Retrenchments can be held invalid
Employers must ensure fair processes are followed as set out in the Labour Relations Act
WHEN retrenching their employees, employers have to comply with section 189 of the Labour Relations Act, 1995. This section prescribes to employers how to ensure fair retrenchments, or in the wording of the act, “dismissals based on an employer’s operational requirements”. Under section 189 there are fair reason and fair process requirements.
Where the contemplated retrenchments involve large employers and large numbers of employees (where employers employing more than 50 employees contemplate dismissing roughly 10% of their workforce), section 189A of the Labour Relations Act applies, and this scenario is unsurprisingly known as a “large-scale retrenchment”. This section introduces some variations from the standard requirements. Most notably, section 189A provides for two broad procedural options — first, the parties can elect to appoint a facilitator from the Commission for Conciliation, Mediation and Arbitration (CCMA) to preside over the retrenchment consultation process between the employer and the trade union or employees, with a mandatory 60-day consultation period that begins on the date that an employer gives formal notice of its intention to embark on retrenchment consultations.
Second, in the absence of the appointment of a facilitator the parties conduct the consultation process themselves, but practically speaking, at least 60 days must also pass before the employer is permitted to retrench. (This is because the trade union or employees can refer a dispute arising from the retrenchment consultations to the CCMA, but may not do so earlier than 30 days from the date when an employer gives notice that it is considering retrenchments, and the employer may only give notice of its decision to retrench employees once the earlier of 30 days from the date that a dispute was referred to the CCMA elapses, or the date on which the dispute between the parties concerning the retrenchments is certified as unresolved.)
In addition, in large-scale retrenchments the employees may embark on protected strike action (something that they cannot do in “normal” retrenchment processes) over the fairness of the reason for the retrenchments, or refer a dispute to the Labour Court to adjudicate the fairness of the retrenchments. When the trade union or employees refer the fairness of the reason for the retrenchments to the Labour Court, section 189A(18) states that the Labour Court may not adjudicate the procedural fairness of the retrenchments. In other words, only the substance, such as the business case for the retrenchments or the selection criteria, may be challenged in the court.
The section contemplates 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 to compel the
The Labour Appeal Court found that where an employer does not follow the mandatory provisions of Section 189A… such notice of retrenchments are invalid and null and void
employer to comply with fair procedure during the consultations, to restrain the employer from retrenching prior to complying with a fair procedure or to direct the employer to reinstate the employees until it has complied with a fair procedure.
Section 189A(13) therefore envisaged that the trade union or employees could 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, and complaints about procedure would not be dealt with by the Labour Court when such a dispute came to trial, which often only occurs years after the retrenchment.
However, recent judgments from the Labour Appeal Court indicate that procedural validity may still have a role to play when the fairness of the reasons for the retrenchments are adjudicated by the Labour Court many years later. In De Beer’s Group Services (Pty) Ltd vs National Union of Mine Workers [NUM] (2011) 32 ILJ 1293 (LAC), the Labour Appeal Court held that the provisions of Section 189A are peremptory and that where notice of retrenchments (falling under section 189A) had been prematurely given (for example, before the expiry of the 60-day consultation period), the notices of retrenchment were 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 and Others v National Union of Mine Workers [NUM] and Others (2012) 33 ILJ 1846 (LAC). Here, the Labour Appeal Court dealt with an appeal from the Labour Court concerning NUM’s challenge to the fairness of the reason for the retrenchment of about 58 of its members. In the Labour Court, Revan Civil Engineering conceded that although it did not 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)), but argued that the Labour Court was accordingly precluded from adjudicat- ing procedural fairness by virtue of the provisions of section 189A(18).
Following the reasoning set out in De Beer’s Group Services vs NUM, the Labour Appeal Court found that where an employer does not follow the mandatory provisions of section 189A of the Labour Relations Act regarding one of the prescribed modes for consultation, or the compulsory time frames for giving notice of retrenchments, such notice of retrenchments are invalid and null and void for being in breach of the provisions of section 189A.
This decision is a significant development in the law relating to largescale retrenchments in that, firstly, procedure can effectively be ‘challenged’ by the trade union or employees in a referral to the Labour Court long after retrenchments have been given effect to, and not only in an application to the Labour Court while the consultation process is ongoing (in terms of section 189A(13)) and, secondly, where a lawful consultation process has not been followed because section 189A had not been followed where it ought to have been, or there has been non-compliance with the mandatory time frames for the giving of notice of retrenchments set out in section 189A, 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. Employees are then effectively placed back in the position they would have occupied prior to the invalid notice of retrenchments and the termination of the employees’ contracts of employment.
In Revan Civil Engineering, the employees were retrenched during July 2008 and the Labour Appeal Court declared their retrenchments invalid and null and void during March 2012. The Labour Appeal Court’s order has 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.
When embarking on retrenchments, in order to avoid hefty back-pay and reinstatement orders employers should be particularly careful to investigate whether such retrenchments will fall under the provisions of Section 189A of the Labour Relations Act and to follow Section 189A process requirements carefully and to ensure that consultation is explored exhaustively.
Given the reasoning of the Labour Appeal Court in Revan Civil Engineering, where an employer fails to meet the ordinary procedural requirements of section 189, such as issuing a notice of contemplated retrenchments (as required by section 189(3)) or dealing adequately with the consultation matters specified in section 189, such noncompliance could result in a declaration that the retrenchments are null and void.
FAIRNESS MUST APPLY