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Lavhelesani Mainganye spoke with labour law experts Cliffe Dekker Hofmeyr (CDH) to find out more about the economic outlook for 2023 and employment law

The recent impact of COVID-19 means a multi-year period of slow growth, with some struggling businesses resorting to retrenchment to stay afloat. The year started with many qualms—some old, some new—which could result in different macroeconomic scenarios playing out for South Africa during 2023. Economists predict South Africa has a 45% chance of a recession this year.

The consequence of all this is visibly the high loss of jobs and unemployment. The advent and increase of robotics and artificial intelligence are also contributing to job losses, with more and more businesses replacing human beings with technology.

Cliffe Dekker Hofmeyr (CDH), a full-service law firm with an extensive reach across Africa consisting of more than 350 lawyers and a track record spanning over 169 years, gives legal advice to ensure the employer and employee are on the safe side of the law should the only option available be a job cut.

CDH laid out some of the legal implications that companies need to guard against when invoking a Section 189 process either on a small or large scale.

The law is clear on the basis and process to be followed when an employer contemplates retrenchment. The end of the process either results in the implementation of an alternative to avoid retrenchment or the termination of employment. The retrenchment procedure, as set out in the Labour Relations Act (LRA), must be followed properly and in good faith by the employer. Reasons for retrenchment may be attributed to one or more of the following factors that a part of an employer’s operational requirements: Structural, economical, technological, or similar operational needs.

Selection criteria

The selection criteria on the basis of which employees are to be retrenched must be clear. One of the issues an employer is obliged to consult on during a potential retrenchment process is the selection criteria to be applied when determining which employees will be dismissed. Section 189(7) of the LRA stipulates that employers may select employees to be retrenched according to the criteria they have agreed upon by the consulting parties. If no criteria have been agreed upon, the selection must be fair and objective.

The LRA requires that consultation must take place when the employer contemplates retrenchment. The consultation is a process and not a once-off meeting. Section 189(1) of the LRA provides that, before retrenching, employers must consult any person whom the employer is required to consult in terms of any collective agreement that may be in force. If there is no collective agreement, consultation should be with the employer’s workplace forum and/or any registered trade union whose members are likely to be affected by the proposed dismissal. If there is no workplace forum or trade union, then with all employees that could be affected by the retrenchment. A good-faith consultation is a fundamental requirement of a retrenchment process and a failure to consult will render a retrenchment process procedurally unfair.

Which is the best selection criterion?

There is no one answer. The LIFO method (last in, first out) is widely recognised as the criterion associated with the least risk. The FIFO (first in, first out) method is dangerous because it has the indirect effect of discriminating on the basis of age. LIFO, however, may not be appropriate for senior-level employees where an employer seeks to retain skills or employees with other characteristics that are valuable to the operations of the employer. An employer may therefore decide upon a combination of selection criteria based on their operational needs provided the selection criteria are applied fairly and objectively.

Can misconduct, poor work performance, affirmative action, or pay inequality be used as a selection criterion?

Dismissals for operational requirements are not fault-based. Since misconduct is fault-based, the employer must not conflate the issues, and must rather keep them separate. Even though prior misconduct can be considered, the employee cannot be dismissed for misconduct, but rather for operational reasons, with their prior misconduct considered as part of the determining factors of whether they are dismissed. Employers are not permitted to use a retrenchment procedure to eliminate pay inequality. Accordingly, pay inequality is not an objective selection criterion.

Alternatives to retrenchment

CDH also advises that the employer is under an obligation to search for alternatives, but no absolute obligation rests on it to find (or create) alternatives.

An employer must:

  • Identify alternative options to retrenchment
  • Apply objective selection criteria when deciding who to retrench
  • Consider “bumping” long-serving employees into positions where they are capable of rendering services
  • Consult on all these issues before dismissal with a view to reaching a consensus.

An employer may also explore other options such as the implementation of short-time or temporary layoffs either in terms of a collective agreement or by mutual agreement between the parties.

How can employees challenge the fairness of a retrenchment process in terms of s 189A?

Employees can challenge the procedural fairness of the large-scale retrenchment process by way of an urgent application to the Labour Court in terms of s189A(13). Employees can challenge the substantive fairness of the termination of their employment by referring a dispute to the Labour Court or by engaging in industrial action.

Can the employer invite affected employees to re-apply for their jobs?

Yes. The employer must be careful to ensure that it follows an objective and fair process by placing the onus on the employees to re-apply for their own positions. The interview process must be treated with caution and the selection process must be fair and objective. Such a process is a measure to avoid retrenchments and not a selection process.

Lavhelesani Mainganye is a PRISA accredited communication practitioner with considerable experience in the field.