. NUMSA alleged that the application of these criteria rendered the retrenchment of its members unfair.
The court held that where consulting parties are unable to agree on selection criteria, the prerogative as to the criteria to be used rests with the employer. Such criteria should, however, be fair and objective. It is generally accepted that LIFO is the most objective and fair criterion. However, an employer is not obliged to use LIFO where its application could result in loss of skills or disrupt the business operations. The court noted that there was no evidence that the application of LIFO in this case would have had this effect.
The court held further that where the selection of employees is based on factors such as attendance record, tardiness and performance, the employees should be given an opportunity to make representations against a negative conclusion that may be drawn against them. It is therefore not only the criteria that must be fair and objective – its application must also be fair.
In this case, the applicants who were selected had already received punishment for their attendance record. There was also evidence that an employee’s attendance record was applied even in cases of ill health arising from injury on duty. This was clearly unfair, and the court accordingly held that the company had failed to prove that the selection criteria was fair and objective.
The court further emphasised that a retrenchment must be a matter of last resort and that the employer should attempt to avoid it. If not, the retrenchment will be held substantively unfair. One way in which retrenchments may be avoided, is through the application of bumping. NUMSA had raised bumping, but the company rejected or ignored it without objective justification.
In the circumstances, the court held that the retrenchment of the NUMSA members was unfair and ordered compensation of 12 months’ remuneration.
In SACTWU and Another v Cadema Industries (Pty) Ltd  8 BLLR 790 (LC), the Court found that by targeting the employee in this case, the selection criteria used by the respondent was unfair. The evidence revealed that the respondent had retained casual employees who had been with it for a period far shorter than that of the employee.
It is evident from the above that the courts are very strict in determining whether the employer has applied a “fair and objective” criteria regarding the “selection criteria” adopted by the employer. Employers must be wary of this fact when undergoing a retrenchment exercise.