Business survival & resilience: A time to grow your business and a time to “prune” your business – Part 2.

Introduction

It has been 6 months already since I published Part 1 of this article and I will quite understand if you are wondering why it took me so long to deliver Part 2. In all honesty, it was not my intention to delay the publication of Part 2 this much, but my desire to provide clarity to the reader, as far as possible, regarding the subject of my articles, made me procrastinate the finalising of Part 2.

The writing and publishing of all of my articles are always preceded by a fair amount of research regarding the topic concerned and only once this has been done in such a way that I clearly understand the subject matter myself and its application in practice, would I have the confidence to impart my knowledge and understanding to my readers, so that they can at least derive benefit from the article concerned.

To a considerable degree, my research regarding this second part of the article concerned provided the clarity sought, however I still stumbled upon two apparent contradictory or unclear provisions in the relevant sections of the Labour Relations Act (LRA), which I just had to find clarity on. Sadly, my endeavours in this regard were to no avail up the point of publishing Part 2 of this article.

As part of my research, I presented these apparent contradictions and lack of clarity to a few colleagues and associates and also arranged that it be presented to an academic in the field of labour law, as well as to a partner in a prominent firm of attorneys specialising in labour law.

The colleagues and associates just shrugged their shoulders after having been apprised of my concerns, being as dumbfounded as I am, while neither the academic, nor the legal practitioner, reverted with an explanation to date.

As the latter two professional resources were casually and informally presented with my conundrum via the associates I mentioned, their input thus not commercially solicited. Consequently, I unfortunately did not have the entitlement or leverage to demand a response. This eventually left me none the wiser, but I just could not delay the publishing of Part 2 any longer and decided to rather incorporate these apparent contradictions and lack of clarity into Part 2 of my article on retrenchment.

Any reader of Part 2 of the article concerned is however most welcome to provide the clarity that was evading me up to now. In fact, I would highly appreciate such assistance, even if it eventually exposes that I missed some obvious explanation of the apparent uncertainties. I certainly do not profess to know all that is to be known regarding the topics I write about – In the end, we always learn from one another in the quest of the objective truth.

Note: Unless specifically indicated otherwise, all sections of the law referenced herein is cited from the Labour Relations Act (LRA).

Re-capping Part 1

The provisions of Section 189 (proper) of the LRA, which were the subject matter of Part 1, create a basis and point of departure for Section 189A of the LRA, being the topic of Part 2 of the article concerned.

From this follows that one can only properly interpret the provisions of Section 189A, when taking due cognisance of the provisions of Section 189 (proper) and cross reference where needed. By way of an automotive analogy, the very same “engine”, as in Section 189 (proper), is powering Section 189A, only with a few enhancements and additional enabling features.

Recapping what was covered in Part 1, the premise we departed from in Part 1 was founded on the following, which still rings true for invoking the provisions of Section 189A:

• Considering all various options available during restructuring, the emphasis was placed on retrenchment as an eventual consequence of restructuring.
• Redundancy of human resources happens by design in a need-based restructuring.
• The restructuring of the business is embarked on from a position of “weakness”, implying that the employer is coerced by prevailing circumstances to restructure in order to survive economically.
• The mode of interaction between employer and affected employees (and their representatives) during restructuring is on the basis of meaningful, joint, consensus-seeking consultation, addressing the timing of consultation, with whom to consult, the nature of the consultative process, as well as the content of consultation.
• Dealing with alternative employment, as a means of avoiding retrenchment.
• Dealing with voluntary retrenchment, as a means of mitigating the adverse effect of retrenchment.
• Cautioning the employer that all aspects of the restructuring exercise, culminating in redundancy and retrenchment, may be subjected to judicial scrutiny.

I reiterate that the content summarised above is relevant to and constitutes the basic tenets of a Section 189A exercise, as much as it is relevant to the process required in respect of Section 189 (proper).

Application of Section 189A

One has to “read between the lines” in order to properly understand the application criteria regarding Section 189A.

Sub-section (1) of section 189A first and foremost excludes employers employing 50 employees or less from the application of Section 189A.

Employers employing 51 employees, and more are provisionally eligible in respect of Section 189A, provided that the employer qualifies as follows in respect of number of employees employed and number of employees destined to be retrenched:

• Section 189A(1)(i):

Qualification criterion:

Workforce: 51-200???????????????No of Retrenchees: 10+

Disqualification criterion:

Workforce: <51 / >200??????????No of Retrenchees: <10

• Section 189A(1)(ii):

Qualification criterion:

Workforce: 201-300?????????????No of Retrenchees: 20+

Disqualification criterion:

Workforce: <201 / >300????????No of Retrenchees: <20

• Section 189A(1)(iii):

Qualification criterion:

Workforce: 301-400?????????????No of Retrenchees: 30+

Disqualification criterion:

Workforce: <301 / >400????????No of Retrenchees: <30

• Section 189A(1)(iv):

Qualification criterion:

Workforce: 401-500?????????????No of Retrenchees: 40+

Disqualification criterion:

Workforce: <401 / >500????????No of Retrenchees: <40

• Section 189A(1)(v):

Qualification criterion:

Workforce: 500+??????????????????No of Retrenchees: 50+

Disqualification criterion:

Workforce: <500???????????????????No of Retrenchees: <50

Note: Section 189A(1)(b) provides that the number of employees retrenched in the 12 months preceding the current retrenchment exercise, is to be taken into account in order to determine the number of retrenchees specified as criterion in the various sub-categories above.

