TO RETRENCH OR NOT TO RETRENCH - LABOUR LAW AND COVID-19

The words of Hamlet are a worrying ring in the ears of Employers the world over during this unprecedented pandemic. We are all faced with the quandary:

“..whether ‘tis nobler in the mind to suffer….or to take arms against a sea of troubles…”

With cashflow of many businesses destroyed and prospects of future trading unsure, we urge Employers to consider the 3 major focus points when it comes to retrenchments:

1. Contract
2. The Labour Relations Act and Basic Conditions of Employment Act
3. Public Policy

The Contract is ordinarily the first point of departure with labour related matters and is read with any internal policies or procedures in place during the currency of the Employment.

Thereafter, and to the extent necessary, one turns to the Labour Relations Act and Basic Conditions of Employment Act. Both Acts provide a general standard of practice when it comes to handling relationships of Employment. Regulations and abounding common law flow from these Acts and provide Employers with a guide on how to handle issues of misconduct and issues of staff retention.

Both Acts are drafted and interpreted to include public policy considerations stemming from historic disadvantages, practices and economic considerations specific to South Africa.

It is at this point that the labour law departs from strict statute and its application and becomes a matter of fairness and substantive consideration.

The current COVID-19 pandemic has placed Employers at a loss as to how best to handle matters of continued employment where it is objectively not possible for the Employee to carry out his or her duties. It is similarly impossible for the Employer to offer to the Employee the ability to carry out duties and fulfil the role. This is ordinarily interpreted as an “impossibility of performance” and falls within the realms of the Law of Contract. It is however, not that simple.

It cannot be said that either party has breached the Employment Contract / Agreement and as such it cannot be said that the employment relationship be terminated by reason of breach or misconduct. The reality of the pandemic is that a situation of impossibility of performance has arisen on the face of it, but at the same time a cry for Public Policy considerations can be heard. It is submitted that simply claiming “impossibility of performance” as a reason for termination of Employment will not suffice. We suspect that the CCMA and Labour Court will not look kindly on this approach by Employers in light of the current pandemic. After all, Section 189 of the Labour Relations Act makes provision for a “no-fault” dismissal, often referred to a Operational Based Dismissal / Retrenchments.

Operational Based considerations or Operations Requirements relate, simply, to the continued ability of the business to operate as it was. Does your business find itself in a position where it financially can no longer afford to employ its Employees or afford to pay an individual to carry out his/her role? Is the position redundant by reason of a change in the Employer’s financial position / economic reality that makes the continued employment financially non-viable?

These are the primary considerations or “tests” when addressing issues of operational based dismissals or retrenchments. From this point, the Employer would need to satisfy a number of requirements, including but not limited to:

1.   Consultation with the Employee:

a.   How exactly this is done during a National Lock Down is difficult to say. Suggestions that telephonic consultation, video conferencing and other emailing might be the best possible avenue for all.

2.   Consideration of alternative avenues to address the operational concerns, including:

a. Reduced pay

b.   Reduced Hours

c.    A change in Employee role

d.   Extent of the operational concern (will it be resolved or is it temporary?)

e. Any other consideration which, at its core, is rooted in continuing employment.

f. Is retrenchment the final resort?

3.   Economic Considerations and Business practice that could alleviate the operational concern.

4.   Any other action which could be taken other than retrenchment.

Recognition of the current extraordinary situation must be given. The “no fault” nature of this type of consideration is paramount and would be a consideration of any Labour Court, CCMA or tribunal when assessing the conduct of the Employer and the actions taken by it.

It is likely that the CCMA and Labour Courts will follow the generally accepted questioning, adapted to the current circumstances:

1. Could the Employer, in these extraordinary times, afford to pay the Employees’ Salaries for the duration of the lockdown?
2. Was the Employee due any annual leave, which could be used to offset a reduction in income and protect the Employee during this time?
3. What can the Employer do to protect its Employees from a national economic shut down?

The Law, and indeed Public Policy, dictates that an additional element of care must be taken to protect the employment of people in this country and that every effort must be taken by an Employer, within reason, to retain Employees in operational based requirement considerations.  

Many of our Clients have elected to take as fair and as economically sound approach as possible to this. Many have approached their Employees to offer, by agreement, the use of a portion of their Annual Leave to prevent a reduction of income should the lockdown continue for longer than expected. Many Employers had considered and calculated to pay the Employees for the month in the ordinary course of business long before the lockdown became a reality and have, as a result, honoured that projection.

Where the nature of the business itself has been dramatically altered by the lockdown (“non-essential” production lines, small “non-essential” retail or company-to-public service contracts), income to pay the salaries will have been terminally impacted. In certain other types of Employment, the impact has been less damaging on an immediate scale (e.g.: private employment of domestic workers, gardeners etc) .

It would be our advice and interpretation of the law that every effort should be made to retain Employees as much as possible during this time. Wherever possible, Employers should take every measure to try and accommodate their Employees and to take whatever action required to prevent termination of employment.

Reductions in salaries might become an unavoidable consequence of the pandemic and ultimately redundancies will become more common as the time goes on. As the financial considerations and circumstances of each Company differ, we cannot make any comment or give advice in a vacuum.

We will gladly consult with you and obtain further information required to protect you as the Employee or your Company as Employer and advise on the most suitable and correct way to approach retrenchments or operational requirement-based dismissals. We can assist with the drafting of Section 187 Notices and the structuring of retrenchment consultations

We wonder, as did Shakespeare, whether “conscience does make cowards of us all”? We hope, for the sake of South Africa, that it does.

For advise on all Labour Related matters, call John Hudson & Company on 031 3033 002, visit our website or email David Brereton on david@johnhudson.co.za

The information above is primarily aimed at furnishing members of the public with guidance on South African law and not to meet the individual requirements of each specific person. Proper legal advice ought to be sought to address a person’s unique circumstances. As a result, John Hudson & Company, its partners, employees or third party associates will under no circumstances accept liability or be held liable, for any innocent or negligent actions or omissions which may result in any harm or liability flowing from the use of or the inability to use the above information.