Retrenchments
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    Ivan Israelstam

     
     

    When an employer considers retrenching employees, full consultations must first take place about this intention before making any decision to retrench, according to the Labour Relations Act.  When employees belong to a trade union, the employer is required to consult with that union on several issues, the most important of which is ways of avoiding job losses.


    Should the employer choose not to engage in proper pre-retrenchment consultations, and the employees are forcibly retrenched, this would normally result in a finding of unfair dismissal.  But where the employer has made every effort to consult, it can't be blamed for failure to do so.


    There are several reasons that retrenchment consultations may fail to take place or may fail to comply with the requirements of the act. These include:

    • The employer was unaware of the 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 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 unlikely that any of these reasons will be an acceptable excuse for the employer's failure to consult. This is because employers are required to find out about what they do not know.

    • The employer may have urgent reasons for needing 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 entity. The prospective buyer may have set a 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 may be protracted, especially when 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.

    • When the employer has exhausted every means to locate and contact the union without success, it may consider the possibility of consultation with the employees/ shop stewards directly.



    The question arises as to whether the employer should, after being forced to give up on a recalcitrant trade union, consult directly with the employees.  In the case of Numsa v Ascoreg (CLL Vol 12, July 2008) the Labour Court found that the employer could consult directly with the employees when the union refused to consult.


    However, the employer will need proof of the union's refusal, as consultation with employees instead of their union is forbidden 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 by making unreasonable demands or failing to participate in consultations, the courts may well refuse to find against the employer, despite the implementation of retrenchments without proper consultations.


    In the case of Simelane and others v Letamo Estate (CLL Vol 17, July 2008) the Labour Court found that the trade union has a duty to co-operate and participate in the consultation process.  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 co-operate, the employer must do everything in its power to do so. It is only where the employer has proved that the union has been unreasonably unco-operative, despite the employer's best efforts, that the courts may excuse the employer for retrenching without consulting the union.


    The employer's duty to consult before retrenching lies at the heart of the employer's duty to ensure procedural fairness.  Despite the many different obstacles to the achievement of 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 delayed due to hold-ups in consultations, this could be as costly from a salary bill point of view.


    Employers are therefore advised to obtain advice from a reputable labour law expert on:

    • Ivan Israelstam is chief executive of Labour Law Management Consulting. He can be contacted on 011-888-7944 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it.
    • Our appreciation to Ivan and The Star newspaper for permission to publish this article.

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