A slowing economy can make retrenchment an unpleasant reality for employers. The problem is that many employers fail to follow the complex consultation process required by the Labour Relations Act. Instead, they reach a unilateral and final decision and then break the bad news to the affected employees. Doing things the wrong way can only increase your financial pain!
You should, at first, take only an in-principle decision to retrench. You must recognize the possible need to retrench, while retaining an open mind to constructive feedback from your employees.
Then you need to consult with your employees about the possible retrenchment. Generally, you need to talk to all employees who might possibly be affected by retrenchment, and not just those individuals who you have identified in-principle. If the employees are unionized, you need to be talking to the union.
The consultation process is very formalized, commencing with a written notice that must provide a range of compulsory information. You then must seek feedback at consultative meetings. Having considered the feedback, you are now, at last, in a position to make a final decision on whether or not to retrench. If you decide to proceed with the retrenchment, you must give your reasons to the employees or union.
There are a number of issues to be considered during the consultation process. Take the selection of employees to be retrenched, as an example. This is not always as straight forward a decision as it might seem. LIFO (last-in-first-out) is generally applied, but this principle need not always prevail. Departmental boundaries also become pervious in a retrenchment - if you want to retrench a long-standing employee in a particular department, you need to consider whether there are junior employees in other departments who might need to be 'bumped" so that you can retain the long-standing
employee.
You also need to consider the alternatives to retrenchment, including any vacant positions, changes in working hours and other measures. Employers often make the mistake of quickly reaching the conclusion that there are no alternatives or that the alternatives will be unattractive to the affected employees. You need to be creative in identifying alternatives and present these to the employee regardless of their perceived attractiveness.
Failure to follow the right procedure can result in significant financial penalties. Make sure that your documentation is bullet-proof and that you get advice on the adequacy of your proposed retrenchment process.
Tim Brown is an attorney with Venn Nemeth and Hart Inc and can be contacted at: 033 355 3170 or tim@vnh.co.za
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