South African companies hit by coronavirus could consider demotion rather than retrenchment
As South African cases of the Covid-19 coronavirus continues to rise, president Cyril Rampahosa is expected to announce further stringent measures around curbing its spread – including the possibility of a phased shutdown.
Companies are already beginning to suffer financially as people practice social distancing and self isolation, meaning that more social spaces like restaurants, nail bars, salons, hotels etc lose revenue as consumers stay home. This unfortunately puts pressure on staff retention, and could lead to retrenchments.
However, Kayla Shadiack, senior associate at Christodoulou & Mavrikis Inc for legal research and technology solutions provider, LexisNexis South Africa, says that alternatives should be considered.
One possible alternative is instead of outright retrenchments, employers might want to look at demotions during this extraordinary time.
Shadiack said that despite the trying circumstances, if employers look at taking this route, they are advised to take all labour law considerations into account before imposing demotion on an employee.
The reason for this is that should the CCMA or bargaining council find the demotion to be unfair, the commissioner has the right to:
- Reinstate the employee into the position from which he/she was demoted;
- award the employee compensation;
- apply any other corrective measure that he/she may deem to be appropriate.
Shadiack highlighted the following legal cases around demotion in the workplace.
“In (the case of ) Plaatjies vs RK Agencies, the employer offered the employee an alternative position at a lower salary due to the fact that the employer had lost a major contract.
“While the arbitrator accepted this as a valid reason, the demotion was still unfair because the employer had failed to consult with the employee before making the offer.”
In view of the above decision, employers should never implement demotion before obtaining the appropriate labour law advice as to:
- Whether the demotion is merited (in the case of Covid-19 it would be as the employer will no longer be able to afford salaries);
- The procedure to be followed in implementing a fair demotion.
“In terms of Ngxowa v Sebenza Manufacturing System, a demotion occurs when the employer diminishes the status of the work or responsibilities of an employee even when their remuneration remains the same.
“Section 186(2)(a) of the Labour Relations Act provides that any act or omission involving the unfair conduct of the employer in relation to Demotion constitutes an unfair labour practice,” she said.
Shadiack also highlighted the case of Piki vs Development Action Group, where the CCMA held that an employer is not permitted to unilaterally change the employment conditions of the contract of employment without the employee’s consent.
“Since a demotion without consent is a repudiation of the employment contract, it, therefore, entitles the employee to sue for breach of contract,” she said.
However, Shadiack stressed that an employer should consider a demotion as an alternative to retrenchment, chiefly because a person would rather have a job with less money than no job at all.
“Should an employee refuse the demotion, the employee will be entitled to severance pay, as long as the reason for refusal is justifiable.
“Should such refusal of demotion, as opposed to retrenchment be unreasonable, the employee will not be entitled to severance pay in terms of Sub-Sections 41(2) and 41(4) of the Basic Conditions of Employment Act.”
Shadiack said that employers must always obtain the employee’s consent to a demotion, in writing, as it entails the changing of an employee’s terms and conditions of employment.
This means a demotion cannot be imposed unilaterally by an employer without consulting with the employee. Should an employer demote an employee without affording the employee the right to be heard, it could amount to an unfair labour practice with the employer being liable to the employee for either reinstatement or compensation, she said.
“In the case of a dismissal for operational requirements, an employer may suggest that the employee consider accepting an inferior position to the one previously held, with a reduction of salary as an alternative to retrenchment.
“This may assist with small, medium and large businesses having to accommodate the financial distress that the Covid-19 has and will still bring to the economy of South Africa.”
Read: New case deals with the ‘right not to be dismissed’ in South Africa
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