The parties must agree on selection criteria

Termination on operational requirements — retrenchment — carries a consultation process under the Employment and Labour Relations Act and its Code of Good Practice Rules.

What consultation must cover

The purpose is to ensure employer and affected employees agree on alternatives to minimise the intended retrenchment, such as:

• Transfer to other jobs
• Voluntary retrenchment packages
• Early retirement

The consultation must focus on mitigating the consequences of the retrenchment.

Selection criteria must be agreed

Rule 24(1) of the Employment and Labour Relations (Code of Good Practice) Rules provides that the employer and employees should agree as to the criteria for selection of employees to be retrenched.

Selection imposed without that agreement is a procedural weakness.

Where no alternative is possible

The parties should agree on terminal benefits — severance pay, transport allowance and other statutory rights under Section 44.

An agreement becomes binding

If an agreement is reached, it is binding on the parties as a collective agreement under Section 71(3)(c) of the Act.

That gives a negotiated retrenchment package real force.

Notice and its effect

Should the employer issue notice of termination in accordance with Sections 41 and 38, certain payments do not apply.

During retrenchment, employers are expected to issue a notice of retrenchment — and where notice is issued, the employer is not subject to that payment.

Establish whether notice was given, since it changes what is owed.

Severance under Section 38(c)(v)

The employer is required to pay severance, calculated from at least seven days' basic wage for each completed year of continuous service, up to a maximum of ten years.

Fair procedure

Rule 9(1) of the Code of Good Practice provides that an employer shall follow a fair procedure before terminating, which may depend to some extent on the reasons given.

Section 37

Governs unfair termination by an employer, describing the grounds and procedures to be followed and the remedies. These provisions must be observed by both parties.

Where disputes go

The Commission for Mediation and Arbitration, and the Labour Division of the High Court. Any Code of Good Practice is taken into account in deciding whether a termination was fair.