Legal steps for Dismissals
6/12/2009

The following article by Adams & Adams professional assistant Jonathan Maphosa was published on Law24.com on 3 December 2009.
Legal steps for employers contemplating retrenchment or dismissal for poor work performance
Retrenchment procedures
In light of the steep increase in large scale retrenchments embarked upon by local industries, the requirements for a fair retrenchment process in terms of the Labour Relations Act (“LRA”) have become the subject of greater scrutiny by the Labour Court and the Commission for Conciliation, Mediation and Arbitration (“CCMA”).

Under South African law, the requirements for small-scale retrenchments are set out under section 189 of the LRA and the requirements for large-scale retrenchments, typically those effected by employers who employ more than 50 employees are dealt with under section 189A of the LRA.

The reason to initiate a retrenchment must be based on the operational requirements of the business. Economic, technical or structural reasons would qualify as “operational requirements” for the purpose of retrenchment. Economic reasons are those that relate to the financial management of the business, while technological reasons are linked to the adaptation of new technology with the consequence of restructuring the workplace or making existing jobs redundant and structural reasons would be those that relate to the redundancy of positions as a result of the employer’s restructuring.

The retrenchment process must be both substantively and procedurally fair. Essentially there should exist both a valid legal reason for the retrenchment and the required procedures as set out in the LRA must be followed.

As soon as an employer contemplates retrenchment or foresees the possibility of retrenchment taking place, the employer must issue a written notice inviting the potential retrenchees or their representatives to consult in a meaningful, joint consensus seeking process to attempt to reach consensus on issues such as alternatives to the contemplated retrenchment and mechanisms to adopt to minimize the effects of the retrenchment.

It is important that employers bear in mind that decisions concerning any contemplated retrenchment cannot be taken prior to the consultative process and all communication prior to and during the consultative process must be couched in contemplative terms. The written notice inviting the possibly affected employees to consult must disclose the reasons for the proposed dismissals, the alternatives that the employer considered before proposing the dismissals, the number of employees likely to be affected and the job categories in which they are employed.

Also to be included in the notice are the proposed method for selecting which employees to dismiss, the time when or period during which the dismissals are likely to take effect, the severance pay proposed, any assistance that the employer proposes to offer the employees likely to be dismissed, the possibility of future re-employment, the number of employees employed by the employer, and the number of employees that the employer has dismissed for reasons based on its operational requirements in the preceding 12 months. This list is not limited and other considerations relevant to the proposed retrenchment must be disclosed to the consulting parties by the employer.
In order to be procedurally fair, the employer is obliged to give reasonable prior notice of the commencement of consultations. In addition to the formal notice inviting employees or their representatives to consult, other practical steps can be taken by the employer over and above the legislatively prescribed notice, such as; displaying notices on notice boards in the workplace or attaching informal invitations to consult to the employees’ payslips.

The period over which consultation should take place is not defined in the LRA and is informed by the circumstances surrounding the contemplated retrenchment. The employer must consider the representations put forward by the employees or their representatives during the consultation process seriously and in good faith. If the employee’s representations are not taken seriously and a decision is taken by the employer prior to giving the employees the opportunity to give adequate feedback, this will have the effect of rendering the retrenchmentsubstantively unfair.

The LRA requires that the criteria for selecting the employees to be retrenched must be either agreed with the consulting parties or, if no criteria have been agreed, be fair and objective criteria. Selection criteria that has been accepted by the LRA and the CCMA to be fair includes amongst others: service; qualifications; and the “last in, first out principle” (“LIFO”).
Another criterion commonly used by employers is the retention of employees based on those respective employees key skills which would be fundamental to the successful running of the business (“key staff”). Employers contemplating to adopt this particular criterion must be in a position to prove that the employees retained are indeed fundamental to the successful operation of the business.
One of the most common questions asked by employers contemplating a retrenchment during this global economic crisis is whether a business must suffer losses or a possible downfall before it can retrench for economic reasons? The Labour Appeal Court has found that during the period leading up to and at the time of retrenchment, if an employer makes some profit this does not necessarily preclude him from retrenching employees provided that the employer has exhausted all his other options at making the business more profitable and more competitive.

It has become more important now in the context of the global recession and increased mass retrenchments that employers be cautious against taking a mechanical approach to complying with the substantive and procedural requirements of a retrenchment. Employers should seek appropriate legal guidance and advice prior to embarking on a retrenchment in order to avoid the pitfalls of non-compliance with the provisions of the LRA.
Dismissal for poor work performance procedure
The other LRA recognised ground for dismissal under discussion is a dismissal based on the capacity of the employee; this would typically be related to the employees work performance. In determining whether a dismissal for poor work performance is fair or unfair you (the employer) should consider:

• whether or not the employee failed to meet a performance standard; and
• if the employee did not meet a required performance standard, whether or not he/she was aware, or could reasonably be expected to have been aware, of the required performance standard; whether or not the employee was given a fair opportunity to meet the required performance standard; and whether dismissal is an appropriate sanction for not meeting the required performance standard.

If you are contemplating dismissing an employee on the basis of poor work performance, if no evaluation, ongoing instructions, training, guidance and/or counselling took place then it is quite unlikely that the dismissal would be found to be fair. The employer must show that the reason for dismissal is a reason related to the employee's capacity. If the employer fails to do that, or fails to prove that the dismissal was effected in accordance with a fair procedure, the dismissal is unfair and open to contest by the employee.
An employer's rules must create certainty and consistency in the application of discipline. This requires that the standards of conduct are clear and made available to employees in a manner that is easily understood. Some rules or standards maybe so well established and known that it is not necessary to communicate them.

Efforts should be made to correct employee's behaviour through a system of graduated disciplinary measures such as counselling and warnings. Following an employee’s annual or bi-annual review, employers must make sufficient effort to counsel and try to bring the employee’s performance in line with expected standards. This can later be used as a defence if the dismissal is contested as the employer will be in a position to prove that he exercised both corrective and progressive discipline.

The procedure leading to dismissal should include an investigation to establish the reasons for the unsatisfactory performance and the employer should consider other ways, short of dismissal, to remedy the matter. In the process, the employee should have the right to be heard and to be assisted by a trade union representative or a fellow employee.

The employer should notify the employee of the allegations using a form and language the employee can reasonably understand. After the
enquiry, the employer must communicate the decision taken, and preferably furnish the employee with written notification of that decision. In the event that the employee is a trade union representative or an office-bearer or official of a trade union, employers are advised that disciplinary steps should not be instituted without first informing and consulting the trade union.

On dismissal the employee should be given the reason for dismissal and reminded of any rights to refer the matter to a council with jurisdiction or to the Commission for Conciliation, Mediation and Arbitration (“CCMA”), which is a dispute resolution body established in terms of the LRA, or to any dispute resolution procedures established in terms of a collective agreement.
About the author
Jonathan Maphosa joined Adams & Adams in 2008 as a professional assistant in the Commercial Law department. He specialises in consumer protection law, corporate law, general commercial law, securities law, tax law, as well as estate planning and wills.

Jonathan holds an LLB from the University of Kwa-Zulu Natal and Certificates in Advanced Corporate and Securities Law and Technology and Crimes from UNISA and the Abo Akademi University in Finland respectively.

He also holds a Post-Graduate Diploma in Drafting and Interpretation of Contracts from the University of Johannesburg and is currently studying towards an LLM in Tax Law at the University of Pretoria.

Jonathan is a member of the Law Society of the Northern Provinces and the Corporate Lawyers Association of South Africa.