Dismissal of employees that is based on the operational requirements of the employer is regulated by Sections 189 and 189A of the Labour Relations Act 66 of 1995 (LRA).A Code of Good Practice has also been issued in terms of the LRA to govern the retrenchment process to be followed by an employer.
Dismissals based on the employer’s operational requirements are more commonly known as retrenchments.Two types of retrenchment processes are distinguishable, small scale retrenchments and large scale retrenchments:
Small scale retrenchments are regulated by section 189 of the LRA (click here to read the relevant section of the act)
While large scale retrenchments are regulated by section 189A of the LRA (click here to read the relevant section of the act).
The section 189A process will be applicable if an employer employs more than 50 employees.
Retrenchments have rightly been classified as “no fault” dismissals. This means that the retrenchment arises from the employer’s situation and not due to the employee’s responsibility. In light of this, Employment Law is prescriptive with regard to the procedure and substance compared to other forms of dismissal.
Retrenchment is allowed on the basis of an employer’ operational requirement which is defined in section 213 of Labour Relations Act as “requirement based on the economic, technological, structural or similar needs of the employer” The employer thus has to show that there is a need for retrenchment.Should an employer fail to proof that there indeed existed an operational requirement that could justify the retrenchment of an employee and the employer fails to proof that the retrenchment of that employee was the last resort, that employee’s dismissal will be substantively unfair.The employee can then claim to be reinstated on the same terms and conditions he/she enjoyed immediately before the retrenchment or if reinstatement is not an option or possible then the employee can be entitled to up to 12 months his monthly remuneration he received at the time of his retrenchment.
A thorough consultative process has to take place before an employer can effect retrenchments.The Labour Relations Act refers to this exercise as “a meaningful joint consensus seeking process”. If this test is not passed, and it is found that the retrenchment was procedurally unfair the employee can be entitled to up to 12 months his monthly remuneration he received at the time of his retrenchment.
It is critical that the parties to the consultation process seek to reach consensus.The parties do not need to reach actual consensus.According to our courts the process of seeking consensus on the following suitable measures are sufficient.
- To avoid retrenchments
- Minimize and or change timing of retrenchments
- Mitigate adverse effects of retrenchments
- Selection criteria for employees to be retrenched
- Severance pay and offers of reemployment of retrenched employees.
As pointed out above, different processes are applicable in small and large scale retrenchments.Click here to read more about small scale (section 189) and large scale (section 189A) retrenchment procedures.
An unfair retrenchment dispute must be referred to the CCMA or relevant Bargaining Council within 30 days of retrenchment.
Conciliation is the first step in the dispute resolution process. If it fails, the dispute may be referred to the CCMA for arbitration, if the employee was the only individual consulted and retrenched or to Labour court for adjudication, if more than one employee was consulted and retrenched. The dispute must be referred within 90 days after the process of conciliation has failed.
Our team at Retrenchment Assist can help with all aspects of claiming compensation regarding unfair retrenchment. We understand the pain and trauma and disruption to one's life caused by unfair retrenchments. To find out more information on how we may help you with claim compensation for Unfair Retrenchment, please contact us click here.
Alternative dispute resolution
ADR offers a viable mechanism for a speedy resolution of disputes related to retrenchment.
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