How can firms balance imperatives of layoffs and employment equity?

The detrimental effects of coronavirus and lockdown have forced many employers to consider retrenchment to stay afloat.

But in a notice on May 4 to designated employers, the Commission for Employment Equity (CEE) reminded them that in an organisational restructuring or configuration they remained bound by employment laws and were required to ensure there was no unfair treatment and unfair discrimination in their policies and practices.

The commission also acknowledged the “catastrophic” effect of Covid-19 on the economy, “including the threat posed by the pandemic on ... economic growth, job creation and retention”.

The notice said “all designated employers are requested to strive not to reverse the previously attained transformation gains, including to, where reasonably practical, achieve their initially planned annual EE [employment equity] targets”. So employers must not forget their legal obligations, particularly in workplace transformation. Arising from this, two questions have to be considered.

When selecting employees for retrenchment, can employers take into account the need to meet the goals set in their employment equity plan? What happens if the retrenchment affects an employer’s workforce to such an extent that its employment equity plan becomes unachievable?

The method for selecting employees for retrenchment is one of the topics on which the consulting parties must attempt to reach consensus. But if selection criteria are not agreed, selection must be on the basis of fair and objective criteria.

The code of good practice on dismissal based on operational requirements confirms that employment equity considerations may indeed fall within the ambit of “fair and objective criteria”. It does so implicitly by recognising that the “last in, first out” principle, generally considered to constitute fair and objective selection criteria, could undermine an agreed affirmative action programme. Importantly, however, this is coupled with the warning that such exceptions must be “treated with caution”.

The short answer appears to be that there is no absolute bar to taking into account employment equity considerations and that the application of such a selection criterion could be defensible.

Strict application of the “last in first out” principle as a selection criterion, which could discriminate directly or indirectly on the grounds of race or sex, could in certain circumstances be seen as an “employment barrier”, and a measure designed to eliminate or mitigate this barrier could be seen as an affirmative action measure as envisaged in section 15 of the Employment Equity Act.

Whether an employer would be entitled to take such an approach would be fact specific. Compliance with employment equity goals is in itself an important justification for adopting this selection criterion. However, it is possible that further justification may be required. For example, if compliance with employment equity goals is a requirement for being able to successfully tender for contracts or acquiring or retaining the right to operate in certain sectors of the economy, it would also be necessary to show that the employment equity policy on which reliance is placed is a rational, properly considered policy that meets the requirements of the Employment Equity Act itself.

Furthermore, the criteria would have to be applied in a fair and flexible manner.

One important way for employers to mitigate claims that the use of employment equity as a sole criterion falls foul of the requirement that it is fair and objective is to use a combination of selection criteria, one of which would be an employer’s employment equity goals and targets. This should, if applied properly, go a long way in achieving a fair and equitable selection process while advancing an employer’s employment equity objectives.

Against this backdrop an attempt to maintain employment equity targets using retrenchment selection criteria could likely be successfully defended if it is done in a flexible and balanced manner.

But what if an employer has already undertaken the retrenchment process and its employment equity goals and targets are no longer realistic?

In this regard, the CEE notice recognises that, “in the midst of all the organisational configuration processes ... it would be inevitable that the achievement of the initially planned annual employment equity targets would not be left unscathed”.

If employment equity goals and targets are no longer achievable due to any tangible impact occasioned by retrenchments, employers can amend their employment equity plans to ensure they are more realistic or relevant to their changed workforce. This is endorsed by the CEE notice, which provides that “employers may consider reviewing and amending their employment equity plans in consultation with the employment equity consultative forums, but must document all reasons for the changes as prescribed in the Employment Equity Regulations 2004”. This consultation would be done in accordance with section 16 read with section 17 of the Employment Equity Act.

Despite the economic hardship the Covid-19 pandemic has provoked, it is vital that employers remain cognisant of their employment equity obligations, even if it means amending targets due to huge reductions in a workforce.

Should an employment equity plan be taken into account for purposes of retrenchment selection criteria, a context-responsive approach that delicately balances the objects of compliance with employment equity requirements and the interests of adversely affected employees is essential.

IT IS VITAL THAT EMPLOYERS REMAIN COGNISANT OF THEIR EMPLOYMENT EQUITY OBLIGATIONS, EVEN IF IT MEANS AMENDING TARGETS