An increasing number of South African companies plan to cut jobs due to the coronavirus pandemic, and questions have been raised around the selection criteria used for retrenchments and which employees are at risk.
Despite the unforeseeability of the pandemic, law firm Cliffe Dekker Hofmeyr said that Section 189(2) of the Labour Relations Act should still be followed when considering retrenchments at a company.
This requires an employer and other consulting parties to engage in ‘a meaningful, joint consensus-seeking process and attempt to reach consensus on the method for selecting the employees to be dismissed’, it said.
“During consultation, the employer must consider and respond to the submissions made by the other consulting parties and, as required by s189(3), must state reasons if it disagrees with the representations.
“If the consulting parties made written submissions, then the employer must respond in writing.”
“The essence of sections s189(2) and s189(6) is that an employer cannot decide on the criteria to use, without consulting the other consulting parties.”
Where the consultation on selection criteria does not result in consensus, it is then open to the employer to unilaterally decide on selection criteria to be used, provided that the employer will then have to show that the criteria was fair and objective, Cliffe Dekker Hofmeyr said.
What selection criteria is legally acceptable?
Section 189(7) recognises two types of selection criteria that the employer may use to select the employees to dismiss:
- One that has been agreed to by the consulting parties;
- One that is fair and objective if no selection criterion has been agreed upon.
“Where the consulting parties have agreed upon selection criteria, the employer is obliged to use such criteria,” Cliffe Dekker Hofmeyr said. “Where there are no agreed selection criteria, the employer is obliged to use only fair and objective criteria.”
Past case law has shown that if an employer does not to implement criteria agreed with the majority of representatives in a consultation process, it would in all probability be unfair.
It would be equally unfair to apply a disparate range of selection criteria depending on a particular consulting party’s preferences or demands, the firm said.
“Section 187(7) is consistent with the view that parties are not obliged to agree on the selection criterion, and in the absence thereof, the employer has an obligation to show that the selection criteria adopted were fair and objective,” it said.
Which criteria to use for selection?
Cliffe Dekker Hofmeyr noted that the Labour Relations Act only facilitates the consultation process and does not prescribe the selection criteria to be used, instead leaving it to the parties to agree on the selection criteria.
The generally accepted selection criterion according the CCMA Code of Good Practice on Operational Requirements includes:
- “Last in first out” (LIFO);
- The length of service;
- skills and qualification.
The firm added that LIFO is the criterion associated with the least risk for the company as long as it is fairly applied.
However, where LIFO is inappropriate, as is often the case with senior-level employees, employers may also use skills retention in the alternative, the firm said.
“To the extent that agreement on selection criteria proves elusive, the employer may have no option but to unilaterally impose selection criteria. However, this option exposes the employer to the risk of the criteria being disputed later,” Cliffe Dekker Hofmeyr said.
“The safest approach would be to negotiate the selection criteria with the relevant unions, and conclude a collective agreement recording the criteria.
“This will make it more difficult for the unions to raise a dispute later, because the selection criteria were mutually negotiated.”
The firm added that there is no ‘best criteria’ but that the LIFO method is widely recognised as being the most objective criterion to select the employees to be retrenched.
It is all the more objective because it tends to retain the most experienced employees, which is a valid goal when considering operational requirements, it said.
It is also not necessary for a company to only use one selection criteria.
“The employer may opt not to use LIFO, and instead decide on a number of other criteria (for example skills, performance, personal circumstances and family commitments).
“Again, the safer, more conservative approach would be to arrive at these criteria by agreement with the relevant union,” Cliffe Dekker Hofmeyr said.
You can read Cliffe Dekker Hofmeyr’s full retrenchment guideline here.