Why are retrenchment consultations important?

When an employer contemplates retrenching employees it is required by the Labour Relations Act (LRA) to first consult about this prospect before making any decision to retrench. Where the relevant employees belong to a trade union the employer is required to consult with that union on a number of issues, the most important of which is any means of avoiding job losses.

Should the employer choose not to engage in proper pre-retrenchment consultations and the employees are forcibly retrenched this will normally result in an unfair dismissal finding against the employer. However, where the employer has, in vein, made every effort to consult it may possibly not be blamed for any failure to consult.

There are a number of reasons that retrenchment consultations may fail to take place or may fail to comply with the requirements of the LRA. These include:

  • The employer was unaware of its legal obligation to consult with the employees/union. Some employers are aware of the requirement to consult but are not aware of the role of the union or of the extent of the consultation requirements. It can also happen that the employer is not aware of the fact that the employees have joined a union. It is not likely that any of these reasons will suffice as an acceptable excuse for the employer’s failure to consult. This is because employers are required to find out about what they do not know.
  • The employer may have urgent reasons for needing to retrench such as:
  1. Dire financial circumstances threatening the immediate survival of the business
  2. A pressing need to get rid of employees pending a hastily arranged takeover by another entity. The prospective buyer may have set a very tight deadline for the date of the takeover and may have made it a condition of the deal that workforce numbers be reduced before the conclusion of the sale
  3. The employer may have no money to pay salaries during a consultation exercise (which exercise may be very protracted especially where the employer has more than 50 employees). The employer may, therefore, need to curtail retrenchment consultations.

Once again, none of these reasons will be accepted by the courts as an excuse for failure to consult fully and properly.

  • Where the employer has truly exhausted every effort to locate and contact the union without success it may consider the possibility of consultation with the employees/shop stewards directly. The questions arise as to whether the employer should, after being forced to give up on a recalcitrant trade union, consult directly with the employees. In the case of Numsa vs Ascoreg (CLL Vol.12 July 2008) the Labour Court found that the employer could consult directly with the employees where the union refused to consult. However, the employer will need solid proof of such trade union refusal as consultation with employees instead of their union is forbidden under normal circumstances.
  • The trade union may be purposely delaying the consultation process. If a court finds that the union unreasonably delayed the consultation process by making unreasonable demands or failing to participate in consultations the courts may well refuse to find against the employer despite the implementation of retrenchments without proper consultations. In the case of Simelane and others vs Letamo Estate (CLL Vol. 17, July 2008) the Labour Court found that the trade union has a duty to cooperate and participate in the consultation process.

However, the law clearly gives the employer the onus of ensuring, as far as it possibly can, that proper consultations take place. Therefore, despite difficulties in getting the union to cooperate, the employer must do everything in its power to gain the union’s cooperation. It is only where the employer has proved that the union has been unreasonably uncooperative despite the employer’s best efforts that the courts may excuse the employer for retrenching without union consultations.

The employer’s duty to consult before retrenching lies at the heart of the employer’s duty to ensure procedural fairness. Despite the numerous and varied obstacles to the achievement of proper consultations, the employer is likely to find that failure to consult (or to consult properly) extremely costly from a legal point of view. On the other hand, where the retrenchments are delayed due to hold-ups in consultations this could be equally as costly from a salary bill point of view. Employers are therefore advised to obtain advice from a reputable labour law expert on:

  • The requirements of the law regarding retrenchment consultations
  • How to prepare for and conduct retrenchment consultations
  • How to overcome obstacles to legally compliant consultations without unduly delaying the completion of the retrenchment exercise.

Ivan Israelstam is the Chief Executive of Labour Law Management Consulting. To buy their e-book, Walking the New Labour Law Tightrope, please contact Ivan via ivan@labourlawadvice.co.za or 0828522973.

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