Sentso* knew that the company he was working for was having financial difficulties. But he was shocked when, all of a sudden, his boss called him up one morning to tell him he should not report for work until further notice. When he called the company back to find out what was going on, he was told that his boss had ‘resigned’ and that the company had closed down. What now? What is Sentso’s legal recourse?

Scorpion Legal Protection’s advice
Section 189 of the Labour Relations Act (LRA) sets out the retrenchment process that must be followed when employers retrench for operational requirements. These are defined as requirements based on economic (financial), technological, structural or similar needs of the employer.

Like all dismissals, retrenchments must be both procedurally (proper procedure was followed) and substantively (there was a valid reason for the retrenchment) fair. According to the LRA, consultation must take place when the employer contemplates retrenchment. The consultation is a process and not a once-off meeting, and must be held with all employees that could be affected by the retrenchment.

The matters that need to be discussed, and that both parties must try to reach an agreement on, include the following:

• Possible ways to avoid dismissal
• Measures that could help minimise the dismissals
• Measures to change the timing of the dismissals
• Measures to lessen or reduce the effects of the retrenchment
• The method for selecting the employees to be dismissed
• Severance pay

The employer must also issue a notice of possible retrenchment to the affected employee(s). This must include:

• The reasons for the retrenchment
• Alternatives to dismissal that were considered and the reasons why they were rejected
• The number of employees likely to be affected
• The proposed method of selection
• Severance pay
• Assistance that the employer will be offering
• Possibility of future re-employment

The employer must then allow the affected employee the opportunity to make representations regarding the proposed retrenchment. When the consultation process is done, the employer must issue notices to the employees who have been selected to be retrenched.

Severance pay must also be agreed on. Employees are entitled to receive severance pay only if they are retrenched for operational requirements. The requirements regarding severance pay are set out in section 41 of the Basic Conditions of Employment Act (BCEA). Section 41 of the BCEA says that an employer must pay an employee who has been dismissed for operational requirements “severance pay equal to at least one week’s remuneration for each completed year of service with that employer”.

Since Sentso’s employer has not engaged in any consultative process, it makes the dismissal unfair. Sentso can refer a dismissal dispute to the CCMA within 30 days of the date he was instructed not to report to work.

Tips:

• Consultation is compulsory – an employer may not simply tell you not to come to work.
• Consultation is intended as a means of coming up with solutions to the problem the employer is facing. If you have ideas on how retrenchment can be avoided or lessened, you should discuss them with your employer.

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* Terms, conditions, limitations and exclusions apply (click here to view the Legal Membership Agreement). This is only basic advice and cannot be relied on solely. Names have been changed to protect identity.