Implementing fair retrenchments in the time of Covid-19

25 June 2020,  Sinenhlanhla Khoza 965
The COVID -19 pandemic has resulted in the financial distress of many businesses nationwide. This has unavoidably resulted in retrenchment having to be considered. It is however important to first determine the fair procedure for implementing retrenchments during the nationwide lockdown.
The duration of the Covid-19 lockdown is unknown to everyone, but we know it is temporary so employers must not be too quick to consider retrenchments when they have not exhausted other alternatives, which may include temporary lay-offs and unpaid leave.

The declaration of Covid-19 as a national disaster and the subsequent regulations promulgated in terms of the Disaster Management Act have had little to no effect on the obligations of employers who want to conduct retrenchments and they may therefore not circumvent any of the retrenchments processes that are strictly defined in section 189 of the Labour Relations Act (LRA).

Failing to follow the procedures set out by the LRA, an employer could be exposed to a claim of unfair dismissal being referred to the CCMA or Labour Court. 

Section 189 of the LRA is restrictive and an employer who is contemplating retrenchments due to his/her operational requirements is required to first consult with a trade union, a workplace forum or employees who are more likely to be affected by the contemplated retrenchments. If there is a collective agreement in place, an employer may only consult with those parties required to be consulted in terms of such collective agreement. The Constitutional Court in Association of Mineworkers and Construction Union and Others v Royal Bafokeng Platinum Limited and Others recently held that section 189(1) of the LRA did not limit the right to fair labour practices by allowing for the exclusion of the minority union and non-unionised employees in the consultation process.  

The consultation process must be genuine and must be aimed at reaching some level of consensus with the employees, which may include issues like changing the timing of the dismissals or mitigating the adverse effects thereof. An employer must consider and respond to the representations made by employees during the consultation process.

Employers must further select employees who are likely to be retrenched according to a criterion that is objective and fair. Employers and employees may agree to use a selection criteria and record this in writing to prevent any future disputes regarding the fairness of the criteria adopted by the employer. 

If the business will not be in a financial position to pay severance packages at the time of implementing retrenchments, affected employees must be informed of this during the consultation process in order for both parties to attempt to reach an agreement regarding payment thereof. 

A retrenched employee is entitled to at least one week’s salary for every completed year of service with an employer. Parties in the consultation process may agree for severance pay to be divided into monthly payments, or defer payment thereof to a later date as agreed to by the consulting parties.
Despite the Covid-19 pandemic and the difficulties that may be associated with the retrenchment procedures, employers remain bound to follow the retrenchment process as contained in the LRA and to pay employees all statutory amounts due because the regulations of the lockdown will not excuse employers who circumvent this process. We therefore advise that you consult with a labour law specialist who will offer guidance on the fair implementation of retrenchments. 
Related Expertise: Labour and Employment

Subscribe to our blogs

and stay up to date with the latest developments