Beware the consequences of not following appropriate retrenchment procedures

In Mawer v Nortech International (Pty) Limited [2014] JOL 32512 (LC) the Labour Court had to consider whether Mawer’s retrenchment was substantively and procedurally fair and, if not, if he should be reinstated or compensated.

Section 189 of the Labour Relations Act 66 of 1995 (the LRA) regulates dismissals based on operational requirements.

Based on the evidence adduced by the respondent, the Court accepted that the respondent had a valid and fair reason to retrench. It then had to consider whether the selection criteria applied by the respondent satisfied the test set out in section 189(7) of the LRA, which provides that the employer must select the employees to be dismissed according to selection criteria that have been agreed to by the consulting parties; or if no criteria have been agreed, criteria that are fair and objective.

The evidence showed that the selection criteria applied by the respondent were not agreed between the parties. It was therefore necessary to consider whether the approach by Nortech satisfied the requirements that they be fair and objective. The Court was satisfied that that in the particular circumstances of this matter the respondent was entitled to adopt the retention of the most appropriate skills as the selection criterion. There was no suggestion that the respondent in any way approached this exercise mala fides or having prior to the commencement of the consultation process determined that the applicant was to be dismissed and that the consultation process was merely a sham.

While proper process until that point was diligently followed, the respondent thereafter abandoned all consideration of what was required of an employer. The rest of the procedure contemplated in section 189 was abandoned, and the applicant was presented with a settlement agreement regarding his termination of employment. That serious irregularity rendered the retrenchment procedurally unfair.

The Court ordered the respondent to pay the applicant compensation in an amount equal to 12 months’ remuneration.

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