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Retrenchments

When can employer retrench employees?

Section 189 of the LRA permits an employer to dismiss employees based on the employer’s economic, technological, structural or similar needs. An employer may retrench to improve their profits. Whatever the reason may be for the retrenchment, the employer must be able to prove or back-up its allegations.

    • Economic reasons are those that relate to the financial management of the enterprise;
    • Technological reasons refer to the introduction of new technology which affects work relationships either by making existing jobs redundant or by requiring employees to adapt to new technology or a consequential restructuring of the workplace; and
    • Structural reasons relate to the redundancy of posts consequent to a restructuring of the employer’s enterprise.

Once an employer contemplates dismissing one or more employees for reasons based on the operational requirements, the employer must issue the section 189(3) notice and commence consultations.

The section 189(3) notice should technically be issued only to the parties who the employer is required to consult in terms of section 189 of the LRA. Still, for employers who want to reduce their risks, they could send it to the affected employees and majority and minority trade unions recognised in the workplace.

The consulting parties must attempt to reach a consensus on the rationale for the restructuring, appropriate measures to avoid dismissals, change the timing of the dismissals, minimising the number of dismissals, mitigating the adverse effects of the dismissals, the method for selecting the employees to be dismissed and severance pay. The employer must allow employees to make representation concerning ways to avoid retrenchments as well as consider alternatives. The employer must provide reasons for rejecting any alternatives.

Useful resources for employers (and possibly employees):