Re­trench­ments can be held in­valid

Em­ploy­ers must en­sure fair pro­cesses are fol­lowed as set out in the Labour Re­la­tions Act

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - ALEXAN­DER ROCHER

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.

Pic­ture: THINKSTOCK

FAIR­NESS MUST AP­PLY

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