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Dismissals for operational requirements

Dismissals for operational requirements


1. Introduction

Dismissals for operational requirements are proving to be a challenging area for human resource practitioners. As businesses struggle to adapt to international pressures and stagnant domestic economic growth, constant business reorganisation has become a fact of life for many South African employers.

As every practitioner knows, the legal requirements for dismissal for operational requirements are set out in s189 of the Labour Relations Act 66 of 1995 as amended and further elaborated upon in the accompanying Code of Good Practice for Dismissal for Operational Requirements.

Strict compliance with these provisions does not necessarily mean that any retrenchment exercise will necessarily be fair - at least from the Labour Court's perspective. The difficulty for practitioners lies in the "discretionary" requirements of s189. This is best illustrated is recent cases from the Labour Court.

2. The duty to consult - When to start consulting?

Neuwenhuis v Group Five Roads & others - It is incumbent on the employer to consult the employee as soon as it (i.e. the employer) "contemplates" the possibility of a dismissal. Kotze v Rebel, supra, at p.142C-143E. While there can be no brook with the employer's entitlement to consider a restructuring exercise and even to take a decision in principle, once the employer has identified retrenchment as a possible consequence of its restructuring process, it is obliged, at that stage, to consult the employee on the issues stipulated in the statute.

In Kotze's case, supra, at p.150H, Conradie J postulated the test as follows: "[45] From a productive point of view the employer wants to be certain of his decision before facing the disruption which it is bound to cause; from an industrial relations point of view, he dare not be certain before he invites consultation (and thereby makes his intention known).

A court can only afterwards monitor how open or closed an employer’s mind was when he embarked on the consultation process. An employer must remain sufficiently flexible to conduct meaningful discussions with his employees. He is therefore obliged to invite input from the employees. If he fails to do this, and fails to give a reasonable opportunity for the employees to make their contribution, he leaves himself small opportunity for arguing before a court that his mind had not been made up."

3. Senior managerial employees

Invariably senior managerial employees have themselves been part of the strategic decision making process which may lead to organisational restructuring, even affecting their own jobs. The Labour Court has in such instances acknowledged that the consultation process with them may take an attenuated form. This does not however imply that there is less of an obligation to enter into meaningful consultation with such employees.


The Labour Appeal Court reaffirmed the rights of senior managerial employees to be fully consulted before being retrenched. The Court noted that implicit in the requirement of a free opportunity to make a meaningful proposal in the consultation process is the duty to give employees reasonable notice of the proposed retrenchment.

"He or she must be afforded the opportunity to come to terms with the situation, to reflect on the matter, to seek guidance and prepare for consultation and then only can a fair and genuine consultation begin. What constitutes such reasonable time would depend on the circumstances of each case."

4. Consensus seeking - achieving the underlying purpose of s. 189

Johnson & Johnson (Pty) Ltd v CWIU [1998] 12 BLLR 1209 (LAC) at 1216J-1217A

The achievement of a joint consensus-seeking process may be foiled by either one of the consulting parties. The employer may obviously frustrate it by not fulfilling its obligations under s. 189(1), (3), (5), (6) and (7). The other consulting party may do it by refusing to take part in any of the stages of the consultation process, or by deliberately delaying the whole process.

It may also appear that any one of the parties simply went through the entire formal process with no intention of ever genuinely reaching agreement on the issues discussed.

These different possibilities depend on the facts of each particular case. [29] The important implication of this is that a mechanical, "checklist" kind of approach to determine whether s. 189 has been complied with is inappropriate.

The proper approach is to ascertain whether the purpose of the section (the occurrence of a joint consensus-seeking process) has been achieved. If that purpose is achieved, there has been proper compliance with the section. If not, the reason for not achieving the purpose must be sought. If the employer alone frustrated the process in some way or another, there can be no compliance. If the employer was not at fault and did all it could, from its side, to achieve the kind of consultation referred to above, the purpose of the section would also have been achieved.