The Section 189A consultative process

The Section 189A consultative process can be conducted in basically two ways:

• Through facilitation by the CCMA; or
• Following a process where facilitation by the CCMA is not required or resorted to.

Consultative process facilitated by the CCMA:

In this regard, reference is made to the provisions of Section 189A (3) – (7)

The appointment of a CCMA facilitator occurs in one of the following circumstances:

• Where the employer formally requests facilitation in its notice in respect of Section 189(3); or
• Where a consulting party, representing the majority of employees facing possible retrenchment, has formally requested facilitation and notified the CCMA accordingly on notice of 15 days: or
• By agreement by the consulting parties.

The administrative requirements governing the facilitation process are made known by way of ministerial regulation covering inter alia time periods and its variation, powers and duties of facilitators, circumstances where the CCMA may charge a facilitation fee, etc. Refer in this regard to Section 189A (6).

Dispute resolution:

Presuming that the prescribed consultative process, as outlined in Part 1, has been followed to the point where retrenchments could eventually not be averted and the notion to retrench is challenged, the following information, pertaining to dispute resolution, detailed in Section 189A (7), applies:

• A prerequisite for invoking the dispute resolution process is that 60 days must have elapsed since the date on which the employer issued the Section 189 (3) notice.
• This having been the case:

o??The employer may give contractual notice of retrenchment in accordance with Section 37 of the Basic Conditions of Employment Act (BCEA); and

o??A registered trade union or the affected employees themselves, who received notices of retrenchment, may either:

• Give notice of a strike in accordance with Section 64 (1) (b) or (d) Note: The prerequisite 30-day period referred to in Section 64 (1) (a) (ii) does not apply where a facilitator is appointed (refer Section 189A (11) (a) (i)); or
• Refer a dispute regarding the fairness of the reason for retrenchment to the Labour Court in accordance with Section 191(11). Refer to Section 189 (7)(b)(ii).

The unfacilitated consultative process

In this regard, reference is made to the provisions of Section 189A (8) – (9)

Again, it is presumed that the consultative process as outlined in Part 1 has been followed to the point where retrenchment could not be averted and the notion to retrench is challenged.

Dispute resolution:

• ?A prerequisite for invoking the dispute resolution process is that 30 days must have elapsed since the date on which the employer issued the Section 189 (3) notice, before a dispute can be referred to the CCMA or a Bargaining Council (BC) having jurisdiction. Refer to Section 189A (8)(a).
• ?Subsequently and provided that either a following period of 30 days has elapsed since the date of referral of the dispute or a certificate of non-resolution has been issued in consequence of an unsuccessful conciliation attempt:

?o??The employer may give contractual notice of retrenchment in accordance with Section 37 (1) of the BCEA (Refer to Section 189A (8)(b)(i)); and

o??A registered trade union or the affected employees themselves, who received retrenchment notices, may:

• Give notice of a strike in accordance with Section 64 (1) (b) or (d) – refer to Section 189A (8)(b)(ii) (aa); or
• Refer a dispute concerning the fairness of the reason for retrenchment to the Labour Court in accordance with the provisions of Section 191 (11). Refer to Section 189A (8)(b)(ii) (bb).

General requirements regarding dispute resolution in consequence of Section 189A

• ?Notice of a strike may not be given regarding a dispute involving the fairness of the reason to retrench, where such dispute has been referred to the Labour Court. Refer to Section 189A (10)(a)(i).
• ?A dispute concerning the fairness of the reason to retrench may not be referred to the Labour Court, where notice to strike has been given in this regard. Refer to Section 189A (10)(a)(ii).
• ?Where a trade union gave notice of a strike, no member covered by a collective agreement dealing with restructuring or employee in respect of which such collective agreement has been extended, may refer a dispute involving the fairness of the reason to retrench to the Labour Court and any such referral, already made, will be deemed to be withdrawn. Refer Section 189A (10)(b)(i) & (ii)).
• ?The following provisions of Chapter IV of the LRA, dealing with strikes and lockouts, apply to any strike or lock-out pertaining to Section 189A:

?o??Section 64 (1) and (3), with the exception that the employer may only lock out defensively, that is, in reaction to a strike notice having been issued.

?o??Subsection (2)(a) sic unqualified. Uncertain aspect no 1: Logically, reference is made to Subsection (2)(a) of Section 64, which is at issue here. However, this subsection deals with a refusal to recognise a trade union as a collective bargaining agent or to agree to establish a bargaining council, which obviously has no bearing on the subject matter of dispute resolution within context of Section 189A. It therefore remains uncertain which subsection (2)(a) is referenced here and within which context.

