Retrenchments: Procedural fairness

Retrenchments: The when and how of retrenchment consultations in light of COVID-19 - let everyone know, before you decide to let anyone go

Section 189, read with section 188, of the Labour Relations Act (LRA) tells us that it is not sufficient for employers to have good reasons to retrench their employees – as many employers certainly will after the lockdown – but that they must also do so in accordance with a fair procedure which primarily entails a “meaningful joint consensus-seeking” consultation process in the manner prescribed in section 189.

Written by Fundile Sangoni, Advocate of the High Court of the Republic of South Africa, for LexisNexis South Africa.

[Durban, 11 May 2020]

Introduction

When President Cyril Ramaphosa announced the national lockdown, he cautioned that one of the inevitable consequences of the COVID-19 pandemic is that businesses will close down and many employees will lose their jobs.  Indeed, as the economy begins to reopen, employers will have to take urgent steps not only to stem the losses occasioned by the lockdown, but also to increase their profits. One legal method which allows them to pursue both of these ends is a dismissal of employees for operational requirements (i.e. retrenchment).

Section 189, read with section 188, of the Labour Relations Act (LRA) tells us that it is not only sufficient for employers to have good reasons to retrench their employees – as many employers certainly will after the lockdown – but that they must also do so in accordance with a fair procedure. According to the LRA, the fair procedure for retrenchments entails, primarily, a “meaningful joint consensus-seeking” consultation process in the manner prescribed in section 189.

Given the severe pressure that affected employers will no doubt be under to finalise retrenchments where these become necessary, it is crucial for them to begin the consultation process timeously, to ensure that they do not fall foul of the procedural fairness requirement. This requires a reflection on when and how the consultation process must be conducted in light of the COVID-19 pandemic.

When should retrenchment consultations begin?

The LRA says that employers should consult with the relevant stakeholders as soon as they contemplate retrenching one or more employees. This means that employers may not approach their employees after they have already taken a final decision to retrench. It will be no justification for them to cite the adverse economic impact of the national lockdown and then consult merely as a tick-box exercise.

The consultation process must be a genuine effort to reach consensus with the affected employees on the specific issues listed in the LRA. Even if an employer is already disposed towards a particular conclusion, the courts have stated repeatedly that they are obliged to still keep an open mind during the consultations. They must give their employees a real opportunity to engage on alternatives to retrenchment or on measures to mitigate its effects.

Given the closure of most businesses during the lockdown, the reality for most of the affected employers is that they will not have the benefit of time to conduct exhaustive consultations for lengthy periods of time once they resume operations. Many of them will be under serious pressure to make immediate decisions about retrenchments.

It is therefore advisable that such employers start making the necessary projections and assessments of their business needs immediately, even if they are not yet at a point where retrenchments might be a possibility. They should, as soon as reasonably possible, communicate transparently with their employees or their representatives about the position and the future of the business. They should also invite and seriously consider the input and representations of their employees on measures to restructure, save costs and improve the financial status of the business.

If an employer envisages the retrenchment of any employees in the course of its considerations, it must then commence the formal section 189 consultation process immediately.  That employer and its employees will benefit from having initiated consultations early, before reaching this crossroads.

The Labour Appeal Court has said that employers may rely on the discussions that took place prior to their issuing of the section 189 notice to comply with the procedural fairness component of the retrenchments. The reliance on the prior discussions will not taint the procedural fairness of the retrenchments if those discussions are still relevant at the time of the retrenchments. The affected employees will also have had the opportunity to engage meaningfully and exhaustively with their employer on mutually beneficial options and alternatives.

Conclusion

It goes without saying that the lifting of the national lockdown will require employers to take urgent steps to keep their businesses afloat, which may include the retrenchment of some employees. However, it cannot be stressed enough that employers are still required to ensure that any retrenchments are both substantively and procedurally fair for them to be legally defensible once challenged.

Therefore, employers who envisage the possibility of having to retrench any of their employees due to the effects of the national lockdown are advised to seek legal assistance immediately, before these considerations become a foregone and unavoidable conclusion. Equally, employees who are retrenched in a manner which is at odds with the process highlighted above must also approach labour law specialists or the CCMA for further assistance.