The effect of the national lockdown on business owners, instituted at the end of March 2020, cannot be understated. As it currently stands, South Africa is observing high rates of Covid-19 infections and some restrictions remain in place under level 2 lockdown. As a result, employers have had to utilise the Covid-19 Temporary employee/employer Relief Scheme, otherwise referred to as TERS. The fund assists employers who have had to close their operations, either completely or partially and institute temporary layoffs.
The question may then be posed; what happens if this is not enough to guarantee the future viability of the company? Inevitably, the employer will need to restructure for operational reasons to ensure their companies long-term survival. Depending on the number of employees affected by the restructuring, the employer will embark on consultations as provided for in section 189 (2) to (4) of the Labour Relations Act 66 of 1995 (LRA). A large-scale retrenchment process can be followed in terms of S189A, which may be referred to the CCMA by the employer or employee. The rule regarding consultations with employee’s or their registered trade unions remains the same. The consultations should be a “meaningful joint consensus-seeking process’ in which the parties attempt to reach agreement on a range of issues which are aimed at, where possible, avoiding retrenchment. All alternatives need to be considered, and the consultations should be exhaustive and thorough.
Restructuring may not always constitute a dismissal of employees for operational requirements but may necessitate that employees continue their work on different terms. Reduced working hours or lower pay are examples of some conditions that may be imposed to ensure the company remains profitable.
In National Union of Metalworkers South Africa and Another v Aveng Trident Steel and Another [2019] 9 BLL 899 (LAC), the employer restructured and amended it workers’ terms and conditions of service during retrenchment consultations. The workers were asked to accept the new terms and conditions and those who failed to do so were retrenched. The Union argued that the dismissals were substantively unfair. The Labour Appeal Court held that the dismissal was substantively fair, and in giving the workers the option to continue employment on new terms was a genuine attempt to ensure the company’s long-term survival and mitigate dismissals for operational requirements. The court held further that “..the proposal having been negotiated to an impasse, the imperative or dynamic to dismiss for operational requirements transcended tactical positioning to become fair reason. The failure by the employees to accept the proposals engendered an insurmountable operational requirements problem that constituted a fair reason for dismissal.” The Union’s contention that the choice to sign new contracts constituted a tactical advantage for the employer, was therefore not accepted.
Where the employer has no option but to proceed to issue termination letters as a result of an inability to reach an agreement with the employees or their trade union representative, the following may occur.
- The employees may refer the matter to the Labour Court to challenge the substantive fairness of the dismissal in terms of S191(11) or;
- Issue a strike notice in terms of Section 64(1) (b) or (d).
Should the employees contend that the consultations were not adequate or fair, they may seek and interdict compelling the employer to comply with a fair procedure and reinstating the employees in the interim. Employers may guard against this by ensuring consultations or held in accordance with section 189 of the LRA.
Regarding substantive fairness, the employer should ensure they have adequate information regarding the reasons for the proposed restructuring. As long as one can justify the restructuring process taken and prove it is a genuine effort to ensure the future profitability of the company, it cannot be found to be substantively unfair.
Article by: Gordon Flanagan
Dispute Resolution Official – East London