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retrenchMany factors can give rise to retrenchments, among them a drop in sales due to economic factors, requiring fewer employees due to new labour saving technology, deciding to outsource labour to save costs, or rationalisation of employees resulting from mergers or buy outs. Previously, the courts were quite lenient towards employers with regards to retrenchments.

As long as the employer could show that the retrenchment was a result of a genuine operational restructuring, the court was satisfied. However, it is not enough anymore to show that a retrenchment was necessary in order to boost profits. The courts take four key factors into account when deciding whether or not a retrenchment was fair. Employers must prove:

1. There was sufficient operational reason for the retrenchment;

2. A fair criterion was used for choosing which employees where to be dismissed;

3. That the employer consulted properly with the employees (and/or union) on measures to avoid or reduce the number of employees to be retrenched as well as on numerous other issues related to the retrenchment PRIOR to deciding to retrench;

4. That the employer gave the employees (and/or union) all the information relevant to the retrenchment and the consultation process.

It is also important to note that if the employees are unhappy with the reason for the retrenchment, they will likely go on strike. If the employees decide to take the matter to court instead of striking, they only have to show that a retrenchment took place. The employer has to prove that the retrenchment was unavoidable due to operational circumstances.

In a recent case, the courts found for a group of truck drivers who had been retrenched due to outsourcing, and the employer was ordered to pay each employee compensation equal to 12 months’ remuneration. (SATAWU and Others v Forecourt Express (Pty) Ltd (2013 8 BLLR 824))

It is therefore imperative that employers take a fresh look at their plans to merge, restructure or outsource where this could affect workers’ jobs. Proper legal advice is crucial not only on the retrenchment procedure but also on the justification for the retrenchment.

If you have any questions in this regard or require assistance with a possible retrenchment, please contact us on (033) 266 6170 or mail us at admin@mccarthylaw.co.za.