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Retrenchments

Ivan Israelstam

 

We have regularly reminded employers of the factors that render dismissals for operational requirements (retrenchments) fair and unfair. Despite this employers continue to get it wrong and land up paying a very heavy price.

 

In order to win a retrenchment case at the CCMA or Labour Court the employer must fulfil its onus of proving that the retrenchment was fair in all respects. That is, it is the employer who has the duty of proving that:

  • There was a genuine and valid reason for retrenching
  • The employees chosen for retrenchment were fairly chosen
  • The retrenchment procedure as laid down in the Labour Relations Act (LRA) has been followed properly and in good faith by the employer
  • The employer has shared with the targeted employees (or their representatives) all documentary and other information pertinent to the retrenchment.

 

Despite the fact that retrenchment procedure is clearly spelt out employers are still being caught out at the CCMA and in the Labour Court for failing to follow procedure. For example, in the case of NUMSA and others vs Dorbyl Ltd and another (2004, 9 BLLR 914) 176 employees embarked on a protected strike. Thereafter, the plant at which they worked was closed down and 122 employees were retrenched. The employees claimed that the retrenchments were unfair because (amongst other reasons) they had not been properly consulted by the employer before being retrenched.

 

The court found that:

  • The decision to retrench was taken at an executive meeting held before the employer consulted with the employees regarding the retrenchments.
  • This rendered the consultations meaningless as the employer had already made up its mind and went into the consultations with a foregone conclusion.
  • As good faith consultation is the core requirement of retrenchment procedure the retrenchment was procedurally unfair.
  • The employer was required to pay each of the 122 retrenchees two months’ remuneration in compensation.

 

In Nkopane & others vs the Independent electoral Commission (2007, 2 BLLR 146) the employees were employed on the basis of fixed-term contracts. However, prior to the natural expiry date of the contracts, the employees were retrenched. The Labour Court found that it was a breach of the contract for the employer to terminate it prior to the expiry date unless the employees had been in breach themselves. However, this had not been the case and the employer was ordered to pay all the employees out up to the date of the expiry of their contracts.

 

There are a number of possible reasons for the fact that employers are still not complying with dismissal law, including:

  • Employers know the law but do not believe it will be applied to them
  • They hear about the law but do not believe it
  • The operational circumstances of the employer are so dire that the pressure distracts the employer from the legal aspects of the retrenchment
  • The mistaken belief that, if there is a good reason for retrenchment, the court will be lenient on the procedural side of the case
  • Employers misuse so-called retrenchments to get rid of undesirable employees. As their priority is getting shot of such undesirables the legal requirements are given little consideration
  • Employers are given poor legal advice regarding retrenchment law and implementation strategy.

Although the courts have become stricter over time in applying retrenchment law employers still implement retrenchments without giving thought to labour law compliance. As I have repeatedly warned employers, the courts see retrenchments as no-fault terminations. This means that the employee is losing his/her job through no fault of his/her own. In addition, the unemployment rate in South Africa is extremely high and it is very difficult for retrenchees to find new jobs. For these reason the courts have no hesitation in protecting the rights of retrenchees and making employers pay heavily where they deviate from the law.

 

Ivan Israelstam is the Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 082 852 2973 or via e-mail address: [email protected]. Website address: www.labourlawadvice.co.za

Ivan Israelstam

 

Due to the fact that some employers are unskilled in dealing both effectively and legally with poor performance or misconduct they look for other ways of getting rid of ‘troublesome employees. However, the law has made it clear that employers must use laid down corrective/disciplinary processes in such cases and are not allowed to misuse other methods such as retrenchments.

 

Many employers cull undesirable employees by declaring jobs redundant and placing the incumbent employees in a ‘redundancy pool’ or ‘redeployment pool’. The employer then requires the pooled employees to apply for vacant posts but turns down the applications of the targeted ‘undesirables’. The practice of ‘pooling’ might succeed if the employer can prove that the pooling and the redundancies are legally justified in the prevailing circumstances, that there are no hidden agendas and that the employees concerned have agreed to the pooling option. However, this approach bears so many pitfalls and is so open to misuse that I strongly advise employers to avoid it.

