Retrenching employees can be an expensive business. You’ll have to pay each employee a minimum of one week’s pay for each completed year of ongoing service, and that total liability can add up alarmingly.
A recent Labour Court ruling has however set out clear guidelines for avoiding that cost by arranging alternative employment for your retrenched employees.
A lost cleaning contract and a raft of retrenchments
A contract cleaning services company, fearing it would lose a particular contract in an upcoming tender process, warned all staff employed at the factory in question that they could face retrenchment.
Sure enough, the tender went to a competitor. The company was able to absorb 130 employees into other positions and locations, but 41 had to be retrenched. Eleven of them were given severance pay, but the employer declined to pay anything to the 30 who accepted alternative employment.
The employees were having none of that, and approached the CCMA (Commission for Conciliation, Mediation and Arbitration). The CCMA awarded them both retrenchment pay and notice pay.
The employer then took the matter to the Labour Court, which set aside those awards. So, the employer is off the hook on both counts – and employers and employees should understand the Court’s reasoning for that decision.
Having your cake, and eating it
Employers: Two practical steps to avoid liability
Employers should take two lessons from this ruling:
Another point to consider
It’s worth noting perhaps that the Court also mentioned in passing (“obiter dicta”) that even if an employee were to find her own new employment “through her own efforts and without the aid of her retrenching employer” she “needs no soft cushion of severance pay to land on” and would have to justify any such claim.
Still, on the “better safe than sorry” principle, employers should not take chances here - rather be pro-active in arranging alternative employment as soon as you can.
A final thought for employees
Before you decide to reject any offer of alternate employment bear in mind that, as this court confirmed, it will be up to you to prove your entitlement to severance and/or notice pay – it’s not automatic!
Whether you’re an employer planning to retrench staff, or an employee facing an impending retrenchment, getting the best legal advice is key.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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