COVID-19 may not be killing your Employees, but it could be killing your business. Is Retrenchment an instant option?

COVID-19 may not be killing your Employees, but it could be killing your business. Is Retrenchment an instant option?
02 Apr 2020

Introduction

South Africans are in a state of COVID-19 information overload and Employers and Employees alike are finding themselves in circumstances where information is either unreliable or presently uncertain, particularly in respect of what the consequences are for Employees should the Employer’s business shut down due to the COVID-19 pandemic, or in circumstances where the Employer’s business has already operationally and for all intents and purposes shut down. Both Employers and Employees must be skeptical of social media hype and seek the guidance of properly qualified legal practitioners in respect of the appropriate employment and labour law measures and compliance to be implemented during this period.

Your business is feeling the financial consequences of COVID-19. What now?

In the past few days we have been inundated with queries by Employers, many of whom trade in the hospitality industry, which businesses are inclusive of, but not limited to; hotels, restaurants, farm lodges, travel and tourism businesses and the like whose customers have either cancelled their reservations, or bookings have dropped in certain circumstances to 100%. The hospitality industry, and other industries, are presently not economically and operationally surviving and the need for reliable information in respect of employment and labour law compliance is currently imperative.

Employers in all industries need to immediately educate themselves in respect of compliance with South African employment and labour laws if they foresee that their businesses will shortly be shutting down or have already shut down operationally.

Can your business avoid retrenchment?

Employers whose businesses are likely to be severely impacted by the spread of COVID-19, such as the hospitality industry for example, may be thinking of retrenching some or all of their Employees, simply because they will not be able to afford to pay salaries if the business itself is not generating income. However, Employers need to be mindful that although it is unknown how long the COVID-19 crisis will prevail, it may be temporary. Accordingly, to err on the side of caution, temporary employment measures should be considered first and foremost prior to considering retrenchment.

In these circumstances, alternatives to retrenchment could include temporary remote working arrangements if possible, special leave if the Employer can afford to grant such an indulgence, utilizing annual leave or utilizing short term measures of placing Employees on short time work. Employers should be proactive in engaging with their Employees in respect of the aforementioned alternatives to retrenchment. That said, Employers must be mindful of the fact that measures such as implementing short time work for example cannot be unilaterally imposed on Employees. If the Employee’s contract of employment does not make provision for short time work, then the Employer must first consult with Employees in respect of short time work and an agreement must be reached between the Employer and Employee in this regard. If no agreement is reached and an Employer unilaterally enforces short time work on its Employees, this unilateral act could result in a labour dispute and claim against the Employer relating to what is called a unilateral change to the terms and conditions of employment.

Employees on the other hand must be mindful of the fact that short time work is an alternative to retrenchment and in the era of the COVID-19 pandemic, it certainly would be a saving grace to have some income, rather than to be retrenched and have no income at all. Nevertheless, if Employers and Employees cannot come to an agreement regarding the implementation of short time work or other interim employment arrangements, alternatively if the business is shutting down and short time work or other arrangements is not an option to be explored then Employers must follow the retrenchment process set out in the Labour Relations Act 66 of 1995 (“the LRA”).

Your business has no alternative but to consider retrenchment. What is the process?

The COVID-19 pandemic does not, until we are advised otherwise by our Government via new legislation or temporary regulations, allow for an Employer to skip the retrenchment process set out in the Act and merely retrench Employees without due process. It is imperative that the correct processes, rules and regulations as set out in section 189 of the LRA are followed by Employers if they are considering retrenchment. Failure to follow the process of retrenchment as per the LRA could lead to mass unfair dismissal claims against Employers which would naturally further cripple the Employer during this period.

Employers and Employees may have heard that the Commission for Conciliation, Mediation and Arbitration (“the CCMA”) has temporarily shut its doors due to the COVID-19 outbreak. Indeed, this is true, and the CCMA has issued an official statement in that regard. However, it must be noted that the CCMA has shut its doors purely as a preventative health measure and in alignment with our Government’s instructions due to the COVID-19 outbreak. It must further be noted that the CCMA has not shut its doors to curtail unfair dismissal claims or any other claims by Employees against Employers. Employees may still refer their unfair dismissal disputes, including retrenchments for operational requirements, to the CCMA via email service to [email protected] (Western Cape Region) or [email protected],za (CCMA Head Office) attaching proof of email or fax or hard copy service of their referral on the Employer or former Employer.

The temporary shutdown of the CCMA does not mean that failure to follow the LRA in terms of retrenching Employees will result in a skip in the process and Employers ‘getting a pass’ during this crisis. Employers are by law required to follow the steps of the retrenchment process and most importantly to ensure their Employees receive severance pay and all statutory monies owing to them, inclusive of their UI19 documentation so they may start the process of claims from the Unemployment Insurance Fund (“the UIF”). Claiming from the UIF during this period is critical as obtaining new employment during this crisis is unlikely.

Conclusion

The retrenchment process includes a consultation and joint consensus seeking exercise between the Employer and the Employee to consider all options to avoid retrenchment or at the very least mitigate the impact the retrenchment will have on the Employee. Contact SchoemanLaw Inc. should you require any guidance in implementing the retrenchment process lawfully and in compliance with the LRA. We are equipped to assist you with the required notices and guidance in respect of the consultation and joint consensus seeking exercise as it relates to the retrenchment process.

See also:

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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