?o??Section 65(1) and (3) dealing with the prohibition of participation in a strike or lock-out when the party contemplating industrial action is bound in this regard by a collective agreement, arbitration award or ministerial determination, regulating participation in industrial action.

o??Section 66, dealing with secondary strikes.

?o??Sections 67, 68 and 69 dealing with a strike and lock-out in compliance with the LRA, strike and lock-out not in compliance with the LRA, as well as picketing, respectively.

o??Section 76, dealing with replacement labour. Uncertain aspect no 2: What is at issue here is, on the one hand, a prohibition of employing replacement labour during a protected strike, where the whole or part of the employer’s service has been designated a maintenance service (refer to Section 76 (1)(a)).

On the other hand, Section 76 deals with a prohibition to employ someone to do the work of an employee who has been locked out, unless the lock-out is a defensive lock-out (refer to Section 76 (1)(b)). The latter prohibition is however not where the apparent confusion lies, but the former prohibition.

Section 65(1)(d)(ii), also cited as applicable in respect of Section 189A, clearly and unambiguously prohibits an employee to participate in a strike where such employee is engaged in a maintenance service. Similarly, lock-out is also prohibited in such circumstances.

?In consequence of Section 65(1)(d)(ii) it is not legally possible to engage in a protected strike where the employer’s business is designated a maintenance service. This logical conclusion renders what is stated in Section 76 (1) (a) nonsensical and superfluous. The only possible strike embarked upon within the circumstances described in Section 76 (1)(a) will be an unprotected strike.

?Where the employer is confronted with such unprotected strike, in contravention of Section 65(1)(d)(ii), the employer is at liberty to dismiss the strikers en masse if they fail to adhere to an ultimatum to return to work. In such circumstances the dismissed striking employees can be replaced permanently, hence temporary replacement labour, as contemplated in Section 76 (1)(a), finds no application within this context.

?The reason why Section 76, as a whole, is referenced as being applicable in respect of strikes and lockouts within context of Section 189A escapes my understanding, unless the intention of the legislator was to exclusively refer to Section 76 (1)(b), which resonates with what is provided in the referenced Section 189A (11)(a)(ii).

Recourse to the Labour Court by the employee party, has been confirmed both within context of a facilitated consultative process and an unfacilitated consultative process, notably, where the fairness of the reason to retrench is disputed (Refer Section 189A (7)(b)(ii) and Section 189A (8)(b)(ii) (bb)).

?The employee party’s recourse to the Labour Court is also confirmed in respect of Section 189A (13) where the fairness of the process followed is disputed. Of relevance to this recourse is Sections 189A (14), (15), (16) and (17).

?Important - A distinction is to be drawn between a dispute involving the fairness of the reason to retrench and the fairness of the procedure followed when an employee is retrenched. Without this distinction having been drawn, the fact that the Labour Court is prevented from adjudicating a dispute concerning the retrenchment of an employee in terms of Section 189 (18), may appear, at first glance, as a contradiction in terms, especially having regard to the declared accessibility of the Labour Court in respect of Section 189A (7)(b)(ii) and Section 189A (8) (b)(ii) (bb).

?The difference lies in the fact that recourse to the Labour Court within context of Section 189A is restricted to disputes involving the fairness of the reason to retrench. Disputes involving the procedural fairness of a retrenchment would be subjected to arbitration under the auspices of the CCMA or Bargaining Council having jurisdiction.

Conclusion

Resorting to retrenchment as of necessity in order to survive economically, is not a decision of choice. It brings along a lot of hardship, not only for those losing their livelihood in the process and those dependent on them, but also for the business owner and employer having to dispose with a considerable part of what he/she has build up over many years.

Part 2 of the article on retrenchment focuses on the larger scale restructurings and associated retrenchments. Admittedly, Section 189A is not the most clear and transparent piece of legislation and getting to grips with what specifically it obliges the employer and the employee to comply with, may be a bit daunting on first glance.

It would have served no purpose when writing Part 2 of this article to simply quote the relevant statutory provisions verbatim in order to make you acquainted with what is legally expected of you when faced with restructuring resulting in retrenchment. Rather, I paraphrased the narrative in, hopefully, more understandable language, based on my personal understanding, focusing only on the salient aspects involved, at the same time citing the relevant sections and subsections within the statutes concerned (LRA and BCEA) for reference purposes. The ideal is that you access these statutes as the primary source and use this article as an explanatory tool. The proper grasping of what Section 189A entails will require using Part 1 and 2 concurrently as points of reference, as there is an element of intertwining involved.

It is not the first occasion where I detected a drafting error in the wording of statutes, hence I will not be surprised if the uncertainties highlighted above can also possibly be attributed to drafting errors.

I trust that this article at least makes for a better reading and understanding of the intricacies of Section 189A.

Assistance in this regard is available by simply contacting the JJK ER/IR Consultancy at [email protected] .

Author: J J (Koos) van der Merwe – Chartered HR Professional, registered with the SABPP

09 February 2021