Introduction
Recent judgments

Comment


Introduction

When retrenching employees, employers must comply with Section 189 of the Labour Relations Act 1995, which sets down rules for ensuring fair retrenchments ("dismissals based on an employer's operational requirements"). Section 189 contains fair reason and fair process requirements.

Section 189A of the act applies to large-scale retrenchments – retrenchments involving large employers and large numbers of employees (ie, where employers employing more than 50 employees contemplate dismissing roughly 10% of their workforce). This section introduces some variations from the standard requirements. Most notably, Section 189A provides for two broad procedural options:

  • The parties can elect to appoint a facilitator from the Commission for Conciliation, Mediation and Arbitration to preside over the retrenchment consultation process between the employer and the trade union or employees, with a mandatory 60-day consultation period which commences on the date that the employer gives formal notice of its intention to embark on retrenchment consultations.
  • In the absence of the appointment of a facilitator, the parties can conduct the consultation process themselves; however, at least 60 days must lapse before the employer is permitted to retrench. This is because the trade union or employees can refer a dispute arising from the retrenchment consultation to the commission, but may not do so earlier than 30 days from the date on which an employer gives notice that it is considering retrenchment. Further, the employer may give notice of its decision to retrench employees only once the earlier of 30 days from the date that a dispute was referred to the commission lapses or the date on which the retrenchment dispute between the parties is certified as unresolved.

In addition, in large-scale retrenchments, employees may embark on protected strike action (which is not permitted in 'normal' retrenchment processes) over the fairness of the reason for the retrenchment or refer a dispute to the Labour Court to adjudicate the fairness of the retrenchment. Where the trade union or employees refer the fairness of the reason for the retrenchment to the Labour Court, Section 189A(18) states that the Labour Court may not adjudicate the procedural fairness of the retrenchment. In other words, only the substance (ie, the business case for the retrenchment or the selection criteria) may be challenged in court.

Section 189A(18) provides that employees cannot wait until after they have been retrenched in a large-scale retrenchment to challenge the procedural fairness of their dismissals, but they can approach the Labour Court under Section 189A(13) (urgently if necessary) during or immediately after the consultation process in order to:

  • compel the employer to comply with fair procedure during the consultation;
  • restrain the employer from retrenching before complying with a fair procedure; or
  • direct the employer to reinstate the employees until it has complied with a fair procedure.

Section 189A(13) envisages that the trade union or employees can approach the Labour Court in an application designed to rectify an unfair process and to place retrenchment consultations back on track should an employer disregard the provisions of Section 189A. Further, complaints about procedure are not dealt with by the Labour Court when such a dispute comes to trial, and often follow only years after the retrenchment has taken place.

Recent judgments

However, recent judgments from the Labour Appeal Court indicate that procedure may still have a role to play when the fairness of the reasons for retrenchment are adjudicated by the Labour Court many years later. In De Beer's Group Services (Pty) Ltd v National Union of Mine Workers(1) the Labour Appeal Court held that the provisions of Section 189A are peremptory, and that where notice of retrenchment (falling under Section 189A) had been prematurely given (eg, before the expiry of the 60-day consultation period), the notice was invalid and of no force and effect.

The Labour Appeal Court developed the law further in this regard in the recently reported judgment in Revan Civil Engineering Contractors v National Union of Mine Workers.(2) In this case, the Labour Appeal Court had to deal with an appeal from the Labour Court concerning the National Union of Mine Workers' challenge to the fairness of the reason for the retrenchment of approximately 58 of its members. In the Labour Court Revan Civil Engineering conceded that although it had failed to follow the processes provided for in Section 189A, the retrenchments were, in fact, large-scale retrenchments (as triggered by the thresholds set out in Section 189A(1)), and argued that the Labour Court was accordingly precluded from adjudicating procedural fairness by virtue of the provisions of Section 189A(18).

Following the reasoning set out in De Beer's Group Services, the Labour Appeal Court in Revan Civil Engineering found that where an employer does not follow the mandatory provisions of Section 189A regarding one of the prescribed modes for consultation or the compulsory time frames for giving notice of retrenchment, such notice of retrenchment is invalid.

This decision is a significant development in the law relating to large-scale retrenchments, in that:

  • procedure can effectively be 'challenged' by the trade union or employees in a referral to the Labour Court long after retrenchment has been given effect; and
  • where a lawful consultation process under Section 189A has not been followed, the ensuing retrenchments are invalid and null and void.

According to Revan Civil Engineering, if retrenchments are declared "invalid and null and void", there is no further need to investigate the substantive fairness or otherwise of the retrenchments, since the law does not recognise the validity of the dismissals in the first place. Thus, employees will effectively find themselves in the position that they were in before the invalid notice of retrenchment and the termination of the their employment contracts.

In Revan Civil Engineering, the employees were retrenched in July 2008 and the Labour Appeal Court declared their retrenchment invalid and null and void in March 2012 (although the decision was reported only in August 2012). The Labour Appeal Court's order had the effect of operating as one of 'retrospective reinstatement', meaning that the employees must be paid all wages that they would have earned between July 2008 and March 2012 and onwards until they are lawfully (and substantively fairly) retrenched.

Comment

When embarking on retrenchments, in order to avoid hefty back pay and reinstatement orders, employers should carefully investigate whether such retrenchments will fall under the provisions of Section 189A and follow Section 189A process requirements carefully, and ensure that consultation is explored exhaustively. Furthermore, given the Labour Appeal Court's reasoning in Revan Civil Engineering, where an employer fails to meet the ordinary procedural requirements of Section 189 (eg, issuing a notice of contemplated retrenchment (as required by Section 189(3)) or dealing adequately with the consultation matters specified in Section 189), such non-compliance could result in retrenchments being declared invalid, null and void.

For further information on this topic please contact Alexander Rocher at Edward Nathan Sonnenbergs by telephone (+27 11 269 7600), fax (+27 11 269 7899) or email (arocher@ens.co.za).

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Endnotes

(1) (2011) 32 ILJ 1293 (LAC).

(2) (2012) 33 ILJ 1846 (LAC).