Tuesday, August 11, 2009

Mass retrenchments, an issue becoming increasingly relevant as the economic recession deepens, are governed by Section 189A of the Labour Relations Act.

Employers are strongly advised to analyse the Section 189A procedure, and in particular Section 189A(1), which is somewhat more complicated than its relatively simple Section 189 counterpart.

Section 189 is perfectly clear, but not necessarily logical, as it arbitrarily regulates which retrenchment exercises fall in or out of Section 189A. For example, if an employer with 199 employees contemplates dismissing 11 employees, the employer must follow Section 189A, even though the actual number of employees who are ultimately retrenched might be reduced to nine once the envisaged joint consensus seeking process has been followed.

On the other hand, if another employer with, say, 198 employees, contemplates dismissing nine employees and actually does dismiss those nine, he falls within the scope of Section 189.  At the other end of the continuum, an employer with 1 000 employees who contemplates dismissing 50 employees, falls within the parameters of Section 189A. 

The lesson for employers is that the “contemplation” of retrenchments should be considered carefully, lest the employer finds itself (unnecessarily) following the more complicated Section 189A procedure.  Not only is the 189A procedure more complicated, but the real downside for employers is that the consultation process will necessarily take more time, particularly if a facilitator is appointed.

Two other aspects of Section 189A deserve closer scrutiny – what recourse do employees have if the retrenchment is (a) substantively, and (b) procedurally unfair?

If the former, the employees have two options – they may either give notice of a strike, or refer the dispute for adjudication by the Labour Court.  Once the choice is made, however, the referring party must live with its choice.  Notice of a strike may not be given if the dismissal has been referred to the Labour Court and, conversely, if a strike notice is issued, any referral to the Labour Court is deemed to be withdrawn. 

It is significant that the steps to be taken by the referring party, in reaction to a substantively unfair retrenchment, must be taken after the dismissal has taken place or, at the earliest, when a notice of dismissal has been given. 

If it is alleged that the employer is not complying with a fair procedure, the consulting party has the opportunity of approaching the Labour Court and asking for one of four orders:

  “(a) Compelling the employer to comply with a fair procedure;
   (b) Interdicting or restraining the employer from dismissing an employee prior to
         complying with a fair procedure;
   (c) Directing the employer to re-instate an employee until it has complied with a fair procedure; and
   (d) Making an award of compensation, if an order in terms of paragraphs (a) to (c) is not appropriate.”  
Any such application must be made not later than 30 days after the employer has given notice to terminate the employees’ services or, if notice is not given, within 30 days of the date on which the employees are actually dismissed.

It is clearly intended that procedural defects should be cured, by way of an interdict during the retrenchment process, with a view to enabling the Labour Court to direct the employer to return to the correct procedural path before arriving at a decision to retrench. 

This is reinforced by Section 189A(18), which denies the Labour Court the power to adjudicate on the procedural fairness of a dismissal where the dispute referred to it alleges that the reason for the dismissal is based on operational requirements.

If this amounts to a referral for an allegedly substantively unfair retrenchment, the Labour Court in such circumstances again finds that its powers are limited.  Section 189A(19) provides that if a dispute is referred to the Labour Court for adjudication where an employee has alleged that the reason for dismissal is based on the employer’s operational requirements, the Labour Court must (my emphasis) find that the employee was dismissed for a fair reason if:

a. The dismissal was to give effect to a requirement based on the
     employer’s economic, technological, structural or similar needs;
b. The dismissal was operationally justifiable on rational grounds;
c. There was a proper consideration of alternatives; and
d. The selection criteria were fair and objective.
Would it be substantively or procedurally unfair if a dispute is based on operational requirements, which, when narrowed down, might simply amount to a complaint that alternatives were not properly considered?

This question was addressed in Broll Property Group (Pty) Ltd v Du Pont and others. In that matter the Labour Court found that the company’s failure to consult properly on alternatives to restructuring, job functions and descriptions, and alternative employment had rendered the dismissal substantively unfair.

The Labour Appeal Court accepted that a consultation process on operational requirements could be “so woefully deficient as to amount to substantive unfairness”, and that “in such a case it might be proper for the Labour Court to conclude that no substantively fair reason existed for a dismissal.”

However, the LAC maintained this was not such a case. The Court was satisfied that a substantively fair reason had been proved for the retrenchment of the employees and that such reason had not been negated by the inadequacies of the consultation process. The Court accordingly found that the retrenchment of the employees had been procedurally unfair, but substantively fair.

It appears that no clear line has been drawn.  If the consultation process of the operational requirements is inadequately handled, this might amount to procedural unfairness, but if the procedure is “woefully deficient” it mutates to become substantively unfair.

This means that there may yet be scope for having a procedurally unfair dismissal adjudicated upon after the allegedly unfair procedure has already been concluded, provided that the unfair procedure can be classified as “woefully deficient”.