The impact of the Covid-19 pandemic on our economy has been and seems likely to continue to be extremely severe, and many businesses face an uncertain future. While some may be able to wait it out, others may have no alternative but to consider a partial or even total shutdown of operations. It seems inevitable that retrenchment is a grim reality that many employers and employees will be facing.
Central to any retrenchment process is the requirement of consultation with affected parties, the purpose being to try and reach consensus on matters relating to the proposed retrenchment. One of these matters is the critical question of the method for selecting employees to be dismissed. Some methods have over time gained general acceptance, but there is no prescribed or exhaustive list of acceptable methodologies or criteria. The only guidance given in the Labour Relations Act is set out in section 189(7), which provides that:
The employer must select employees to be dismissed according to selection criteria –
(a) That have been agreed to by the consulting parties; or
(b) If no criteria have been agreed, criteria that are fair and objective.
In the first place therefore, criteria that are agreed to by the consulting parties (including in a collective agreement) will determine who will be selected for retrenchment. But where there is no agreement, the employer may implement its own criteria, provided that these are ‘fair and objective’. Length of service, or the ‘last in first out’ (LIFO) principle is generally acknowledged to be a fair and objective criterion, but is by no means the only one. In fact, the Labour Court has over time recognised a multiplicity of selection criteria such as experience, competency, efficiency, qualifications, key skills retention, service delivery, conduct, adaptability, attitude, potential and the like, and also that a matrix or mix of criteria is acceptable. But whatever the criteria, it is important that the system used to rate employees must be applied fairly and objectively. In Chemical Workers Industrial Union and Others v Latex Surgical Products (Pty) Ltd, attendance/absenteeism formed part of the selection criteria matrix. Apart from any consideration of whether this criterion was fair in the circumstances, the court found that its application was clearly unfair, the attendance factor having been applied even in cases where the absence had been due to ill-heath arising from an injury at work.
When using criteria such as performance and/or conduct, (which by their nature involve some subjectivity), it is advisable to give employees an opportunity to challenge or make representations about any past performance or disciplinary issues. Unlike dismissals for misconduct or incapacity, a dismissal for operational requirements is regarded as a ‘no-fault’ dismissal, and employers need to ensure that ‘dismissal does not cross the line between a no-fault dismissal and one based on performance’, as the court stated in Numsa v Columbus Stainless (Pty)Ltd. It is worth noting too that the judge in that matter was satisfied that the selection criteria used by the respondent company ‘met the threshold of objectivity and fairness’. The use of the word ‘threshold’ is an important indicator that the concept of ‘fair and objective’ is not required to be absolute – in other words, even should an element of subjectivity exist in the selection criteria, or in the choices made in applying the selection criteria, this need not necessarily be a fatal defect. And one also needs to bear in mind that the concept of fairness is a two–way street; that is to say, fairness needs to be determined from both the employer’s and the employee’s perspective.
Criteria that infringe a fundamental right when they are applied can never be fair. The Constitution protects individuals from being unfairly discriminated against, either directly or indirectly , on one or more grounds, ‘including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age , disability, religion, conscience, belief, culture, language and birth’. The Employment Equity Act (EEA) includes three further categories, namely family responsibility, HIV status and political opinion. Applying criteria that directly or indirectly unfairly discriminate against a particular category of employee should be avoided; interestingly, even the widely recognised LIFO criterion could lead to a claim of unfair dismissal on the grounds of age, as generally speaking the last in would be younger employees. What of affirmative action though? It is a feature of our employment landscape, but should it be considered when determining selection criteria?
In Thekiso v IBM South Africa (Pty) Ltd, a black female employee argued that in terms of the Employment Equity Act (EEA) she had been unfairly retrenched and that a white male should have been retrenched instead. The court did not agree, finding that the provisions of the EEA do not bring about an individual right to affirmative action. In terms of this judgment, there is no legal obligation on an employer to give preference to suitably qualified employees from a designated group (as defined in the EEA) when contemplating retrenchments.
The situation might be different though, where an employer has an employment equity plan which specifies transformation through affirmative action as a selection criterion in the case of a proposed retrenchment. This would still be subject to scrutiny however, and it would need to be shown that specific targets in the employment equity plan would in fact be negatively affected should transformation not be taken into consideration. One would also need to balance any transformation criterion against both the prohibition against unfair discrimination on any ground listed in the Constitution and EEA, as well as section 15(4) of the EEA, which provides that a designated employer is not required to take any decision concerning an employment policy or practice ‘that would establish an absolute barrier to the prospective or continued employment or advancement of people who are not from designated groups’.
Wherever an employer finds itself on the spectrum of the need to retrench, the first principle to bear in mind is that a dismissal that could have been avoided but was not is a dismissal that is without a fair reason. As stated by Nicholson JA in General Food Industries Ltd v FAWU:
“The loss of jobs through retrenchment has such a deleterious impact on the lives of workers and their family that it is imperative that -even though reasons to retrench employees may exist -they will only be accepted as valid if the employer can show that all viable alternative steps have been considered and taken to prevent the retrenchment or to limit it to the minimum.”