South Africa is entering ‘retrenchment season’ – here are 3 things you should know

South Africa is now entering a ‘retrenchment season’ as it grapples with the impact of the coronavirus lockdown, says law firm Cliffe Dekker Hofmeyr.

Speaking in a virtual seminar on Wednesday (8 July), Thabang Rapuleng, a director at Cliffe Dekker Hofmeyr said that large-scale retrenchments have become the ‘order of the day’  for many of the country’s businesses.

He noted that these retrenchments are regulated by S189 of the Labour Relations Act (LRA) and envisage a consultation period of 60 days.

However, he noted that the timing of the retrenchment differs on whether a facilitator is appointed and that an employer may retrench after only 30 days where a facilitator has not been appointed.

Rapuleng said that some of the key issues that arise around these retrenchments, especially during the Covid-19 pandemic, are the following:

  • When is an employer allowed to introduce voluntary severance packages?
  • If an employer cannot afford to pay employees on a month to month basis, what can it do, particularly to avoid retrenchment?
  • What if an employer cannot afford to pay severance packages?

When is an employer allowed to introduce voluntary severance packages? 

Rapuleng cited the recent case of SACU vs Telkom which dealt with an employer who introduced a voluntary severance package before a S189 (3) consultation process.

The issue was referred to the Labour Court which held that:

“Even if a party has reservations about whether there is a need for retrenchment, it must be prepared to engage in consultations on alternatives.

“Nothing prevents a party from engaging on a provisional basis, by making it clear upfront that its consent to the adoption of certain alternative measures is subject to it being persuaded that retrenchment would otherwise be required.”

“Essentially the court held that there was nothing untoward with the employers conduct and this case now means that the employer may offer voluntary severance packages even before initiating a S189 (3) process,” explained Rapuleng.


What if an employer has fallen on hard times?

The second case deals with an employer who has already fallen on hard times and cannot pay salaries either before or while the facilitation process is pending.

In this case, Rapuleng referred to the case of  Numwsa vs SAA where an employer introduced voluntary separation agreements during business rescue proceedings.

“The court was called to decide on the wisdom of the employer to initiate the voluntary separation agreements in the process of a business rescue proceeding,” he said.

“It is important to note that the company, at that particular stage, had placed a moratorium on retrenchment and the question was whether or not the packages would constitute a dismissal.

“The court held that there is no basis to argue that an employer cannot initiate a voluntary retrenchment process if there is a moratorium on retrenchment.

“If the parties reach an agreement to terminate the employment relationship, it will constitute an agreement and will not constitute a dismissal.”

Rapuleng said that this, therefore, extends the possibilities of employers if a company falls on hard times. He added that voluntary severance packages may be concluded even before retrenchment is contemplated or a S189 (3) process is initiated.


What if an employer cannot afford to pay severance packages?

Rapuleng said that in these cases the sad reality (for companies) is that the payment of severance is a legal obligation as provided for in the Basic Conditions of Employment Act.

However, if an employer is unable to do so, the employer may apply to the minister of Labour for an exemption, he said.

“In the absence of that particular exemption, the employer is unfortunately required to pay severance pay,” he said.


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South Africa is entering ‘retrenchment season’ – here are 3 things you should know