BY Ivan Israelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or on e-mail address: ivan@labourlawadvice.co.za.
Section 213 of the LRA indicates that the reasons for retrenchment may be based on the economic, technological, structural or similar needs of the employer. It is necessary to look at each of these reasons more closely.
- Typically, economic reasons given for the need for retrenchment include the ability to make money or to retain sufficient funds to continue operations.
- Technological reasons advanced for the need to retrench often include the introduction of new chemical formulas, equipment, computer packages, electronic systems and techniques that might reduce the need for labour.
- Structural reasons advanced for the need to retrench include the need to flatten the management structure or to switch from a functional corporate structure to a project based structure.
In Tiger Foods Brands Limited vs L Levy (CLL May 2007 page 102) the employer wished to introduce a system whereby employees would work on public holidays. The employees embarked on a strike in protest against this move. During the industrial action a large number of strikers behaved violently. As the company was unable to identify the perpetrators it concluded that it was unable to continue managing the workplace. It therefore decided to consider retrenching several employees.
The Labour Court the Court found that the company’s need to protect its managers and to manage the business fell under the definition of ‘operational requirements’ as they affected the viability of the business. These were grounds “similar to economic, technological or structural needs.”
Employers are warned not to interpret this finding as a license to invent their own reasons for retrenchment.
In Numsa vs Chabo and Joubert Air Conditioning (Lex Info 26 June 2025. Labour Court case number JS432/20) Numsa referred to the Labour Court an unfair retrenchment dispute on behalf of its members. The Court found in favour of the union primarily because the employer had failed to provide an acceptable reason for the retrenchments.
Specifically, the Court found that the employer’s claim that it had suffered a R3 million loss to be invalid. This was because subsequent financial reports showed the company was trading at a profit. The employer had failed to discuss its reasons with the union, had failed to consider alternatives to retrenchment and had adopted unfair criteria for retrenching NUMSA’s members.
As a result the Court ordered the employer to pay twelve months’ remuneration to two of the dismissed employees and to reinstate eight others with five years’ backpay each.
In the light of the above, before dabbling in the dangerous area of retrenchments, employers should ensure that its management is trained the requirements of labour law as regards retrenchment.
The innovative video series WALKING THE LABOUR LAW TIGHTROPE assists employers to provide their managers with very inexpensive training that allows the managers to achieve labour law knowhow at times suitable to their very busy schedules. Its 48 chapters, averaging 10 minutes in length each, can easily be watched at junctures when the manager has time. This greatly informative yet very engaging and practical video series provides crucial and user-friendly learning through the use of a stimulating, animated case study that runs throughout the 48-chapter series. Each chapter contains clear and important advice needed by workplace management on the basics of labour law over a very wide range of topics.
A further advantage is that the manager can, for a full year, easily go back to any of the 48 videos for purposes of refresher training or in order to access information on how to deal with a current workplace issue. This solves the problem of managers forgetting what they have learned.
This video series helps management to walk the shaky labour law tightrope and to run the workplace productively without falling into the labour law abyss.
To access our groundbreaking video series: WALKING THE NEW LABOUR LAW TIGHTROPE please go to www.labourlawvideos.co.za or contact Ivan on ivan@labourlawadvice.co.za