 

A case that illustrates this point is that of Oosthuizen vs Telkom SA Ltd (2007, 11 BLLR 1013). Ooosthuizen was an engineer with 30 years of service. During a staff cut-back exercise his job was made redundant and he was placed in a redeployment pool with the agreement of his trade union. He then applied for 22 vacancies at Telkom but, although he was short-listed for some of them, he was unsuccessful with all of them. When he was retrenched he claimed that this was unfair as the employer had not consulted with him.

 

The Labour Court found that the employer had no obligation to consult with him as they had consulted with his trade union. The court therefore found the retrenchment to be fair. Oosthuizen therefore appealed to the Labour Appeal Court where it was found/decided that:

  • Employers are obliged not to retrench employees if this can be avoided.
  • The employer had offered to retrain the employees in the redeployment pool but had failed to retrain Oosthuizen.
  • It is unfair to retrench an employee whose job could have been saved via minimal retraining.
  • The employer had brought no evidence as to why the employee had been unsuccessful with his 22 job applications.
  • The fact that the employee had been short-listed for some of the jobs suggested that he had the basic qualifications required for those jobs.
  • In choosing Oosthuizen for retrenchment the employer had applied the criterion of required skills despite having agreed to apply the criterion of LIFO (last-in-first-out).
  • The employer, in deciding to choose the employee for retrenchment had completely ignored his 30 years of service.
  • The above meant that the employee may have been rejected for the vacant posts on arbitrary grounds.
  • The employee had belonged to a trade union and therefore would normally not have been entitled to individual consultations with the employer. However, the employer had conceded that the employee was a manager and the employer’s normal practice was to consult directly with managers on the retrenchment list even if they belonged to a trade union.
  • While the employer had entered into consultations with the employee’s trade union it had failed to consult on the issue of the criteria for deciding which employees should be placed into the redeployment pool.
  • No evidence was led to justify the employer’s decision to require the employee to apply for new positions alongside colleagues with shorter service than his.
  • As a result the retrenchment was procedurally and substantively unfair.
  • The employer was to reinstate the employee with 12 months’ back pay.
  • Should the reinstatement result in an extraneous employee the employer would have to consider retrenching another employee.
  • The employer was required to pay the employee’s appeal costs.

 

This case reinforces the fact that the courts are now placing a much tougher test than ever before on the question as to whether the employer is entitled to retrench employees. This means that hidden agendas are more likely to be uncovered and punished. Before employers consider dismissing employees under any circumstances they should obtain expert advice in order to ensure both effectiveness and legal compliance.

 

lvan lsraelstam is the Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 082 8522 973 or on e-mail address: [email protected] or www.labourlawadvice.co.za.

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What's the right retrenchment procedure?

Ivan Israelstam

 
Employers have regularly been reminded in this column of the factors that render dismissals for operational requirements (retrenchments) fair and unfair. Despite this, employers continue to get it wrong and, in many cases they land up paying a very heavy price. In order to win a retrenchment case at the CCMA or Labour Court, the employer must fulfil its onus of proving that the retrenchment was fair in all respects. It is the employer who has the duty of proving that there was a genuine and valid reason for retrenching staff in the first place.

Furthermore, they must prove that the decision as to which employees will be retrenched and which will keep their jobs was arrived at fairly. The retrenchment procedure as laid down in the Labour Relations Act (LRA) must be followed properly and in good faith by the employer. The employer must also prove that he/she has shared with the targeted employees (or their representatives) all documentary and other information pertinent to the retrenchment.

Despite the fact that the retrenchment procedure is clearly spelt out, employers are still being caught out at the CCMA and in the Labour Court for failing to follow procedure. For example, in the case of Numsa and others v Dorbyl Ltd and another (2004, 9 BLLR 914) 176 employees embarked on a protected strike. Thereafter, the plant at which they worked was closed down and 122 employees were retrenched.

The employees claimed that the retrenchments were unfair because (among other reasons) they had not been properly consulted by the employer before being retrenched and the options were not explained to them. The court found that the decision to retrench was taken at an executive meeting held before the employer had consulted the employees regarding the retrenchments. This rendered the consultations meaningless as the employer had already made up its mind to go ahead with the retrenchment procedure and, therefore, it went into the consultations with a foregone conclusion.

