Retrenchment consultations and the Labour Relations Act 66 of 1995

Provided by Cowan-Harper-Madikizela

By Neil Coetzer & Jayson Kent

Topics Dispute Resolution | Labour Law

30 Apr 2018

Identifying consulting parties in terms of section 189(1) of the LRA

Employers are often uncertain as to who they should consult with when embarking on a restructuring exercise in terms of section 189 of the Labour Relations Act 66 of 1995, as amended (“the LRA”). Depending on various factors, the consultation process could last several months and as a result, identifying the correct party (or parties) to consult with is of paramount importance. A failure to do so may render the entire process unfair and consequently require the employer to start again. In circumstances where an employer is contemplating retrenchments due to financial difficulties, having to restart the process can have dire consequences.

Section 189(1) of the LRA provides for a hierarchy in relation to consultation for purposes of restructuring exercises, known as the cascade principle. As a point of departure, the LRA requires that employers must consult with any person with whom it is required to consult in terms of a collective agreement (section 189(1)(a)). In the absence of a collective agreement specifying the relevant party, an employer must consult with any relevant workplace forum (section 189(1)(b)).

While the LRA provides for the establishment of workplace fora, this concept has never really gained any traction in South Africa and employers rarely have to engage in a workplace forum. Where no such workplace forum exists, the employer is required to consult with any registered trade union whose members are likely to be affected by the proposed dismissals (section 189(1)(c)). If there is no such trade union, the employer must consult with the employees likely to be affected by the proposed dismissals (or their representatives nominated for that purpose) (section 189(1)(d)).

At face value, this appears to be a simple process. However, in practice, this becomes more complicated. In some instances, certain affected employees do not fall into any of the categories in sections 189(1)(a), (b) or (c). By way of example, the employer may wish to retrench 10 employees, 7 of whom are members of a trade union. The employer may be of the view that in terms of the hierarchical structure it is only required to consult with the trade union concerned. This would, however, result in the remaining 3 employees having no participation in the consultation process whatsoever and no opportunity to influence a process which would result in their own dismissal.

In dealing with this problem, employers should take note of the finding of the Labour Appeal Court in Johnson & Johnson (Pty) Ltd v Chemical Workers Industrial Union (1999) 20 ILJ 89 (LAC). In that case, the LAC found that a checklist approach to section 189 of the LRA is inappropriate and that the proper approach is to ascertain whether the purpose of that section has been achieved (see paras 28-29). This may, therefore, involve consulting with more than one of the parties set out in section 189(1) in order to achieve the objectives of the LRA.

The Courts have grappled with the cascade principle on several occasions since Johnson & Johnson, with conflicting views emerging. In Sikosana & Others v Sasol Synthetic Fuels (2000) 21 ILJ 649 (LC), the Labour Court held that section 189(1) of the LRA ‘quite deliberately renounces dual consultation in favour of the single level of consultation for which it provides’. The Court’s finding appears to have been premised on the understanding that the hierarchical structure of consultation created by section 189(1) was created intentionally and that the Courts should not interfere with this legislative choice.

Conversely, the Labour Appeal Court in Baloyi v M & P Manufacturing (2001) 22 ILJ 391 (LAC) held as follows:

“[23] In keeping with the premise of the Act, s 189(1) envisages that the collectivities of management and labour represented by trade unions should engage in an appropriate process of consultation, save where the affected employees are not so represented….”

The LAC emphasized the importance of consulting as ‘collectivities’, except where the affected employees are not represented by those parties. This caveat introduced by the LAC was considered by the Labour Court in SACCAWU v Amalgamated Retailers (Pty) Ltd (2002) 23 ILJ 165 (LC). In this case, the Court dealt specifically with the issue of consulting individual employees who are not covered by sections 189(1)(a)-(c). The Court held, inter alia, as follows:

“[25] Section 189 of the LRA requires consultation with a defined consulting partner. The hierarchy established by s 189(1) establishes the identity of that partner. It is entirely possible, in the discharge of an obligation under s 189, that an individual employee is never directly advised that his or her continued employment is in jeopardy. This is the consequence of a deliberate recognition by the Act of the primacy of the rights accorded to trade unions, workplace forums, and ad hoc employee representatives in the consultation process.”

Referring to the Baloyi and Sikosana cases quoted above, the Court found as follows:-

“[26] …Neither of these cases deals with a situation where the consulting partner identified by the Act is not an authorized representative of the employees affected by the proposed retrenchment… This point was not raised during the proceedings, but I would incline towards a view that having regard to the purpose of consultation as explained in Johnson & Johnson v CWIU, all affected employees should directly or indirectly be given an opportunity to influence the employer’s decision-making process. The identification of a consulting party by applying the criteria established in s 189(1)(a), (b) and (c) might confer exclusive rights on the partner with the first claim in relation to the other potential partners listed in those paragraphs, but it does not relieve the employer of an obligation to consult in terms of subsection (d) with affected employees or their representatives nominated for the purpose if those employees are not represented in some manner or form by a collective bargaining agent, workplace forum or registered trade union respectively.” (our emphasis)

More recently, the LAC in Aunde South Africa (Pty) Ltd and Others v National Union of Metal Workers of South Africa (2011) 32 ILJ 2617 (LAC) held:

“[32] Where an employer consults in terms of agreed procedures with the recognized representative trade union in terms of a collective agreement which requires the employer to consult with it over retrenchment, such an employer has no obligation in law to consult with any other union or any individual employee over the retrenchment. If such a consultation exercise culminated in a collective agreement that complies with the requirements of a valid collective agreement, all employees including those who are not members of the representative trade union that consulted with the employer are bound by the terms of such collective agreement irrespective of whether they were party to the consultation process or not.

The question of whether an employer is obliged to consult with an individual employee during a retrenchment exercise was once more before the Labour Court in the matter of Ketse v Telkom SA SOC Ltd (2015) 4 BLLR 435 (LC). In Ketse the employee sought to rely on a finding of the Constitutional Court in Aviation Union of South Africa v South African Airways (2012) 3 BLLR 211 (CC) to the effect that when interpreting legislation, an interpretation that takes away rights of employees should not be preferred.

The Labour Court in Ketse referred with approval to the Judgment in Aunde, and specifically to the paragraph quoted above. The Court found that there is no obligation on an employer to consult with an individual employee if there is a collective agreement setting out an agreed procedure for consultation. It is, however, not clear from the Ketse judgment whether the collective agreement had been extended to the entire workplace and thus bound all employees in that workplace.

In view of the conflicting views expressed by the Courts, in circumstances where employees are not bound by a collective agreement, are not part of a workplace forum or are not members of a trade union, it appears that employers would be well-advised to consult with those employees or their nominated representative(s).

Employers should tread carefully in these circumstances. Since a retrenchment constitutes a ‘no-fault’ dismissal, Courts are likely to scrutinize the consultation process more closely and employers would do well to adopt a more inclusive approach to consultation. While the position is not entirely clear, erring on the side of caution reflects a sound industrial relations approach to the issue.