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28 Apr 2020
BY Themba Maduna

When should the Labour Court intervene in a retrenchment process?

Economists predict that the Coronavirus (COVID-19) pandemic will lead to retrenchments on an unprecedented scale on the back of an already weak economy. It is likely that unions, when confronted with proposals to retrench, will approach the consultation process envisaged in section 189 and section 189A of the Labour Relations Act, 1995 (“LRA”) with more rigour.

Section 189A(13)

Of importance in this regard is section 189A(13) of the LRA. It  provides unions seeking to challenge the fairness of a consultation process with an important remedy.

It states that if an employer does not comply with a fair procedure, a union may approach the Labour Court by way of an application for an order to:

  1. compel the employer to comply with a fair procedure;
  2. interdict or restrain the employer from dismissing an employee prior to complying with a fair procedure;
  3. direct the employer to reinstate an employee until it has complied with a fair procedure;
  4. award compensation to an employee, if an order in terms of the above is not appropriate.

How this section should be applied continues to be the subject of litigation.

The recent decision of the Labour Court in SA Communication Union and Another v Telkom SA SOC Ltd and Others is one of the latest decisions to interpret and apply 189A(13). In this case, Telkom gave notice in terms of section 189(3) that it contemplated retrenching over    3 000 employees in two phases. During the first consultation meeting, Telkom proposed that it offer voluntary severance packages (“VSPs”) and voluntary early retirement packages (“VERPs”) to employees. These were seen as a measures to avoid retrenchments.

Two unions, the South African Communication Union and Communication Workers Union working as an alliance, objected to this. They argued that the issue of severance packages could not be raised so early in the consultation process, and that the offering of VSPs and VERPs could only be used as an alternative to retrenchments once there had been consultation on the new employment structures proposed by Telkom.

This argument was based on section 189(3). This provides that an employer contemplating retrenchments must issue a written notice to the unions and/or employees with whom it envisages consulting, inviting them to consult and providing them with all relevant information on a range of issues. These include:

  1. the reasons for the proposed dismissals;
  2. the alternatives that the employer considered before proposing the dismissals, and the reasons for rejecting each of those alternatives;
  3. the number of employees likely to be affected and the job categories in which they are employed;
  4. the proposed method for selecting which employees to dismiss;
  5. the time when, or the period during which, the dismissals are likely to take effect; and
  6. the severance pay proposed.

The Alliance argued that the LRA requires consultation on the topics in the order set out above. Because consultation had not yet taken place on the reasons for the retrenchment, it was not permissible to consult on severance packages. It also argued that it was inappropriate to consult on the issue of severance benefits before employees knew what the new employment structure would be and whether or not they would be accommodated in it. This made it difficult to know whether to apply for a VSP/VERP or not. When an impasse was reached on this issue, Telkom decided to offer VSPs and VERPs, despite the Alliance’s opposition. This caused the Alliance to bring an application in terms of section 189A(13) directing Telkom to withdraw the offer to apply for voluntary packages and to engage in further consultations regarding these packages.

The Labour Court dismissed the application.

In coming to this conclusion, the court rejected the argument that the consultation process must consider the topics in the sequence referred to in section 189(3), saying that this was an unduly rigid approach. The court also accepted that there was a duty to consult on the issue of severance benefits, but that the absence of consultation on this matter could be ascribed to the Alliance’s insistence on consultation on other issues prior to consulting on severance benefits. While there may have been a logic to the unions’ view, this did not mean that a failure to agree on this issue should lead to the consultation process grinding to a halt.

Interestingly,  the court also endorsed earlier Labour Court decisions that describe the approach the court should adopt when exercising its supervisory jurisdiction in terms of section 189(13) of the LRA, namely that intervention in the consultation process should be limited to only serious instances of a failure to comply with a fair process. It did so in the following terms:

“[33]     Bearing the above considerations in mind, the crisp question is: should the court intervene in the type of impasse reached between the parties in this process? Essentially, before the court can intervene it must be satisfied that the employer party has acted in such a way that it has fundamentally prevented or obstructed a fair consultation process in keeping with the intentions of section 189.”

In this case, there had been no such obstruction by Telkom. The stumbling block to proper consultation had been erected by the Alliance when it set preconditions for consulting over VSPs and VERPs.

Reviewed by Peter le Roux, an Executive Consultant in ENSafrica’s Employment department.

Themba Maduna
Employment | Candidate Attorney
+27 67 415 8059