Amid forecasts that up to four million jobs could be lost in South Africa in 2020, employers in their droves are facing up to the grim prospect of embarking on retrenchments. What these employers need to remember is that before they can retrench, they are legally bound to consider alternatives to retrenchment.
‘Even in times of commercial distress brought on by an ailing economy and compounded by the COVID-19 pandemic, retrenchments cannot be implemented without first considering alternatives to dismissal,’ says Rosalind Davey, partner at African law firm Bowmans.
Such alternatives could include reducing working hours, implementing pay cuts, placing employees on extended leave, moving employees to other positions or offering voluntary severance packages, among others.
The crucial point, says Davey, is that retrenchments are seen as a last resort under the Labour Relations Act, which compels employers to consult employees or their representatives on measures to avoid retrenchments.
‘This consultation is intended to be a consensus-seeking process,’ she says, ‘meaning that the parties must attempt to reach consensus on appropriate measures to avoid the dismissals.’
The consultations must also include discussions on the rationale for retrenchments and whether these are indeed necessary under the circumstances.
Davey notes that employers have some flexibility in managing the consultation process. ‘The sole requirement is that the issues about which there must be consultation are meaningfully discussed under the auspices of a joint consensus-seeking process.’
No need for a rigid step-by-step process
This flexibility was confirmed in the Labour Court in March 2020 in the matter between the South African Communication Union (SACU) and Telkom.
Telkom had issued its employees with a notice of possible retrenchments in terms of section 189A of the Labour Relations Act. Shortly after that, the company informed the unions that employees would be offered the opportunity to take voluntary severance packages in order to minimise the number of retrenchments.
Davey says the unions disagreed with Telkom, contending that the Labour Relations Act prescribed the order in which certain matters needed to be discussed. ‘They argued that the rationale for the retrenchments, as well as the categories of affected employees, needed to be discussed before the issue of alternatives. The logic of the unions’ argument was that if the rationale was found wanting, there would be no need for the retrenchments and, obviously, no need to discuss alternatives to dismissal.’
Ultimately, the court found in Telkom’s favour, ruling that section 189 does not prescribe a rigid step-by-step sequence in which consultations have to proceed in order to be compliant.
Parallel engagements permitted
‘This judgment by the Labour Court is important for employers who are contemplating retrenching their employees,’ Davey says. ‘Importantly, it is open to an employer to table voluntary severance packages – or other alternatives – as a point of discussion with the initial retrenchment notice that is issued to employees.
‘Therefore, while parties discuss issues such as the rationale for the retrenchments and any proposed new business structure, there can be parallel engagements relating to the terms, conditions and timing of voluntary severance packages.’ Any agreement reached in respect of discussions on packages could then be made conditional upon the parties finding that retrenchment is necessary in the circumstances.
Davey concludes that the court placed strong emphasis on the obligation of consulting parties to explore alternatives to retrenchment. ‘Given this emphasis, it is likely that similar reasoning will apply in relation to other proposed alternatives.’