Here under some FAQ’s and guidelines in respect of what legally must happen in a retrenchment process.
In terms of s189(1) of the Labour Relations Act, No 66 of 1995 (LRA), an employer must consult with:
- any person an employer is obliged to consult with in terms of a collective agreement;
- if there is no collective agreement, a workplace forum (if in existence) and any registered trade union whose members are likely to be affected by the proposed dismissals;
- if there is no workplace forum, any registered trade union whose members are likely to be affected by the proposed dismissals; or
- if there is no such trade union, the employees likely to be affected by the proposed dismissals or their representatives nominated for that purpose.
Section 189A(1) applies to employers that employ 50 or more employees and intend to retrench the following number of employees:
- 10 employees, if the employer employs up to 200 employees;
- 20 employees, if the employer employs more than 200, but not more than 300, employees;
- 30 employees, if the employer employs more than 300, but not more than 400, employees;
- 40 employees, if the employer employs more than 400, but not more than 500, employees;
- 50 employees, if the employer employs more than 500 employees; or
- if the number of employees that the employee intends to retrench, together with the employees that have been retrenched in the 12 months prior to issuing the s189(3) notice, is equal to or greater than the relevant number specified above.
NOTE: The s189(3) notice is a written notice, issued by the employer, that discloses all relevant information and invites the other party to consult with the employer.
WHAT IS THE MAIN PURPOSE OF S189A?
- To facilitate and protect job security.
- To effectively resolve disputes in large scale retrenchments and to provide speedy remedies, especially where procedural defects occur in the retrenchment process.
PROCESS EMPLOYER MUST FOLLOW
- Notice in terms of s189(3)
- First facilitation meeting
- Second facilitation meeting
- Third facilitation meeting
- Fourth facilitation meeting
- Notice of termination
- Union/employees may give notice to strike or refer dispute to Labour Court
FACILITATION VERSUS NON-FACILITATION
There are three ways in which the intervention of a facilitator may be secured:
- the employer may request the appointment of a facilitator by the Commission for Conciliation, Mediation and Arbitration (CCMA) in its notice in terms of s189A(3)(a) of the LRA;
- within 15 days of receiving the s189(3) notice, consulting parties representing the majority of the employees whom the employer contemplates dismissing, may request the appointment of a facilitator and notify the CCMA; or
- the parties agree to appoint a facilitator.
If the 60 day period lapses before consultations are completed, the employer may not give notice of termination until the consultation process has been exhausted.
WHAT IS THE PRIMARY PURPOSE OF A FACILITATOR?
Their role is not to actually consult with the employees, but to facilitate consultations. The duty to consult rests primarily with the employer and not the facilitator.
The facilitator has certain obligations contained in the Facilitation Regulations that have been issued by the Minister of Labour in terms of s189A(6) of the LRA. This includes an obligation to hold at least four facilitation meetings. The facilitator has a minimum of 60 days, from the date the s189(3) notice is issued, to invite employees to consult so as to promote agreement between them.
WHEN CAN AN EMPLOYER GIVE NOTICE OF TERMINATION?
In terms of s189A(7)(a) of the LRA, an employer can only give a notice of termination once the 60 day period for consultation has lapsed and provided that the consultation process has been exhausted.
The 60 day period in any large scale retrenchment commences once a notice in terms of s189(3) has been issued.
WHAT IS THE PROCESS IF NO FACILITATOR HAS BEEN APPOINTED?
- The parties must consult for a minimum period of 60 days before any notice of termination can be issued.
- Prior to issuing any notice of termination, the parties must refer the dispute to the CCMA.
- This can only be done after a period of 30 days from the date of issuing the s189(3) notice.
HOW CAN EMPLOYEES CHALLENGE THE FAIRNESS OF A RETRENCHMENT PROCESS?
- Employees can challenge the procedural fairness of the retrenchment process by way of an urgent application to the Labour Court (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.
- Section 189(2) requires an employer and the other consulting parties to engage in a meaningful, joint consensus-seeking process and attempt to reach consensus on the method for selecting the employees to be dismissed.
- After the consultation, the employer must consider and respond to the submissions made by the other consulting parties and, as required by s189(3), must state reasons if it disagrees with the representations.
- If the consulting parties made written submissions then the employer’s response to these submissions must also be in writing.