As a good-faith consultation is the core requirement of retrenchment procedure, the retrenchment was procedurally unfair. The employer was required to pay each of the 122 retrenched staff two months' remuneration in compensation. In Nkopane and others v the Independent Electoral Commission (2007, 2 BLLR 146) the employees were employed on the basis of fixed-term contracts. However, prior to the natural expiry date of the contracts, the employees were retrenched.

The Labour Court found that it was a breach of contract for the employer to terminate the contracts prior to the expiry date unless the employees had been in breach themselves. However, this had not been the case and the employer was ordered to pay all the employees out up to the date of the expiry of their contracts.

There are a number of possible reasons for the fact that employers are still not complying with dismissal law, including:

  • Employers know the law well enough but do not believe it will be applied to them;
  • They hear about the law but do not believe it;
  • The operational circumstances of the employer are so dire that the pressure distracts the employer from the legal aspects of the retrenchment;
  • There is also a mistaken belief that, if there is a good reason for retrenchment, the court will be lenient on the procedural side of the case;
  • Employers misuse so-called retrenchments to get rid of undesirable employees. As their priority is getting rid of such employees, the legal requirements are given little consideration;
  • Employers are given poor legal advice regarding retrenchment law and implementation strategy.
 

Although the courts have become stricter over time in applying retrenchment law, employers still implement retrenchments without giving thought to labour law compliance. As I have repeatedly warned employers, the courts see retrenchments as no-fault terminations. This means that the employee is losing his/her job through no fault of his/her own. In addition, the unemployment rate in South Africa is extremely high and it is very difficult for retrenchees to find new jobs.

For these reasons the courts have no hesitation in protecting the rights of retrenchees and making employers pay heavily where they deviate from the law.

  • Ivan Israelstam is chief executive of Labour Law Management Consulting. He can be contacted on 011-888-7944 or 082-852-2973 or [email protected]   

Ivan Israelstam


The Labour Relations Act (LRA) allows employers to dismiss employees for reasons of operational requirements (retrenchment). However, the LRA's provisions make the implementation of retrenchment, especially large-scale retrenchments, extremely difficult. Section 189 of the LRA lays down a number of strict requirements, the breach of which would normally place the employer in hot water. These provisions require that the employer must:

  • Have a good reason for the need to retrench
  • Use fair criteria in deciding which employees are to be retrenched
  • Follow an intricate consultation procedure aimed primarily at seeking ways of avoiding retrenchment.
 

This process is started off with a section 189(3) notification to advise the company's employees that the employer is contemplating retrenchments. The intricate requirements of this procedure make speedy retrenchments extremely difficult, if not impossible. Despite the existence of these stringent restrictions, section 189A of the LRA - read together with section 64 (10(a) - contains additional far-reaching provisions that further delay the completion of the retrenchment process.

Section 189A applies only where the employer has more than 50 employees and:

  • Where there are up to 200 employees employed, the employer contemplates retrenching at least 10 employees.
  • Where there are up to 400 employees employed, the employer contemplates retrenching at least 30 employees
  • Where there are up to 500 employees employed, the employer contemplates retrenching at least 40 employees
  • Where there are more than 500 employees employed, the employer contemplates retrenching at least 50 employees.

 

The number of retrenchments is calculated by adding the number of retrenchments over the previous 12-month period to the number of retrenchments currently contemplated. Section 189A allows employees wishing to dispute the fairness of the retrenchments to either challenge them in court or to go on strike. The section also requires that the CCMA must provide a facilitator to help with the retrenchment consultations should either party request this.

Whether or not a facilitator is requested, the employer is not entitled to finalise the retrenchments before 60 days from the date on which it gave the employees the section 189(3) notification. While section 189A has been written in a very confusing and unclear manner, it appears that, where the employees have neither lodged a dispute with the CCMA nor applied for a facilitator, the employer must either lodge a dispute in terms of section 64(1) of the LRA or must apply for a facilitator.

