2.50 Retrenchment Notice.doc (2 pages)

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The LRA permits dismissals based on the employer?s operational requirements provided they are for a fair reason and in accordance with a fair procedure. Operational requirements are requirements based on the economic, technological or similar needs of an employer. (Refer to Form 2.6 Code of Good Practice: 2 (ix)? ?2019 Edition
Dismissals for Operational Requirements.) The employer?s mere words to the employee that he/she is being retrenched due to operational requirements are insufficient to justify the retrenchment. There is a thin line between a dismissal for operational reasons and for other reasons. Basically a retrenchment refers to a dismissal because an employee?s needs have become superfluous for reasons related to the needs of a business. Section 189 of the LRA deals with operational requirements and compels the employer to consult with the employee or his / her representative body in a meaningful joint consensus-seeking process and attempt to reach consensus or appropriate measures inter alia (amongst other things) to avoid dismissals or to mitigate the adverse effects of dismissals and on the severance pay. A written notice must be served on the affected employee inviting him/her to consult with the employer. The notice should disclose all relevant information as set out in section 189 (3) plus any other relevant information. During the consultation the employer must permit the employee to make his/her representations and respond to them and give reasons if the employer disagrees. Consultation must be exhaustive and not merely sporadic, superficial or a sham. The targeted employees must be selected on criteria that are fair and objective. Employees on fixed-term contracts that have not expired may not be retrenched. Section 189 does not apply to employees who are dismissed for reasons other than operational requirements, for example incapacity or poor work performance. A retrenchment could be unfair if the employer failed to prove it could not have placed the employee in an alternative position. The retrenchment must be procedurally and substantively fair. It has been held that a mechanical checklist approach by which an employer is examined as to whether it has complied with each and every one of the procedural steps as set out in Section 189 (2) must be avoided. The court will rather consider whether the totality of the employer?s efforts was aimed at avoiding retrenchment. The retrenchment must be shown to be justifiable and rational. An employer need not prove there will be financial ruin if it does not retrench. Employers are entitled to make a profit and in doing so restructure their business.