1.1 ELRA recognises the following circumstances as legitimately forming the basis of termination on operational grounds (retrenchment);
- Economic needs that relate to the financial management of the employer;
- Technological needs that refer to the introduction of a new technology which affects work relationships either by making existing jobs redundant or by requiring employees to adapt to the new technology or a consequential restructuring of the workplace; and
- Structural needs that arise from restructuring of the business as a result of business-related causes such as merger of business, change in nature of the business or transfer of the business.
1.2 Under the labour laws an employer who intends and contemplates to terminate his employees on operational requirement, has three basic obligations to fulfill before an agreement on retrenchment can be reached. These obligations are provided by Section 38(1) of ELRA and they are; issuance of notice of intention to retrench as soon as it is contemplated, disclosure of all relevant information on the intended retrenchment and consultation prior to retrenchment.
1.3 As soon as the employer contemplates retrenchment he has an obligation to issue a notice of the intended retrenchment to a Trade Union and to any employees who are not represented by a Trade Union to inform them of the intended retrenchment.
Disclosure of information and Consultation
1.4 After the notice is issued the employer is required to disclose information to the Trade Union representing employees to be effected by the retrenchment or to the employees themselves if they are not represented by a trade union. Both Consultation and disclosure of information can be done simultaneously.
1.5 Information that needs to be disclosed and which forms the basis of consultation are; the reasons for the intended retrenchment, the measures to avoid or minimize the intended retrenchment, method of selection of the employees to be retrenched, timing and severance pay.
1.6 Measure that may be used to avoid or minimize retrenchment includes transfers to other jobs, early retirement, voluntary retrenchment packages and layoffs.
1.7 The employer is also required to adopt criteria for selecting employees to be retrenched. Under the Rules, it is provided that in the event one or two employees are to be selected for retrenchment from a number of employees, the criteria for their selection shall be agreed with the Trade Union and if not agreed, the criteria used by the employer shall be fair and objective.
1.8 The Rules also requires the criteria to be used not to infringe a right protected by ELRA when they are applied. Criteria not considered to be fair, includes the ones where selection is on the basis of union membership, or activity, pregnancy, or discriminatory grounds. Selection criteria that are generally accepted to be fair include;
- Length of service in which the employees are being selected according to First in Last out principle (FILO);
- The need for the efficient operation of the organization;
- The need to retain key jobs and skills; or
- The ability, experience, skill or occupational qualifications of employees or affirmative action criteria.
1.9 During consultation (if the employees are members of any Trade Union) the employer is obliged to allow the Trade Union to report back to the employees and to allow the Trade Union to request, receive and consider all the relevant information to enable the Trade Union to inform itself of the relevant facts for the purpose of reaching agreement with the employer on possible alternative solutions.
1.10 ELRA and the Rules expects the employer and the Trade Union (or employees if not members of a Trade Union) to reach an agreement after consultations on the retrenchment. In the event the parties fail to reach an agreement, ELRA makes it an obligation for the parties (employees or the employer) to refer the matter to Mediation.
1.11 LIA establishes a Commission for Mediation and Arbitration (CMA) which among other functions mediates and determines labour disputes and issues awards thereafter to make a determination on a dispute.
1.12 The Rules restricts the employer from implementing the retrenchment during the time the dispute is pending completion of mediation. In the event mediation fails and the matter is referred to arbitration, the employer is prohibited from proceeding with retrenchment. At arbitration stage, if an award is issued in favour of the employer the employer is allowed to proceed with the retrenchment even if the employee has preferred a revision at the High Court. Awards by the CMA are subject of revision by the High Court Labour Division.