However, this can only be done 30 days after the 189(3) notification has been issued. It seems that this needs to be done even if the parties are in full agreement on all aspects of the retrenchment (although there is not complete clarity on this). Case law appears to have confirmed some, but not all of these complex, confusing and extremely peculiar legal provisions.

In the case of Leoni Wiring Systems (Pty) Ltd vs NUMSA & others (September 2007, CLL Vol 17 No 2),the Labour Court found that, if a facilitator has been appointed, there is no need for a dispute to be lodged. It appears that the application for and appointment of a facilitator takes the place of the dispute referral.

In the case of NUM vs De Beers Consolidated Mines (Pty) Ltd (September 2007, CLL Vol. 17 No 2), the Labour Court found that, if the employer wanted to complete the retrenchment process within 60 days of the date of issue of the section 189(3) notification, then it would need to lodge a dispute to the CCMA itself as soon as the law allowed it to do so.

It appears that the law relating to large-scale retrenchments is not only complex but is also incomplete. This is because it does not specify whether a dispute must be referred even if the parties are in full agreement on all issues.

The result is that employers will end up either lodging disputes where there are none, just in order to err on the side of caution, or even leave out this step and take the risk of being penalised for committing a procedural irregularity.
     
Due to the onerous, complex and dangerous nature of the requirements of the LRA, it is important that employers should not take any steps towards retrenchment before obtaining advice from a labour law expert. 

  • Ivan Israelstam, chief executive of Labour Law Management Consulting, may be contacted on 011-888-7944 or 082-852-2973 or via e-mail at [email protected]
  • Our appreciation to Ivan and the Star  newspaper for permission to publish this article

Retrenchments and transfer of businesses

Section 1 – Retrenchment in terms of section 189 and 189A

Section 2 - Transfer of a business as going concern – section 197

 

Click here to download registration forms for Gauteng: 5 March 2010

5 March 2010: Southern Sun: OR Tambo International Airport

Module 1
  • Substantive element – ETSOS – when can an employer consider retrenchments?
 

Module 2

  • Procedural requirements – codified by the LRA
  • Obligation on employer – invitation to consult
 

Module 3

The obligation to consult

  • With whom must the employer consult?
  • What are the requirements of consultation?
  • What is the right time and how long to consult?
  • Disclosure of information
  • Representations by the participating stakeholders
  • Dealing with non co-operative stakeholders

 

Module 4

  • Defining the consensus seeking process – matters for consultation

 

Module 5

  • The selection criteria
  • Alternatives, means to avoid dismissals or minimise the effect thereof.

 

Module 6

  • Severance pay and offers of alternative employment
  • Re-employment opportunities
  • Retrenchment of an individual – person or position?

 

Module 7

  • Disputes about substantive issues – as crystallised by authorities
  • Disputes about procedural issues – as crystallised by authorities
  • Jurisdiction of the CCMA and the Labour Court

 

Module 8

Section 189 and 189A - Small scale retrenchments v big scale retrenchments

  • Number of employees
  • Strikes, lock-outs and secondary strikes related to big scale retrenchments
  • Facilitation and the CCMA
  • Time periods
  • Collective agreements
  • Applications to the Labour Court and interdicts

Section 2 - Transfer of a business as going concern – section 197

 

Module 9

  • Defining "business" and "transfer" for the purpose of section 197

 

Module 10

  • Status and obligations of the old and the new employer
  • Rights of the employees – terms and conditions of employment and status

 

Module 11

  • Disclosure and agreements between old and new employer
  • Liability; and
  • time periods

 

Module 12

  • Transfer in the case of insolvency

 

Module 13

  • Easy to understand examples of forms, letters, procedures and matrixes

 

Price:

  • R 1590-00 (incl. Vat) per delegate
  • Price include course material, certificates, legislation andcatering/refreshments

 

For further information contact:

  • Magda or Peraldo (012) 661 3208
  • Johanette 072 177 1966
  • Fax: (012) 661 1411
  • Email [email protected]

Click here to download registration forms for Gauteng: 5 March 2010

 

What does POPI compliance mean?

By Jan du Toit

 

Latest developments – Registration of Information Officers:

 

On 17 May 2021 the Information Regulator’s long awaited online portal went live for the registration of Information and Deputy Information Officers.

