BEWARE OF USING RETRENCHMENT TO GET RID OF UNDESIRABLES

As a result of South Africa’s highly restrictive labour legislation employers threaten to close down their businesses. But it is not necessary for employers to take such drastic steps merely because the labour law interferes with their right to make business decisions. This is because every employer has the ability and opportunity to acquire the expertise necessary to implement business decisions without transgressing the law and still maintain a viable business.

 

Employers too often make the mistake of retrenching problem employees because they perceive the disciplinary process as being too drawn out and complicated. However, they are not allowed to use retrenchment to get rid of ‘deadwood’, trouble makers, poor performers or other undesirables. Retrenchment only becomes a possible option if the job is truly redundant.

 

Employers are not required negotiate retrenchments but only to consult with the trade union or other employee representatives (if these exist) or with the employees themselves. The difference between consultation and negotiation is most important:

 

Negotiation means that the parties must reach agreement before any idea can becomes a decision or is implemented. This is not required in retrenchment law although the trade unions are pressing hard for this to be legislated.

 

On the other hand, the law of consultation provides that, as long as the employer can prove that it disclosed relevant information and tried thoroughly and in good faith to reach consensus, it does not have to actually reach agreement with the employees/representatives.

 

The halls of the CCMA and Labour Court echo endlessly with the groans of many thousands of employers (and some ex-employers) who refused to believe the labour law requiring fair or agreed retrenchment criteria and who failed to acquire the knowledge and expertise necessary to reconcile business pressures with legal requirements.

 

Countless cases have been decided at the CCMA and Labour Court where employers have either had to reinstate retrenchees and/or have had to pay huge amounts in compensation. This is often a disaster for the employer because the biggest reason for retrenchments is financial weakness and these awards against employers can place an unbearable burden on the already strained finances of the employer. 

 

A case in point is that of Toyota SA reported in the Business Report of 30 November 1999. Here, the employer was required to reinstate 280 employees and to pay them R15,2 million because Toyota had failed to disclose to the employees sufficient information necessary for effective consultation.

 

In Ntshanga vs South African Breweries Ltd (2003, 8 BLLR 789) Ntshanga, a commodity manager, was retrenched as part of a restructuring exercise. Prior to his retrenchment he had applied for a post in the new structure but was rejected. He therefore lodged a dispute of unfair retrenchment. The Court found that:

 

• The employer failed to offer the employee one of the available posts because it was dissatisfied with his work performance

 

• The retrenchment was therefore unfair and the employee was awarded compensation.

 

In SACCAWU and others v Woolworths (Pty) Ltd [2019] 4 BLLR 323 (CC) Woolworths decided to convert many of its full-time employees to flexi-time and retrenched those who refused the conversion. 44 employees took the matter to the Labour Court which ruled their dismissals unfair, and ordered Woolworths to reinstate them with retrospective effect. The Labour Appeal Court upheld the unfair dismissal finding but altered the remedy from reinstatement to compensation equal to 12 months’ remuneration. 

The Constitutional Court noted that Woolworths had failed to consider a number of alternatives including SACCAWU’s proposal that the full-timers be converted to flexi-time and be paid lower salaries. It followed that the dismissals were unfair. The Court ordered that all 44 employees be reinstated to their positions as full-timers with effect from the date of the dismissals.

 

The courts will often tolerate the employer requiring operational flexibility but will not tolerate the employer getting rid of those who refuse unreasonable demands of the employer. 

 

Proper strategic thinking and understanding of what are often complex legal principles would have prevented these costly awards! Managers therefore require advice and training on how to restructure businesses and how to deal effectively and legally with poor performers or other undesirable employees.

 

To book for our 17 September webinar on WINNING AT THE CCMA IN THE COVID ENVIRONMENT please contact Ronni at [email protected] or on 0845217492 or (011) 782-3066.