Section 189 of the Labour Relations Act, No 66 of 1995 (LRA) regulates retrenchments. It applies if an employer contemplates dismissing one or more of its employees for reasons based on its operational requirements.

Section 189 contains detail relating to the duty to consult. More specifically, it prescribes when consultation must start, who the employer needs to consult with as well as the topics for consultation.

The parties (the employer and consulting party) must engage in a meaningful joint consensus seeking process and attempt to reach consensus on:

  • appropriate measures to avoid the dismissals;
  • minimising the number of dismissals;
  • changing the timing of the dismissals; and
  • mitigating the adverse effects of the dismissals.

The consulting parties must also attempt to reach consensus on the selection criteria as well as the severance pay for dismissed employees.

Even though the LRA prescribes all of the factors listed above, it does not specifically state what is meant by "consultation" or by "a meaningful joint consensus seeking process". Accordingly, case law needs to be considered.

In Atlantis Diesel Engines (Pty) Ltd v National Union of Metalworkers of SA 1995 (3) SA 22 (A), the court held that consultation provides an opportunity to explain the reasons for the proposed retrenchment, to hear representations on possible ways and means of avoiding retrenchment (or softening its effect) and to discuss and consider alternative measures. It is, however, important to note that the duty to consult does not require an employer to bargain with its employees or the union consulting on their behalf. The ultimate decision to retrench is one which falls squarely within the competence and responsibility of management.

Accordingly, consultation should entail a joint problem-solving exercise to achieve consensus where possible, bearing in mind that problem solving is something distinct from bargaining. Our courts have held that there is a distinct and substantial difference between consultation and bargaining.

  • To consult means to take counsel, or seek information or advice, from someone and does not imply any kind of agreement as an end result.
  • Bargain on the other hand means to "haggle and wrangle" so as to arrive at some agreement.

This principle was also applied in the matter of Karachi v Porter Motor Group (2000) 21 ILJ 2043 (LC), in which the Labour Court held that consultations about retrenchment are not the same as negotiations in collective bargaining, during which the parties wrangle with each other to secure the best deal for their respective constituencies, often by bluffing and trying to outwit or out-manoeuvre each other. Essentially, an approach must be adopted so that the needs of all parties can be explored.

The Labour Appeal Court has held in the matter of Broll Property Group (Pty) Ltd v Du Pont & others (2006) 27 ILJ 269 (LAC) that "poorly handled consultations" could lead to a retrenchment lapsing from procedural unfairness to substantive unfairness as well.

In light of the above, it is important that employers comply with their duty to consult, while simultaneously maintaining the distinction between consultation and bargaining as the ultimate decision to retrench remains management's prerogative.