 

The Information Officer of a Responsible Party is the person at the head of your company (CEO or MD) or any person acting in such capacity, or specifically appointed by the MD or CEO to be the Information Officer. Registration must be completed before the end for June 2021.

 

The address for the portal is  https://justice.gov.za/inforeg/portal.html   

 

The following information is required to successfully register: 

  • Company name.

  • Company registration number.

  • Company type.

  • Company physical and postal addresses.

  • Company telephone and fax numbers.

  • Information Officer gender, nationality, full name and surname, ID or passport number.

  • Deputy Information Officers same details as per above.

 

POPIA Compliance – what must be done?

With a little more than a month left before POPI becomes fully effective, many employers may find themselves out of time to become fully compliant to amongst other considerations, the 8 processing conditions prescribed in the Protection of Personal Information Act.

 

To be considered compliant the following must be considered and applied in the business of a Responsible Party before 1 July 2021. 

  1. POPI training / awareness sessions for the CEO / MD, managers and others tasked with the company’s POPI compliance project. Have a look on our website for the next POPIA training dates.

  2. Compliance audit to be conducted company-wide per department / division to determine the current processing practices within the organization and to establish what needs to be done to be compliant.

  3. Correction of contraventions as identified, and to introduce reasonable technical and organizational measures to prevent the loss or unauthorized access of Personal Information.

  4. Introduction of Data Subject rights and consent in the business through policies and consent clauses / paragraphs / contracts.

  5. The introduction of a PAIA manual (Promotion of Access to Information Act) that incorporates data subject rights and participation in terms of POPIA. This manual must be published on one of the company’s websites. It is also important to note that the current exemption granted by the Minister of Justice for some business to not have such a manual in place currently, expires at the end of June 2021.

  6. General staff POPI policy and legislation awareness training.

  7. Registration of the company’s Information Officer (the CEO, MD or any person acting in such position).

  8. Follow-up assessment on compliance measures and adherence thereto.

 

It is important to note that no institution, not even the Information Regulator, can “accredit” any Responsible Party in South Africa to be compliant in terms of legislation. Compliance (or otherwise) will only be determined should an investigation be launched by the Information Regulator following a complaint. Should such an investigation confirm a lack of compliance, consequences such an administrative fine not exceeding R10m may follow (which one may luckily pay off in instalments). Further to this those whose rights are infringed upon by a Responsible Party not adhering to the requirements of POPIA, may also institute civil proceedings. Such  proceedings may result in compensation being awarded for loss, as well as aggravated damages determined at the discretion of the court.

 

In terms of section 19 of the Act, the Responsible Party (business owner / employer) is required to introduce reasonable organizational and technical measures to secure the integrity and confidentiality of Personal Information. The organizational measures referred  to above includes inter alia both internal and external policies to introduce the principle of protection of personal information in the workplace, as well as the rights of data subjects.

 

To allow you more time to focus on your business, the author of this article compiled a bundle of detailed policies for your business, ready to use. This includes all relevant forms to be used and a template document with draft consent clauses / paragraphs / rules  to be incorporated into service and employment contracts, job applications, credit and other applications forms, WhatsApp and Facebook groups / pages, and Independent Contractor agreements.

 

Also included is an Operator Agreement as required in terms of section 21 of the Act and a consent letter for existing clients / service providers, to agree to the continued processing of their Personal Information beyond June 2021.

 

The policies bundle includes: 

  • Privacy notice template to be published on your website.

  • Personal information protection policy.

  • Personal information retention policy.

  • Data breach policy.

  • Data breach register - form.

  • Data breach report - form.

  • Data security policy.

  • Data subject access request policy and procedures.

  • Data subject access request forms.

  • Processing agreement with third parties as Operators - contract.

  • Data subject participation - draft consent paragraphs / clauses to be incorporated into service and employment contracts, job applications, credit and other applications forms, WhatsApp and Facebook groups / pages and Independent Contractor agreements

  • Guidelines on the appointment of deputy information officers, inclusive of appointment letter.

 

For only R3750 you can now order you set of POPI policies, ready to use. Contact Jan du Toit for further assistance at [email protected]

 

 

 

 

 

 

 

 

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