CAN I RETRENCH A STAFF IF HIS BUSINESS AREA IS UNPROFITABLE

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Re: CAN I RETRENCH A STAFF IF HIS BUSINESS AREA IS UNPROFITA

Unread postby Jan du Toit » 11 Jan 2011, 18:47

Well it depends if you are asking what would happen to the staff?

You will have to consult and retrench the employees as per section 189 of the Labour Relations Act.

What's the right retrenchment procedure?

By Ivan Israelstam


Employers have regularly been reminded in this column of the factors that render dismissals for operational requirements (retrenchments) fair and unfair.

Despite this, employers continue to get it wrong and, in many cases they land up paying a very heavy price.

In order to win a retrenchment case at the CCMA or Labour Court, the employer must fulfil its onus of proving that the retrenchment was fair in all respects.

It is the employer who has the duty of proving that there was a genuine and valid reason for retrenching staff in the first place.

Furthermore, they must prove that the decision as to which employees will be retrenched and which will keep their jobs was arrived at fairly

The retrenchment procedure as laid down in the Labour Relations Act (LRA) must be followed properly and in good faith by the employer.

The employer must also prove that he/she has shared with the targeted employees (or their representatives) all documentary and other information pertinent to the retrenchment.

Despite the fact that the retrenchment procedure is clearly spelt out, employers are still being caught out at the CCMA and in the Labour Court for failing to follow procedure.

For example, in the case of Numsa and others v Dorbyl Ltd and another (2004, 9 BLLR 914) 176 employees embarked on a protected strike.

Thereafter, the plant at which they worked was closed down and 122 employees were retrenched.

The employees claimed that the retrenchments were unfair because (among other reasons) they had not been properly consulted by the employer before being retrenched and the options were not explained to them.

The court found that the decision to retrench was taken at an executive meeting held before the employer had consulted the employees regarding the retrenchments.

This rendered the consultations meaningless as the employer had already made up its mind to go ahead with the retrenchment procedure and, therefore, it went into the consultations with a foregone conclusion.

As a good-faith consultation is the core requirement of retrenchment procedure, the retrenchment was procedurally unfair.

The employer was required to pay each of the 122 retrenched staff two months' remuneration in compensation.

In Nkopane and others v the Independent Electoral Commission (2007, 2 BLLR 146) the employees were employed on the basis of fixed-term contracts.

However, prior to the natural expiry date of the contracts, the employees were retrenched.

The Labour Court found that it was a breach of contract for the employer to terminate the contracts prior to the expiry date unless the employees had been in breach themselves.

However, this had not been the case and the employer was ordered to pay all the employees out up to the date of the expiry of their contracts.

There are a number of possible reasons for the fact that employers are still not complying with dismissal law, including:

•Employers know the law well enough but do not believe it will be applied to them;
•They hear about the law but do not believe it;
•The operational circumstances of the employer are so dire that the pressure distracts the employer from the legal aspects of the retrenchment;
•There is also a mistaken belief that, if there is a good reason for retrenchment, the court will be lenient on the procedural side of the case;
•Employers misuse so-called retrenchments to get rid of undesirable employees. As their priority is getting rid of such employees, the legal requirements are given little consideration;
•Employers are given poor legal advice regarding retrenchment law and implementation strategy.
Although the courts have become stricter over time in applying retrenchment law, employers still implement retrenchments without giving thought to labour law compliance.

As I have repeatedly warned employers, the courts see retrenchments as no-fault terminations.

This means that the employee is losing his/her job through no fault of his/her own.

In addition, the unemployment rate in South Africa is extremely high and it is very difficult for retrenchees to find new jobs.

For these reasons the courts have no hesitation in protecting the rights of retrenchees and making employers pay heavily where they deviate from the law.
Jan du Toit is available to assist employers with all IR related matters and can be contacted at armand@labourguide.co.za

Labour Guide accepts no liability for any damages or losses as a result of actions taken based on information contained herein. The information contained herein does not serve as alternative to legal advice that may be provided during consultation.
Jan du Toit
 
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