Unfair Retrenchment

What to do if you have been unfairly retrenched (2021)

As anyone who has ever been retrenched will affirm, it is an extremely stressful life event to live through. Unfortunately, retrenchment is also very much a reality in SA’s post lockdown economy. If your company is considering letting you go, under south African law you, the employee, are entitled to a formal negotiation with your employer. This is called an employee consultation, and the goal is to explore possible alternatives to retrenchment to potentially avoid it. This is the first step of a fair retrenchment process.

What is retrenchment

To decide whether you believe a retrenchment is unfair, a clear understanding of the term is paramount. Retrenchment is a form of dismissal, but its important to know that it isn’t the same as being fired. When a company decides to retrench employees, it has carefully assessed the operational requirements of the business and has found that in order to continue functioning, a certain amount of employees have to be let go. Operational requirements can be structural (as in new processes are adopted to streamline operations), economical (the business cannot pay all employees while still functioning optimally), or technological, where automated technology can replace employees. Based on premises such as these, an employer needs to be able to justify retrenching you, and all alternatives need to be discussed between you and your employer. Once all these alternatives have been exhausted, retrenchment serves as a last resort.

What is fair retrenchment

Your employer needs to be able to justify your retrenchment and follow a fair procedure, as well as formally notify you of any new developments. In the case of unfair retrenchment, the fundamental point taken into consideration by the courts is whether or not the retrenchment was avoidable. In other words, a fair retrenchment is one that can be justified on account of the operational requirements of the business, and was an absolute last resort. Additionally, the retrenchment must be procedurally fair, and the steps listed below need to be followed:

A process of “consulting employees” must take place. You also need to receive a notice in writing to indicate that such a session with take place between you and your employer. During the session, you will discuss the key aspects outlined in the “consult notice”, and you will be allowed to make your own representations, to which the employer must respond. If the employer finds your argument infeasible, they need to supply you with reasons for their conclusion. If the alternatives have been exhausted, then the employer may decide to retrench.

During consultation, a few key matters need to be scrutinized:

-Ideas on how to avoid retrenchment entirely, such as adjusting work hours or reducing overtime pay.

-Suggestions as to potentially limiting the number of employees being retrenched.

-The amount of severance that needs to be paid out to the employee.

-The method for deciding which employees are to be retrenched, for example the classical formula “FILO”, as in, the employees who have worked for the company the longest are the last to be considered for retrenchment.

After consultation you need to receive a written Notification of Retrenchment, detailing why retrenchment was the final decision, as well as the reasons that the alternatives discussed were not feasible. You will be given a chance to respond to the notice. Details of your severance package will also appear.

Payment packages

Upon the end of your working relationship, you are entitled to compensation.

Typically, you may receive three payouts:

-Severance pay: This is calculated as one week’s remuneration multiplied by every year you have worked for the company.

-Leave payout is the amount you are paid for all the days’ leave you never took throughout the year, if any.

-Notice pay: Because you might not necessarily work the notice period before your working relationship ends, you have to be paid out for it. If you were employed by the company for less than six months, you will receive one week’s notice pay. If you worked at the company for more than six months, it becomes two weeks, and if you served for more than one year, the notice period becomes four weeks.

What to do if you have been unfairly retrenched:
If your employer did not act within legal protocol, and did not meet all the requirements of a fair retrenchment,you may approach the CCMA or a bargaining council within 30 days of your unfair retrenchment. You will be led through a process of conciliation, whereby you and your employer attempt to reach a consensus regarding your retrenchment. Should this conciliation fail, you may bring the dispute to the labour court. You may be reinstated to your position, or be offered 12 month’s remuneration as compensation.

Do you really need legal advice and representation for unfair retrenchment?