Retrenchment The Duty to Consult

In South African law, small-scale retrenchments are governed by section 189 of the Labour Relations Act 66 of 1995 (LRA) and large-scale retrenchments by section 189A. An employer is entitled to retrench employees for "operational requirements" meaning, requirements based on the economic, technological, structural or similar needs of an employer.
As with all other forms of dismissal, a retrenchment needs to be both substantively and procedurally fair. In simple terms, there needs to be a valid reason for the retrenchment and the correct procedure needs to be followed in effecting the retrenchment.
In terms of section 189 of the LRA, an employer is required to enter into consultation with employees likely to be affected by the proposed retrenchments (alternatively with the employees' workplace forum, registered trade union or nominated representative).
Consultation must take place when the employer contemplates retrenchment. In other words, consultation must precede a decision to retrench - retrenchment may not be a fait accompli at consultation.
The purpose of consultation is to "engage in a meaningful joint consensus-seeking process". Accordingly, the process of consultation is not merely an obligation on an employer an employee has a reciprocal duty to meaningfully engage in the consultation process.
Parties are required attempt to reach consensus on a number of issues such as:
Appropriate measures to avoid the dismissals, to minimise the number of dismissals, to change the timing of the dismissals and to mitigate the adverse effects of the dismissals;
The method for selecting employees to be dismissed; and
The severance pay for dismissed employees.
There is no legal requirement for an employer to actually reach consensus on the abovementioned issues. The mere process of seeking consensus is sufficient. Once the consultation process has been exhausted, the employer is entitled to implement its decision.
However, in order for the consultation process to be fair, it is obviously necessary for an employer to allow sufficient time for the parties to reach consensus.
In the matter of Dlamini & Others v Faraday Wholesale Meat Supply, the employer consulted twice with its employees, each "consultation" lasting between five and ten minutes. The Labour Court found it "totally inconceivable to consult in any meaningful fashion with approximately forty people in a time span that ranges between five and ten minutes" and inferred that "there was no attempt to reach consensus"
In another matter, the Labour Court found an employer's haste in finalising retrenchments unjustified, and the subsequent retrenchment of a number of employees procedurally unfair, when the employer insisted that the consultation process be finalised on Freedom Day, a public holiday.
Retrenchments are complex and it is not suggested that employers embark on retrenchment processes without having obtained proper advice.
ABOUT THE AUTHOR: Sian Wilkins
Sian Wilkins is a senior associate at Eversheds, South Africa. She specialises in employment and labour law.