COVID NOT ALWAYS A FAIR REASON TO RETRENCH

BY   Ivan Israelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or on e-mail address: [email protected]. Go to: www.labourlawadvice.co.za.

Due to state capture loadshedding, unexpected power outages, Covid and maladministration South Africa’s economy is in crisis. The biggest fallout of this economic weakness is the very high number of retrenchments in this country.

Many employers are tempted to use Covid as a reason to retrench even when the disease is not the true spur for the retrenchment decision. Such employers often sidestep the legal proedures for retrenchment believing that Covid gives them a licence to terminate jobs quickly. However, despite Covid, the law still requires that:

• • • The employer follows a fair procedure aimed at an attempt to find alternatives to retrenchment. This involves good faith consultations with the employees concerned or with their representatives.
    • Fair or agreed criteria are used to decide which employees should be targeted for retrenchment.
    • There is an acceptable reason for the need for retrenchments.

Section 213 of the LRA indicates that the reasons for retrenchment may be based on the economic, technological, structural or similar needs of the employer. It is necessary to look at each of these reasons more closely.

• • • Typically, economic reasons given for the need for retrenchment include the ability to make money or to retain sufficient funds to continue operations. The courts are divided on whether the desire to increase profits is a fair reason for retrenchment.
    • Technological reasons advanced for the need to retrench often include electronic advances that might reduce the need for labour.
    • Structural reasons advanced for the need to retrench include the need to flatten the management structure.

However, there are other operational circumstances that could justify the need to retrench. In the case of Tiger Foods Brands Limited vs L Levy (CLL May  2007 page 102) the employer wished to introduce a system whereby employees would work on public holidays. The employees embarked on a strike in protest against this move and assaulted replacement workers. Also, a manager was shot and several other received death threats. As the company was unable to identify the perpetrators it concluded that it was unable to continue managing the workplace. It therefore decided to consider retrenching several employees. The union disputed the CCMA’s jurisdiction to facilitate the retrenchment consultations on the grounds that the reasons for the proposed retrenchments did not fall under the definition of operational requirements in section 213 of the LRA. The CCMA agreed with the union.

Later the Labour Court the Court found that the CCMA was wrong. It found that the CCMA arbitrator had, amongst others, made the error of ignoring the last part of the LRA’s definition of operational requirements that says: “or similar needs of an employer”. The Court decided that the company’s need to protect its managers and to manage the business fell under the definition of ‘operational requirements’ as they affected the viability of the business. These were grounds “similar to economic, technological or structural needs.”

In my view this finding makes sense. It seems that the legislators’ decision to include in the definition “economic, technological or structural needs” was based on the intention to give examples of what operational requirements entail rather than to consider this list of three needs as exclusive. The inclusion of the phrase “or similar needs” makes it clear that the definition should be interpreted broadly rather than narrowly. It would make no sense to include some types of operational requirements and to exclude others arbitrarily.

Employers are warned not to interpret this finding as a licence to invent their own reasons for retrenchment. Should the reasons given for retrenchment be found by the courts to be bogus or not to constitute operational requirements the employer will lose the case. This would probably be extremely costly for employers because a likely remedy for the unfair retrenchments will be the reinstatement with full back pay of all the retrenchees.

For example, it would be folly for an employer to retrench employees on the basis of its operational requirement for ‘employees who perform their work well’. While the need for good work performance can be argued to be an operational requirement there is a separate legal procedure prescribed in Schedule 8 of the LRA for dealing with poor performance. In the case of NEHAWU vs Medicor (Pty) Ltd (2005, 1 BLLR 10) the Labour Court forced the employer to reinstate 67 unfairly retrenched employees with full back pay. This was because the employer had used the retrenchment process to get rid of alleged poor performers.

In the light of the above, before dabbling in the dangerous area of retrenchments, employers should obtain legal advice from a reputable expert in labour law.

To attend our 27 May webinar on MANAGING CONFLICT IN THE WORKPLACE please contact Ronni on [email protected] or 0845217492.