Section 189 of the Labour Relations Act 66 of 1995 (LRA), as amended, permits an employer to dismiss employees for operational requirements or reasons. The phrase “operational requirements” is a broad term referring to economic, technical, structural or similar needs of an employer. Before effecting such dismissals, however, the LRA places an obligation on employers to engage in a meaningful joint consensus seeking process in an attempt to reach consensus on, inter alia, appropriate measures to avoid and/or minimise the number of dismissals.
An employer could, as part of the Section 189 process, advice employees that in order for it to remain viable and operative, employees would have to agree to a reduction in their remuneration or other terms and conditions of employment. Those employees who refuse to agree to the reduction could be lawfully dismissed in order to allow the employer to employ employees who are prepared to accept the reduced terms and conditions of employment. This is , in essence, the reasoning that was adopted by the Supreme Court of Appeal in NUMSA and Others v Fry’s Metals (Pty) Ltd  3 ALL SA 318 (SCA).
However, in some instances employers are unwilling or even unable to dismiss employees. The reasons for this are varied, but usually stem from an operational necessity to maintain production or the inability to pay severance packages due to cash shortages. In the present economic climate it also seems to be a social and moral imperative to prevent job losses wherever possible. However, in these circumstances the question arises whether an employer is entitled to implement alternatives suggested during the section 189 consultations unilaterally if the purpose of doing so is to avoid a loss jobs. In other words instead of dismissing employees to achieve the reduction in cost, as per the Fry’s Metals scenario, it is preferable for an employer to retain its current complement of employees.
Dismissal for operational requirements may also only be effected as a measure of last resort. As a consequence, much attention must be given to alternatives which can be agreed to. Such alternatives include, inter alia:
- The reduction or changes to terms and conditions of employment;
- < >Short-time, placing a moratorium on new appointments, overtime or Sunday work;
- Transferring affected employees to other jobs in the employer’s business or group;
- Training or re-skilling employees for other available positions; and
- Granting extended unpaid leave.
Ideally, employers and employees should engage in constructive and rational dialogue on these issues in order to reach agreement. Such agreements, which are concluded between majority unions and the employer, can be extended to all employees at the employer’s workplace in terms of section 23 of the LRA. It often happens, however, that no agreement can be reached on alternatives. Parties routinely adopt polarised positions and engage in brinkmanship in order to force a particular outcome and thus undermine the entire consultation process. In those circumstances, employees may be forced to make an election as to whether they are prepared to accept the alternatives or not. At set out above, the position in respect of Fry’s Metals is clear.
In Entertainment Catering Commercial & Allied workers Union of SA and Others v Shoprite Checkers t/a OK Krugersdorp (2000) 21 ILJ 1347 (LC) the Labour Court (LC) found that employers are entitled to unilaterally change employee’s conditions of service in order to save jobs. This was confirmed by Media workers Association of SA and Others v Independent Newspapers (Pty) Ltd (2002) 23 ILJ 918 (LC) where the court held as follows:
- “Implementation of section 189 often results in changes in terms and conditions of employment. Such changes are justified if they are made in the course of a bona fide retrenchment exercise and as an alternative to retrenchment”.
In respect to large scale restructuring exercises subsections 189A(7) and (8) of the LRA provide that once employees are issued with notices of termination of their employment, they may either give notice of their intention to strike or, alternatively refer a dispute to the CCMA in respect of the alleged unfairness of the reason for their dismissal. Section 189A only permits a strike where employees are actually dismissed, something that would be avoided if an alternative is implemented.
In Irvin and Johnson Ltd v Commission of Conciliation, Mediation and Arbitration and Others (2006) 27 ILJ 935 (LAC) the LAC found that the purpose of this provision was to promote employment and to incentivise employers to take the necessary steps to provide alternative employment for all employees facing dismissal for operation requirements. While this provision clearly underscores the importance of job preservation, it is also important to point out that an employee’s refusal of an unreasonable offer of alternative employment would not absolve the employer from having to pay a severance package. The Labour court, as a court of fairness and equity, will inevitably inquire into the fairness and reasonableness of the employer’s chosen alternative as well as the final decision to implement the alternative unilaterally.
By : Richard Mokhele (LL.B)