Section 189 and 189A of the Labour Relations Act 66 of 1995 (the “LRA”) govern the procedures that must be followed for a fair and lawful retrenchment process. Retrenchment is a form of dismissal due to no fault of the employee; it is a process whereby the employer reviews its business needs in order to increase profits or limit loses, which leads to reducing its employees (see M Mcgregor & Dekker (EDS) / M Budeli Nemakonde W Germishuys-Burchell / Manamela / TE Manamela / CI Tshoose Labour Law Rules page 215 to 218)
What is it considered to be fair procedure for retrenchment?
- The employer must consult with the employees who are likely to be affected by the retrenchment, or their workplace forum, registered trade union or elected representatives, or any other person elected in terms of a collective agreement.
- The employer must issue a written notice inviting employees to consult and disclosing all the necessary and relevant information for such consultation.
- The employer and consulting employees must engage in a consensus- seeking process on certain matters contained in the notice.
- The employer must allow the consulting employees to make representations about the matters contained in the notice and other matters relating to the proposed retrenchment.
- The employer must respond to the consulting employees’ representations if the employer disagrees with the consulting employees, they must state a valid reason for disagreeing with them.
- The employer must select the employees to be dismissed based on a selection criterion agreed with the consulting employees or a selection criterion that is fair and objective.
- After the consultation process has been exhausted, the employer makes its decision to retrench, and then issue a notice of retrenchment to the affected employees.
- At timeline or period of when the proposed retrenchment is likely to come into effect must be provided by the employer.
- Severance pays, or retrenchment packages must be paid to retrenched workers.
- The law provides for additional procedures that the employer, employing more than 50 employees, must follow when deciding to retrench employees.
