Retrenching contractees not always fair
New labour laws aimed at promoting permanent employment
IT IS VERY easy to employ a worker on the basis of a fixedterm contract. However, it is when you want to end the employment relationship that the pain begins.
The employer’s need to terminate the contract could be for a number of reasons.
For example, during a retrenchment exercise, the employer may need to terminate all temporary contracts and give preference to saving the jobs of permanent employees.
There could be a variety of factors contributing to the need for those operational requirement dismissals (retrenchments). These include: Faulty or archaic equipment or technology, ineffective management systems or underskilled/ demotivated employees can reduce productivity, increase financial losses and affect jobs.
Employers may need fewer employees due to new labour saving devices or technology.
A desire to evade labour legislation might result in the contracting out of work instead of giving it to employees.
Bankruptcy or losses caused by mismanagement or misappropriation of funds.
Strikes and lockouts that weaken
Ivan Israelstam
is with Labour Law Management Consulting your company and chase customers and work away.
A drop in sales due to economic factors such as the strengthening of the rand.
Rationalisation to shed “surplus” employees resulting from buy-outs or mergers.
Be aware, though, that retrenchments for reasons related to a takeover of a going concern will be automatically unfair.
These factors will not automatically render a retrenchment fair.
For example, the courts have traditionally taken into account four key factors when deciding whether a retrenchment is fair:
Was there a sufficient operational reason for the retrenchment, or was the retrenchment nothing but a sham?
Was a fair criterion used for choosing which employees would be dismissed or should other employees have been retrenched instead?
Before deciding to retrench did the employer consult properly with the employees or trade union on measures to avoid or reduce the number of retrenchments as well as on numerous other issues related to the retrenchment?
Did the employer give the em- ployees or union all the information relevant to the retrenchment and consulting process?
However, a fifth factor has been brought into play.
In the landmark case of Buthelezi v Municipal Demarcation Board (2005, 2 BLLR 115) the Labour Appeal Court found that retrenchment of an employee prior to the expiry of his/her fixed-term contract was unfair.
In this case Buthelezi had a fiveyear fixed-term contract with the Demarcation Board but was retrenched one year after commencement. Prior to retrenchment he was invited to apply for an alternative post but was unsuccessful.
The Labour Appeal Court found the employer did not have the right to terminate the fixed-term contract before its natural expiry date.
The court’s startling decision means that:
As regards retrenchment, a temporary employee with a fixed-term contract has stronger rights than a permanent employee.
The practice of terminating the contracts of temporary employees in a retrenchment exercise as a means of saving permanent jobs needs to be urgently reviewed.
The terms and wording of fixedterm contracts need to be radically revised.
No employer should enter into or terminate a fixed-term contract before consulting with a labour law expert.
It is clear that employees on fixed-term contracts are extremely well-protected.
This is due not only to the above, but also to new labour law amendments which now enable many employees on fixed-term contracts to force the employer to make them permanent.
Ivan Israelstam is chief executive of Labour Law Management Consulting. He can be contacted at 011 888 7944 or via e-mail at ivan@ labourlawadvice.co.za. Visit www.labourlawadvice.co.za.
To attend a seminar in Durban on Changes and Dangers in Labour Law on September 1, contact Ronni at ronni@labourlawadvice.co.za