- In terms of s189(2) and s189(6) an employer cannot decide on the criteria to use, without consulting the other consulting parties.
- If the parties cannot agree on selection criteria, the employer may only use criteria that is fair and objective.
WHAT SELECTION CRITERIA ARE CONSIDERED TO BE LEGALLY ACCEPTABLE?
Section 189(7) recognises two types of selection criteria that the employer may use to select the employees to dismiss:
- one that has been agreed to by the consulting parties; or
- one that is fair and objective if no selection criterion has been agreed upon.
Where the consulting parties have agreed upon selection criteria, the employer is obliged to use such criteria.
WHICH IS THE BEST SELECTION CRITERION?
- LIFO method (last in, first out) is widely recognised as being the most objective criterion to select the employees to be retrenched.
- It is all the more objective because it tends to retain the most experienced employees, which is a valid goal when considering operational requirements.
- The FIFO (first in, first out) method is dangerous because it has the indirect effect of discriminating on the basis of age.
CAN THE EMPLOYER USE MORE THAN ONE SELECTION CRITERION?
CONDUCT, POOR WORK PERFORMANCE OR INEQUALITY BE USED AS A SELECTION CRITERION?
In terms of case law, employers are not permitted to use a retrenchment procedure to eliminate pay inequality. Accordingly, pay inequality is not an objective selection criteria.
Furthermore, in the decision of Louw v South African Breweries (Pty) Ltd (C285/14)  ZALCJHB 156, the Labour Court held that where selection criteria based on factors such as performance are used, employees should be given an opportunity to make representations against the negative conclusion that may be drawn against them.
WHICH SELECTION CRITERIA TO UTILISE?
The LRA only facilitates the consultation process and does not prescribe the selection criteria to be used, instead leaving it to the parties to agree on the selection criteria.
The generally accepted selection criteria according the CCMA Code of Good Practice on Operational Requirements include “last in first out” (LIFO), the length of service, skills and qualifications.
LIFO is the criterion associated with the least risk as long as it is fairly applied.
VOLUNTARY SEVERANCE PACKAGES
A voluntary severance package is a financial incentive that is offered to an employee in lieu of their resignation or retirement.
Where a voluntary severance results in termination of employment, minimum severance benefits imposed by law cannot be contracted out of.
IS THERE A DUTY ON THE EMPLOYER TO CONSULT WITH EMPLOYEES WHEN OFFERING ANY OF THESE PACKAGES AS A PRECURSOR TO DISMISSALS FOR OPERATIONAL REQUIREMENTS?
The offering of a voluntary severance package as a precursor to retrenchment does not relieve the employer of its obligations in terms of s189 of the LRA to consult with an employee on the matter.
The only time an employer may offer any of the above packages, outside of the s189 process, is when it can be shown that when such offer was made, the employer was not contemplating retrenchments.
WHAT HAPPENS IF THE NOTICE OF TERMINATION IS ISSUED PRIOR TO THE 60 DAY CONSULTATION PERIOD?
Previously, and as held in De Beers Group Services (Pty) Limited v National Union of Mineworkers, a dismissal was declared to be invalid if the employer did not comply with the requirements of s189A(8) of the LRA, more particularly, the issuing of a notice of termination prior to the 60 day consultation period ending. In the recent Constitutional Court case of Steenkamp and Others v Edcon Ltd  [ZACC1] the Constitutional Court found that the failure to comply with s189A(8) may impact on the procedural fairness of the dismissals, but not their validity. The court highlighted that the LRA does not provide for invalid dismissals and that the employees should have sought relief in terms of the LRA and not the common law. The relief they could have sought included embarking on strike action, referring a dispute to the Labour Court seeking, for example, an order compelling the employer to comply with a fair procedure, interdicting the employer from dismissing employees prior to complying with a fair procedure, or directing the employer to reinstate employees until it had complied with a fair procedure.
An employer can only issue a notice of termination once the periods referred to in s64(1)(a) of the LRA have expired and cannot issue notices of termination until a further period of 30 days from the date on which the dispute is referred to the CCMA or the date on which the dispute is conciliated, which ever occurs first, has lapsed.
CAN THE EMPLOYER INVITE RETRENCHED EMPLOYEES TO RE-APPLY FOR THEIR JOBS?