COVID-19 and Retrenchments

Sep 9, 2020

Retrenchments have become part and parcel of the impact of COVID-19 on employers. However, it does not give employers the right to retrench employees at their will.

When an employer is contemplating to retrench employees, the Labour Relations Act (LRA) strictly requires employers to consult first about this prospect before making any decision to retrench. Where the affected employees are members of a trade union the employer is required to consult with that union on a number of issues, the most important of which is any means of avoiding job losses.  

There are various reasons why retrenchment consultations may fail to take place or may fail to comply with the requirements of the LRA. These include: 

  • The employer is unaware of its legal obligation to consult with the employees/union. Some employers are aware of the requirement to consult but are not aware of the role of the union or of the extent of the consultation requirements. It can also happen that the employer is not aware of the fact that the employees have joined a union. It is not likely that any of these reasons will suffice as an acceptable excuse for the employer’s failure to consult.
  • The employer may have urgent reasons for the need to retrench, such as: 
  1.  Dire financial circumstances threatening the immediate survival of the business;
  2. A pressing need to get rid of employees pending a hastily arranged takeover by another business. The prospective buyer may have set a very tight deadline for the date of the takeover and may have made it a condition of the deal that workforce numbers be reduced before the conclusion of the sale; 
  3. The employer may have no money to pay salaries during a consultation exercise (which exercise may be very protracted especially where the employer has more than 50 employees). The employer may therefore need to curtail retrenchment consultations. 

Again, none of these reasons will be accepted by the courts as an excuse for failure to consult fully and properly. 

  • Where the employer has truly exhausted every effort to locate and contact the union without success it may consider the possibility of consultation with the employees/shop stewards directly. In the case of Numsa vs Ascoreg (CLL Vol.12 July 2008) the Labour Court found that the employer could consult directly with the employees where the union refused to consult. However, the employer will need solid proof of such trade union’s refusal as consultation with employees instead of their union is prohibited under normal circumstances. 
  • The trade union may be purposely delaying the consultation process. If a court finds that the union unreasonably delayed the consultation process the courts may well refuse to find against the employer despite the implementation of retrenchments without proper consultations.  

However, the law clearly gives the employer the onus of ensuring, as far as it possibly can, that proper consultations take place. Therefore, despite difficulties in getting the union to cooperate, the employer must do everything in its power to gain the union’s cooperation. It is only where the employer has proved that the union has been unreasonably uncooperative despite the employer’s best efforts that the courts may excuse the employer for retrenching without union consultations.  The same principle applies when the employer consults directly with the affected employees in the absence of a union. It is so that many employers have the misconception that if it affects a few employees, they do not have to consult and more often than not, act unilaterally.

The employer’s duty to consult before retrenching is critical to ensure procedural fairness. Despite the numerous and varied obstacles to achieve proper consultations, the employer is likely to find that failure to consult (or to consult properly) is extremely costly from a legal point of view. On the other hand, where the retrenchments are protracted due to delays in consultations, it could be equally costly from a salary payment point of view.  

The failure to consult and the costliness thereof was highlighted in Woolworths (Pty) Ltd v South African Commercial, Catering and Allied Workers Union and others [2017] 12 BLLR 1217 (LAC). The Labour Appeal Court found that the employer could have considered, as an alternative to retrenchment of 92 employees, the freezing of future wage increases. While there was no certainty how such an alternative might have turned out, the employer’s failure to consider it was enough to find that a reasonable alternative to dismissal had not been considered. It followed that the dismissal was unfair. The Court ordered the employer to pay each of the employee’s compensation equal to 12 months’ remuneration. 

Therefore, it is extremely important that employers consider ALL possible alternatives to retrenchment and give reasons why a particular alternative is considered not viable.

It is advisable that employers therefore obtain advice on:

  • The requirements of the law regarding retrenchment consultations. 
  • How to prepare for and conduct retrenchment consultations. 
  • How to overcome obstacles to legally compliant consultations without unduly delaying the completion of the retrenchment exercise. 

Author:

Wallace Albertyn

Wallace Albertyn is a Senior Associate and Legal Advisor at LabourMan Consultants.

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