Despite ‘GNUphoria’ a large number of companies are still experiencing severe financial difficulties arising from the fallout of Covid, electricity cuts, rampant crime, crumbling logistical services and international economic instability. This has resulted in a huge number of job losses.

While tight financial circumstances quickly give rise to the temptation to retrench as quickly as possible, employers need to appreciate the harm that they can do to the economy and this to their own longer-term survival by implementing retrenchments willy nilly.

The above does not mean that retrenchments must never be contemplated. There are circumstances where job cuts must be implemented. However, there are several reasons that employers should not retrench. These reasons include:

• The retrenched employee and his/her family are likely to suffer as a result of the retrenchment
• Last-in-first-out is the most common criterion for choosing the employees to be retrenched. This can result in the employer losing employees with valuable skills which can in turn do harm to the quality of products and services and hinder the acquisition of new business
• As explained above, the knock-on economic effect of retrenchments could well result in future losses for the employer
• Labour law does not allow employers to retrench employees unless such retrenchment cannot be avoided. That is, the law of retrenchment in South Africa is focused strongly on preserving employment, and makes it clear that a retrenchment is a no-fault dismissal. The law therefore requires the employer to turn over every stone in an effort to find alternatives to retrenchment.
• The retrenchment will only be fair if the employer’s decision to retrench is rational, reasonable and genuine; and there is no viable alternative to retrenchment.

In the case of Shushu and others vs Distell Ltd (Lex Info 10 December 2024. Labour Court case number JS 81/21) The employer retrenched the 3 applicant employees because they had refused to accept a 10% pay cut. The employer had genuinely been experiencing financial difficulties, and 99.9% of the workforce had agreed to the 10% pay cut.

The Court found that the employer’s need to cut costs was genuine and valid. However, this had not justified the retrenchments. This was firstly because the pay cuts of 99.9% of the employees had solved the employer’s financial difficulty making the retrenchments unnecessary. And secondly, the employer had never truly decided that it had been necessary to retrench 4000 of its employees as it had claimed in court. The decision for the need to retrench had only been made after the 3 employees had refused the 10% pay cuts.

This rendered the decision to retrenchment both irrational and unnecessary. The Court therefore ordered the employer to reinstate all 3 employees retrospectively. The period of backpay for the 3 employees totalled 120 months.

This outcome highlights the need for employers to understand the law of retrenchment fully and to ensure that they take very seriously the principles of substantive fairness. 

The innovative video series WALKING THE LABOUR LAW TIGHTROPE assists employers to provide their managers with very inexpensive training that allows the managers to achieve necessary knowhow at times suitable to their very busy schedules. Its 48 chapters, averaging 10 minutes in length each, can easily be watched at junctures when the manager has time.

This greatly informative yet very engaging and practical video series provides crucial and user-friendly learning through the use of a stimulating, animated case study that runs throughout the 48-chapter series. Each chapter contains clear and important advice needed by workplace management on the basics of labour law over a very wide range of topics.

A further advantage is that the manager can, for a full year, easily go back to any of the 48 videos for purposes of refresher training or in order to access information on how to deal with a current workplace issue. This solves the problem of managers forgetting what they have learned.

This video series helps management to walk the shaky labour law tightrope and to run the workplace productively without falling into the labour law abyss. 

To access our groundbreaking video series: WALKING THE NEW LABOUR LAW TIGHTROPE please go to www.labourlawvideos.co.za or contact Ivan on ivan@labourlawadvice.co.za

Written by Ivan Israelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or on e-mail address: ivan@labourlawadvice.co.za. Go to: www.labourlawadvice.co.za