Newsflash: Retrenchment Post The State Of Emergency

In terms of regulation 30E of the Covid-19 Regulations 1 (the Regulation), the retrenchment of employees during the state of emergency is prohibited. The State of Emergency is set to end on 30 September 2021 and therefore the prohibition against retrenchment will be lifted. Employers will be able to commence the retrenchment process in terms of Section 25 of the Employment Act 2 (the Act).

For a retrenchment process to be lawful it must satisfy both procedural and substantive fairness.

Substantive fairness speaks to the commercial or business justification for the retrenchment. In order for an employer to commence the retrenchment process there must be a commercial or business justification for the retrenchment. In the case of Innocent Chinu and 13 others v Pelican Moving Company, the Industrial Court held that “there is no distinction between operational requirements for purposes if making profit and for the purposes of ensuring survival of a business”. Though the employer has the managerial prerogative to economise its business, this prerogative must be exercised fairly 3 . Substantive fairness requires that:

• ?there must be a valid commercial rationale or justification for the retrenchment. If it turns out that the real reason was to victimise them then the commercial rationale for retrenchment does not exist;
• employees must, in good time, be given relevant information in order for them to understand the reasons why their company is considering retrenchment; and
• the employer must consider ways to avoid retrenchment or minimise its effects. The employer must show that all other alternative steps to prevent retrenchment or limit its scope have been duly considered and implemented.

Procedural fairness relates to the procedure followed by the employer prior to retrenching an employee. Procedural fairness requires that 4 :

a) once the employer forms the intention to retrench employees he shall immediately give written notice of that intention to the Commissioner of Labour and every employee who will or is likely to be directly affected by the retrenchment;

b) the employer must undertake consultations with the employees or union. Consultation must be done in good faith and not simply to afford the employee an opportunity to comment on a decision that has already been taken. The principal purpose of the consultations is threefold 5 :-

• ?for the parties to seek ways of avoiding or averting the need to terminate the employee's employment;
• if the retrenchment proves unavoidable, the parties should consult on a fair
• selection criterion and a retrenchment policy to be applied; and
• to consult on ways of alleviating the hardships of retrenchment e.g a reasonable severance package and possible alternative employment opportunities within the business.

c) in terminating employment contracts, the employer, wherever reasonably practicable, must comply with the principle of first-in-last-out. In applying this principle the employer must take into account the need for the efficient operation of the company and the ability, experience, skill and qualifications of each employee concerned. Therefore a more skilled employee who recently joined the company may be retained due to the company’s requirements and a longer serving employee who is less skilled may be retrenched;

d) if within six months after retrenchment, the employer seeks to employ workers for occupations which were the subject of the retrenchment, the employer must give priority to the retrenched employees to such extent as it is reasonably practicable. Failure on the part of the employer to observe either procedural fairness or substantive fairness, or both, may invalidate the retrenchment.

Failure on the part of the employer to observe either procedural fairness or substantive fairness, or both, may invalidate the retrenchment.

Should you require any assistance with Employment Law and terminations, please feel free to contact us at [email protected] or +267 3975779.

The information contained in this newsflash was intended for our clients and correct to the best of the author's knowledge at the time of publication. Before making any decision or taking any action, you should consult the contacts listed here.