On 23 March 2020, President Cyril Ramaphosa announced a nationwide lockdown caused by the COVID-19 virus. In addressing the nation, President Ramaphosa stated: “Our country finds itself confronted by the prospects of a very deep economic recession that will cause businesses to close and many people to lose their jobs”.
In these uncertain times, employers may be struggling to keep their normal operations going. This may lead to employers having to consider the possibility of retrenching certain employees.
There is nothing in the Disaster Management Act, Regulations and Directives, which prevents an employer from engaging in a retrenchment process during the lockdown. However, while this is an unprecedented financially stressful period for both employers and employees, even during the lockdown period, Section 189 of the Labour Relations Act 66 of 1995 (hereinafter referred to as the “LRA”) will continue to govern the procedures that must be followed for a fair and lawful retrenchment; until we are advised otherwise by our Government via new legislation or temporary regulations.
Retrenchment is a form of dismissal due to no fault of the employee. Retrenchment due to “operational requirements” is a process whereby the employer reviews its business needs in order to increase profits or limit losses, which leads to reducing its employees. The Act defines “Operational requirements” as requirements based on the economic, technological, structural or similar needs of the employer. Seeing as the national lockdown may lead to a drop in sales or services, or even closure of businesses, an employer may be considering retrenchment as an option. However, it is not an easy task for the employer, as it must be shown that there is a real reason for the retrenchment and that it is unavoidable (meaning it must only be considered as a last resort).
Employers have been urged by Government to make use of the specific measures and benefits put in place to assist employers and employees during the COVID-19 crisis and the lockdown. These specific measures and benefits include benefits from the Unemployment Insurance Fund and the Temporary Employee/Employer Relief Scheme.
CERTAIN PROCEDURES THAT MUST BE FOLLOWED FOR VALID 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 person elected in terms of a collective agreement (“consulting employees”). • The employer must issue a written Sec 189(3) notice inviting the consulting employees to consult and disclosing all the necessary information for such consultation. The requisite notice should provide the detailed reasons for the restructuring and rationalization and possible retrenchments and the alternatives considered before engaging in the retrenchment process. • The Sec 189(3) notice is an invitation to meaningfully engage on various issues pertaining to contemplated retrenchments. It is to be distinguished from a termination notice and the contents of the Sec 189(3) notice should not render retrenchments a foregone conclusion, undermining the consultation process. The notice must be issued as soon as a retrenchment is contemplated. • The Labour Appeal Court has said that employers may rely on the discussions that took place prior to their issuing of the Sec 189 notice to comply with the procedural fairness component of the retrenchments. • The employer is further required to engage in a consensus seeking process by way of consultations. The employer must allow the other consulting parties an opportunity to make representations and the employer must consider and respond to the representations that are made. • 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. • It is crucial for employers to begin the consultation process timeously, to ensure that they do not fall foul of the procedural fairness requirement. 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. • 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. • The employer must respond to the consulting employees’ representations. If the employer disagrees with the consulting employees, it must state the reasons for disagreeing with them. • If any representations are made in writing, the employer must respond in writing. • The employer must select the employees to be dismissed based on a selection criteria agreed with the consulting employees or a selection criteria that is fair and objective. • After the consultation process has been exhausted, the employer may make its decision to retrench, and then issue a notice of retrenchment to the affected employees. • The employer must give fair reasons for making the decision to retrench and follow a fair procedure when making such a decision or the retrenchment may be considered unfair. • If the correct procedures were not followed leading up to a retrenchment, the retrenchment may be considered to be unfair. • An employee that feels that he/she was unfairly retrenched, may refer a dispute to the CCMA or bargaining council. The dispute must be referred within 30 days from date of retrenchment. • If the dispute is not resolved at conciliation, the employee may refer the dispute to the Labour Court.
SELECTION CRITERIA Sec 189(2) requires an employer and the other consulting parties to engage in a meaningful, joint consensus-seeking process and attempt to reach consensus on the selection criterion on which to base a dismissal for operational requirements. To the extent that the consultation on selection criteria does not result in consensus, it is then open to the employer to unilaterally decide on selection criteria to be used, provided that the employer will then have to show that the criteria was fair and objective.
LEGALLY ACCEPTABLE SELECTION CRITERIA The generally accepted selection criterion according the CCMA Code of Good Practice on Operational Requirements includes “last in first out” (LIFO), the length of service, skills and qualifications. A number of other criteria are: experience, performance, conduct, adaptability, personal circumstances and family commitments.
SUPERVENING IMPOSSIBILITY An employer may not rely on supervening impossibility of performance, to automatically terminate contracts of employments with employees during lockdown. Contracts of employment will only terminate by operation of law owing to supervening impossibility, where the impossibility is absolute. The lockdown has not created an absolute impossibility, but rather a temporary impossibility of performance - as restrictions are temporary and based on the prevailing circumstances. Employers would therefore be required to follow the procedure set out in Sec 189 of the LRA in order to retrench employees.
NEW EMPLOYMENT The employer would need to show proof that it assisted the former employee with finding new employment by possibly forwarding CVs to their contacts in their respective industries and providing the former employee with a positive reference letter. No absolute obligation rests on it to find (or create) alternatives. Employers should also ensure they have issued their former employees with UI19 documentation so they may claim from the Unemployment Insurance Fund as well as a certificate of service, the aforementioned being statutory requirements to be adhered to by Employers in terms of the Basic Conditions of Employment Act 75 of 1997.
THE COMMISSION FOR CONCILIATION, MEDIATION AND ARBITRATION (CCMA) The CCMA has temporarily shut its doors due to the COVID-19 outbreak. However, it must be noted that the CCMA has shut its doors purely as a preventative health measure. Employees may still refer their unfair dismissal disputes, including retrenchments for operational requirements, to the CCMA via email service to ctn@ccma.org.za (Western Cape Region) or HO@ccma.org,za (CCMA Head Office) attaching proof of service of their referral on the employer or former employer.
The temporary shutdown of the CCMA does not mean that failure to follow the LRA in terms of retrenching employees will result in employers ‘getting a free pass’ during this crisis. Employers are by law required to follow the steps of the retrenchment process and most importantly to ensure their employees receive severance pay and all statutory monies owing to them, inclusive of their UI19 documentation so they may start the process of claims from the Unemployment Insurance Fund (UIF). Claiming from the UIF during this period is critical, as obtaining new employment during this crisis is unlikely.
If Employees have missed the time frame of 30 days from date of dismissal in referring an unfair dismissal dispute due to COVID-19 related reasons or a no fault dismissal in the form of retrenchment due to COVID-19 related reasons, the Employee would need to apply for condonation. This means that the Employee would need to, by way of a condonation application, put forth reasons for the lateness of the referral of the unfair dismissal dispute.
CONCLUSION The Regulations and Directives do not permit an employer to deviate from the provisions of the Act, nor is there any prohibition on dismissing an employee for operational requirements. Any dismissal, for operational requirements or otherwise, must be in accordance with the Act, even during the lockdown period.
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