Whether COVID-19 happened or not or whether we are living in the old normal, the new normal or the future normal, South Africa will always have the retrenchment procedure.  

All business owners at some point consider their options when it comes to cost-cutting and the current and future sustainability of their business. Retrenchment allows for business owners to reduce the number of staff they employ for operational reasons and/or requirements. 

It is however not quite as simple and as easy as a handshake and a “thank you for your time here, we are going to have to let you go”.  

There is a very specific prescribed procedure which all Employers/ business owners must follow should they wish to retrench one or more of their staff members. 

A business owner who employs fifty or fewer people is subject to comply with the procedure set out in section 189 of the Labour Relations Act (LRA). Procedural and substantive obligations placed on the business owner ensure a fair retrenchment process in the eyes of the labour law. A business owner must be able to show that there was a real and true reason for the retrenchment and that the retrenchment was unavoidable. That is that retrenchment was the last resort.  The business owner must also be able to show that the prescribed procedure was followed. 

So When can you retrench?

Section 189 of the LRA permits Employers to dismiss Employees for operational requirements, this based on 

•  Economic reasons, for example, COVID-19 and the Nationwide shut down, the loss of sales or services the loss of finances or the closing of a business entirely
•  Technological reasons, for example, upgraded/ new or advanced technology that replaces people such as robots, apps, customer do it yourself systems or machines 
• Structural reasons, mainly where positions in the business are made redundant
• or other similar needs of the Employer.

It is critical to remember that retrenchment is a form of dismissal due to no fault of the Employee. Business owners must therefore not make these common and very costly mistakes as they will find themselves at a loss at the CCMA. 

• Don’t use retrenchment as a form of punishment 
• Don’t use retrenchment as a short-cut to bypass disciplinary action or as a “solution” to a poor work performance problem 
• Don’t use retrenchment because you feel it is the easy way out of difficult Employer, Employee relationship 
• Don’t retrench your Employees without following the procedure prescribed within Section 189 of the Labour Relations Act (“LRA”)
• Don’t think you or your business is above following all the necessary steps prescribed within Section 189 of the Labour Relations Act when it comes to retrenchment 

 An example where the Employer fell foul of the ruling of both CCMA and Labour Court in a case of 176 Employees conducting a protected strike, occurred between NUMSA and others versus Dorbyl Ltd and another (2004, 9 BLLR 914). Post strike, the plant closed down and 122 Employees were retrenched. The retrenchment was contested by the Employees as unfair due to lack of consultation by the Employer amongst other reasons.

 The ruling was as follows:

1. Retrenchment processes were taken at an executive meeting before the Employer consulting with their Employees about the motion to be taken.
2. Consultations between Employer and Employees were therefore null and void as the Employer’s executive decision affected the outcome.
3. A final ruling required all 122 Employees to be paid two months remuneration as compensation for the retrenchment process

 The need for reliable information in respect of employment and labour law compliance is currently imperative. Employers in all industries need to immediately educate themselves in respect of compliance with South African employment.