Retrenchment notices in South Africa – what employers should know

A recent decision of the Labour Court called into question whether a section 189(3) notice is always required for a retrenchment of an employee to be considered fair. 

The Court found that, although being a mandatory requirement, the non-issuing by the employer of the notice did not render the employee’s dismissal unfair, as there had been ‘substantial compliance’ with the provision.

However, Senior Associate at Bowmans, Amandla Makhongwana, and Candidate Legal Practitioner, Jared Allen, outlined that it far from means that a section 189(3) notice goes out the window, with the Labour Court cautioning that this judgement should not be taken as precedent.

“Despite the outcome of this case, employers would be well-advised to comply with the letter of the section and ensure that a notice is issued in each case,” said the legal experts.

Back in 2019, the Joburg Property Company initiated a corporate restructure, impacting several positions including the IT department.

An employee, serving as Head of IT, was directly affected due to the role failing to meet strategic technology advice needs.

The restructuring plans were discussed at the executive committee level, with the IT head present, and were also approved by the Local Labour Forum (LLF), which included her trade union, IMATU.

“IMATU was represented in the LLF by its shop steward – it was common cause that the employer did not issue a section 189(3) notice to IMATU or the employee, in relation to her proposed retrenchment,” explained Makhongwana and Allen.

The employee was ultimately dismissed on 30 September 2019 based on the employer’s operational requirements. She subsequently referred an unfair dismissal dispute to the South African Local Government Bargaining Council, which found her dismissal to be procedurally and substantively fair.

Aggrieved at this, the employee instituted review proceedings in the Labour Court, alleging, among others, that the employer did not comply with section 189 of the Labour Relations Act (LRA) by failing to issue a section 189(3) notice.

Was the dismissal substantively and procedurally fair?

Makhongwana and Allen explained that in terms of section 188 (1)(a)(ii) of the LRA, a dismissal is substantively unfair if the employer fails to prove that the reason for dismissal is fair based on the employer’s operational requirements.

“The test to evaluate the substantive fairness of a dismissal related to operational requirements is that a fair reason is one that is bona fide and rationally justified, and informed by a proper and valid commercial or business rationale,” said the legal experts.

The inquiry into the rationale for operational requirements boils down to whether it is objectively fair.

In the arbitration decision, it was determined the employer legally restructured its operations for efficiency, dismissing an employee who refused a lower-paid alternative role. This action was deemed substantively fair.

The Labour Court upheld this, citing compliance with relevant sections of the LRA and the Code of Good Practice on grounds of operational requirements. The decision considered the employee’s awareness and union acknowledgment during negotiations.

The Court ruled that employees represented by a union during retrenchment under section 189 of the LRA do not need separate consultation.

It referenced a previous Constitutional Court ruling which mandates employers to provide written notice for consultation and disclose all relevant information as per section 189(3) of the LRA.

The Court recognized special circumstances that excused the lack of a section 189(3) letter issuance, noting the employee’s union, IMATU, had approved the management’s structure in an earlier meeting.

Moreover, the employer had informed IMATU, well before the dismissal, that issuing such a notice was unnecessary as all parties understood the dismissal’s reasons. Neither the employee nor IMATU contested this decision.

Therefore, the court ruled the employer’s actions as acceptable, highlighting that the employer had largely adhered to procedural requirements with IMATU’s endorsement.

The Labour Court concluded that the dismissal was both substantively and procedurally fair, affirming the reasonableness of the commissioner’s findings.

Legal analysis

The Labour Court cautioned that this judgment should not be taken as precedent that issuing a section 189(3) notice is not mandatory.

“Where the mandatory provisions are departed from, each case has to be decided on its own merit regarding substantial compliance with section 189(3),” said the experts.

“Notice remains an important part of the retrenchment consultation process as not only is the information contained in the notice necessary for the parties to engage in meaningful consultations; the notice itself serves an important evidentiary function when it comes to proving the fairness of retrenchments.”

“Despite the outcome of this case, employers would be well-advised to comply with the letter of the section and ensure that a notice is issued in each case,” concluded Makhongwana and Allen.

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