For many a human resources manager and in-house legal counsel, the language of the resolution taken at a board meeting or recorded in the minutes of that meeting in respect of the need to embark upon a retrenchment exercise is a cause for concern. However, a recent judgment of the Labour Appeal Court on this very issue may cause such persons to sleep more easily.

The situation is the following. Section 189 of the Labour Relations Act requires an employer to consult with its employees (or their unions) when it contemplates dismissing employees based on its operational requirements. It also requires the employer to approach the consultation process with an open mind and to engage in a joint consensus-seeking process.

However, before employers embark upon that consultation process there is often a board meeting at which a decision is taken that there is a need, for example, to restructure and consequently retrench, and it is only once this decision is taken that the company embarks upon the consultation process.

In SACCAWU v JDG Trading (Pty) Ltd the resolution to initiate the consultation process read –

“The meeting resolved that as a result of the ongoing poor economic trading conditions, the lack of growth in the furniture industry and the resultant negative financial impact, the furniture brand of the Group must further reduce store staff numbers through operational requirements to reduce operational costs.”

SACCAWU took the point during the consultation process that given the language of the resolution the parties negotiating with the union did not have any powers to change the decision of the Executive Committee and therefore the consultation process was superficial, a sham, and a fait accompli.

The Labour Appeal Court disagreed with SACCAWU’s contention and found that based on the evidence as a whole JDG was prepared to discharge its statutory consultation duties with an open mind, to consult in good faith, and to seriously consider alternatives to dismissal during the consultation process. The court stated –

“JDG’s conduct belies any description of the process as a fait accompli. The most probable inference to be drawn regarding the resolution if that JDG had merely formed a prima facie view on the likelihood of retrenchments. An employer in such situations invariably will form a prima facie view on the need for retrenchments. It is unrealistic, technical and formalistic to seize upon the word ‘must’ in the initiating resolution and to divorce it from its context. … An employer must be entitled to form a prima facie view on retrenchments, even a firm one, provided it demonstrates and keeps an open mind in the subsequent process of consultation….”