5. Using s. 189 as a checklist

Neuwenhuis v Group Five Roads & others

When embarking upon the statutory consultation process, the employer is not required to follow the wording of the LRA as if it were a checklist, which had to be strictly adhered to. Rather, the Court (in reviewing a party's purported compliance) should consider whether the ultimate purpose of the section has been achieved.


The Labour Appeal Court has noted that a mechanical "check list" approach to determine compliance with s 189 is inappropriate. The proper approach is to ascertain whether the purpose of the section (the occurrence of a joint consensus seeking process) has been achieved. (See Johnson and Johnson (supra) at 1217A).

6. Referral of issue in dispute to advisory arbitration

Neuwenhuis v Group Five Roads & others

During a retrenchment consultation the applicant employee requested that the issue over which the parties had deadlocked be submitted to advisory arbitration. The Applicant proposed a quick and speedy arbitration to be presided over by an IMSSA arbitrator (or someone similar) to be conducted "in house".

The Applicant was so bold as to say to the Respondent that he would stand or fall by the outcome of any such advisory arbitration. The company, however, refused to be drawn into this dispute resolution mechanism and did not, at the time, provide any trenchant reason for its refusal.

The Court found this to be an acceptable approach - "While the Respondent's reluctance to go to advisory arbitration is notionally grounded in principle, I consider that the Applicant's approach was a mature and non-confrontational way of attempting to reach consensus in terms of the statute."

7. Bumping - the "employment universe"

Neuwenhuis v Group Five Roads & others

Section 189 does not prescribe the so-called employment "universe" across which the selection criteria should be applied, i.e. whether by department, branch, division, company, corporate group or whatever. Apparently, André van Niekerk in Contemporary Labour Law, August 1992, entitled "Selection Criteria - the ‘bumping’ debate, derived the coining of this phrase "universe".

The distinction implicit in this phrase was accepted by the Industrial Court in Raad van Mynvakbonde en Andere v Harmony Goudmyn- maatskappy Beperk (1993) 14 ILJ 183 (IC) at 198C, where the following extract from van Niekerk's article is quoted: "The application of LIFO on a plant basis would, it is suggested, be fair in respect of those employees whose employment universe is the plant.

In respect of the personnel managers, it would be clearly unfair to apply LIFO on a plant basis, thereby selecting the personnel manager for retrenchment on the basis of a month's service at the plant, irrespective of his 20 years' service with the company. The employment universe in this instance is the head office and the three plants - the personnel manager with least service in that universe ought to be selected for retrenchment."

In Amalgamated Workers' Union of SA v Fedics Food Services [1999] 2 BLLR 123 (LC) - Landman J recognised the necessity to "bump" as a matter of principle.

Although it was not the practice in the industry to "bump" employees, nevertheless there was an obligation on the employer to consider whether it should do so because, if it was able to do so in a fair manner which was not injurious to itself and to other employees, then it should have given serious consideration to doing so, to avoid the consequences of retrenchment.

I have considered the evidence as to why Fedics decided not to "bump" employees. It appears to me that fair reasons have been provided." The Learned Judge then considers the arguments advanced in that case and finds that "bumping" would not have been practical or workable in the prevailing circumstances.

8. Selection for dismissal

‘Caution must be applied when an employer declares all jobs to be redundant because, unless the employer is closing down or moving, that clearly cannot be an accurate description of what changes the employer is seeking to make. After all, it would be difficult to sustain an argument that the CEO's position was ever threatened by redundancy. Modifying a job or its responsibilities does not make that job redundant because jobs are normally constantly being redefined and adapted).

This case is also important since it illustrates the tendency for employers to use subjective criteria (often based on an assessment of the employee's performance record despite their being no performance appraisal system in place) in identifying candidates for retrenchment.

9. Pre-trial Conferences


"Generally speaking the function of a pre-trial conference is to limit issues and not widen them. In so far as first respondent contends in paragraph 5 that he persists in his claim that there was no commercial rationale for his retrenchment, such claim did not form part of his statement of case. Whilst it may have been the respondent's legal representative's intention to raise the substantive fairness of the dismissal of the respondents, it was not an issue on the statement of case.

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Gary Watkins

Gary Watkins

Managing Director


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