RETRENCHMENTS: IT IS IN THE “BEST INTERESTS OF SOCIETY THAT AN EMPLOYER REMAINS ECONOMICALLY VIABLE”
Employers do not have free rein to retrench employees who refuse alternative terms and conditions of employment. Only where there is a genuine operational requirement for the retrenchment will such retrenchment not be automatically unfair.
Yesterday the Constitutional Court ruled that the retrenchment of employees following their refusal to accept alternative employment on new terms and conditions is not automatically unfair, where the employer has genuine operational requirements underlying the alternative terms.
Aveng needed to restructure its business to survive and remain profitable. In 2014, it initiated a retrenchment consultation process in terms of section 189A of the Labour Relations Act. The majority trade union, NUMSA, participated in the consultation process. Aveng revised its organisational structure and redesigned job descriptions. As an alternative to retrenchment, the employer submitted a written proposal to NUMSA with the redesigned job descriptions, which was rejected. In 2015, Aveng informed NUMSA that the consultation process was exhausted and that the new structure would be implemented. The affected employees rejected the new terms and conditions of employment. Aveng retrenched them, based on its operational requirements. NUMSA, challenged the retrenchments before the Labour Court claiming that they were automatically unfair because Aveng compelled the employees to accept a demand in respect of a matter of mutual interest.
The Labour Court held that the retrenchments were affected due to genuine operational requirements and could not be linked to the employee’s refusal to accept a demand of the employer.
The Labour Appeal Court found that to determine if a dismissal is automatically unfair, an assessment of the main, dominant or proximate reason for the dismissal is necessary. The Labour Appeal Court found that Aveng did not make a demand, but rather a proposal to its employees:
- a demand is aimed at securing compliance.
- a proposal is aimed at a particular result and implies that the parties may consult on that proposal.
The proposal made by Aveng was used to avoid retrenchments. The Labour Appeal Court found that the proximate reason for the dismissals was Aveng’s operational requirements. The dismissals were therefore not automatically unfair.
The LAC held that the purpose of section 189 (Retrenchments) of the Labour Relations Act was to encourage employers and employees to seek alternatives to retrenchments. The interpretation of retrenchment as automatically unfair undermine that purpose.
NUMSA took the matter to the Constitutional Court
The Constitutional Court upheld the Labour Appeal Court’s judgement that the retrenchment was not an automatically unfair dismissal. It acknowledged that due to the current state of the economy, operational reasons relate not only to the reduction of the workforce but can also relate to restructuring operations and the manner in which an existing workforce carries out its work. Restructuring can take different forms including shift systems, adjusted remuneration and merging of jobs and responsibilities. In this matter, the employer engaged its employees with a re-organisational proposal through a structured consultative process. If the court prevented the employer from dismissing the employees under these circumstances, it would undermine the viability and vitality of the business.
The proposal by the employer was therefore reasonable and sensible and it was used as a means of avoiding dismissals. The dismissals were for operational reasons and amounted to the main or dominant cause of the dismissals.
= WHAT THIS MEANS TO EMPLOYERS:
Aveng’s employees were not dismissed for rejecting a demand in respect of a matter of mutual interest, but rather the dominant reason for their dismissal was the employer’s operational requirements.
There needs to be an evaluation into the cause of the retrenchment and assessing whether the cause is the main or dominant or proximate or most likely cause of the dismissal.
The Constitutional Court includes an acknowledgement that it is in the “best interests of society that an employer remains economically viable“. This does not mean that employers have carte blanche to retrench employees who refuse alternative terms and conditions of employment. Only where there is a genuine operational requirement underlying the retrenchment will such retrenchment not be automatically unfair.
Reasons for automatically unfair dismissals are:
- Participation in or support of, or indication of an intention to participate in or support of, a protected strike.
- Refusing, or indicated an intention to refuse, to do any work normally done by an employee participating in a protected strike.
- To compel the employee to accept a demand in respect of any matter of mutual interest between the employer and employee.
- That the employee acted or indicated an intention to act, against the employer by exercising any right within the labour relations act or participating in any proceedings in terms of the labour relations act.
- Pregnancy, intended pregnancy, or any reason related to her pregnancy.
- Unfair discrimination.
- Transfer, or a reason related to a transfer.
The maximum compensation for this type of dispute is 24 (Twenty-four) months remuneration.