COVID-19: Operational Requirement Terminations

• What happens after the COVID-19 lockdown?
• Can staff be retrenched?
• How do we ensure this is done in a legally compliant manner?
• Are there alternatives?

Contact Carlo Torino, our labour law specialist, for answers to these and other employment law questions.

The global and the SA economy has taken a hard knock from the COVID-19 pandemic, and many businesses are feeling the pinch, with some even looking at restructuring and “downsizing” their operations.

Employee dismissals due to operational requirements are primarily governed by section 189 and section 189A of the Labour Relations Act (LRA), although certain other statutory provisions and Codes of Conduct also apply. This is a legally complex area and employers should definitely seek the necessary legal advice before embarking on such an exercise. There are also various timeframes that must be complied with, depending on whether it is a standard retrenchment or a “large-scale” restructuring process.

What follows below is merely a summary of some of the key steps that all Employers should be aware of, when contemplating the possibility of dismissing employees for operational reasons. Matters of this nature are always fact-specific and we can assist with a bespoke solution suited to your own case.

1.) Is there a valid commercial rationale for embarking on retrenchments, which will withstand the full scrutiny of the CCMA (and the Labour Court)? This is the “why” part of the equation. If an employee’s retrenchment is disputed, the matter could be referred to an external dispute resolution body to be arbitrated or adjudicated upon. You cannot change the “why” part afterwards. Are you prepared for this additional burden? Are you confident that you have thought this through carefully, and that you are legally compliant? Our retrenchment laws are far-reaching, dynamic and apply equally to the situation where a business is planning to close-down! Employers are often tripped up by this first step (which is known as the “substantive fairness” element), which then causes the remainder of the process to unravel. We strongly suggest that you contact our employment law expert to get it right the first time.

2.) Once you have decided on a valid commercial rationale, has a process of “meaningful joint consensus seeking” (a genuine consultation process) been undertaken between the employer and the potentially affected employees (or their trade union)?

3.) Were all the alternatives to retrenchment properly canvassed with your staff in good faith, before any dismissal decision was made or took effect? Many employers simply adopt a “tick-box” approach to this key aspect of the process, which is dangerous. This will be carefully scrutinised by an external dispute resolution body, and it is important to note that wrongly terminated employees could be compensated with up to 12 months’ remuneration. Furthermore, if the retrenchment “selection criteria” are found to be “automatically unfair”, this compensation amount could potentially increase to 24 months’ remuneration.

4.) What proof do you have that you explored “alternatives” to retrenchment before terminating someone’s employment contract on these grounds? We can assist your business to both identify and to properly implement such alternatives. Here are just a few examples of alternatives which might be considered in the current COVID-19 scenario:

1. Have you applied for tax relief and the various other business relief measures?
2. Have you sought wages/salary assistance from the UIF for your staff (based on the dedicated COVID-19 UIF Scheme)?
3. Have you considered the possibility of amending the shift duration and/or shift patterns of your staff?
4. Have you proposed any short-time arrangement, or proposed bringing forward your usual shutdown period to coincide with the lockdown?
5. Have you attempted to avert retrenchments by insisting that staff use up their paid annual leave credit, and/or have you proposed that staff go into a negative annual leave balance to try and achieve the same objective?
6. Have you considered the option of “working from home” and/or “flexi-time” for some of your employees?
7. Have you asked if anyone is prepared to volunteer for retrenchment, and/or provided an incentivised severance package offer which is higher than the statutory minimum for this purpose?
8. If you belong to a bargaining council, if you have a collective agreement in place or if you have any other contractual agreement pertaining to a section 189 process, have you complied with its requirements?
9. Have you looked at temporary lay-offs with UIF assistance, as opposed to actual retrenchments?
10. Have you considered any other changes to terms and conditions of employment, as a further alternative? (Note that this requires its own set of procedures to be followed even before the section 189 process commences).
11. Have you considered your retrenchment selection criteria properly and can these be justified on objective or rational grounds?

5.) These are just some of the issues which must be considered as soon as an employer “contemplates” dismissing an employee for operational reasons. This must not simply be treated as a “checklist”, and the employer is expected to have proof that they have treated the entire process as a “joint problem-solving exercise” and that every alternative to dismissal was considered. Feedback from your staff about each of these issues needs to be responded to. If it later transpired that the outcome was a fait accompli or that the purported consultations were a “sham”, then the employer will be held accountable.

6.) In addition if, after this “consultation process”, it is discovered that you innocently or negligently (or worse still, deliberately) left out an essential step, the CCMA or Labour Court could force you to re-employ all your retrenched employees (with back-pay) and start the process afresh. You could therefore end up being “stuck” in this process for much longer than anticipated – to the detriment of your business.

7.) The retrenchment of employees is fraught with risk, and it is always better to get professional assistance beforehand. Contact our labour law expert to help you to strategically plan and implement a streamlined process and a legally compliant solution.