Marius Scheepers & Company Attorneys
CODE OF GOOD
PRACTICE ON DISMISSAL BASED ON OPERATIONAL REQUIREMENTS
1517 in Government Gazette 20254 of 16 July 1999)
Notice is hereby
given in terms of section 203 (2) of the Labour Relations Act, 1995 (Act
66 of 1995), that the National Economic Development and Labour Council has
issued under section 203 (1) of that Act a code of good practice on
dismissal based on operational requirements as set out in the Schedule.
(1) The Labour Relations Act, 1995 (Act 66 of 1995) (“the Act”)
defines a dismissal based on the operational requirements of an employer
as one that is based on the economic, technological, structural or similar
needs of the employer. It is difficult to define all the circumstances
that might legitimately form the basis of a dismissal for this reason. As
a general rule, economic reasons are those that relate to the financial
management of the enterprise. Technological reasons refer to the
introduction of now technology which affects work relationships either by
making existing jobs redundant or by requiring employees to adapt to the
new technology or a consequential restructuring of the workplace.
Structural reasons relate to the redundancy of posts consequent to a
restructuring of the employer’s enterprise.
(2) Dismissals for operational requirements have been categorised as
“no fault” dismissals. In other words, it is not the employee who is
responsible for the termination of employment. Because retrenchment is a
“no fault” dismissal and because of its human cost, the Act places
particular obligations on an employer, most of which are directed towards
ensuring that all possible alternatives to dismissal are explored and that
the employees to be dismissed are treated fairly.
(3) The obligations placed on an employer are both procedural and
substantive. The purpose of consultation is to enable the parties, in the
form of a joint problem-solving exercise, to strive for consensus if that
is possible. The matters on which consultation is necessary are listed in
section 189 (2). This section requires the parties to attempt to reach
consensus on, amongst other things, appropriate measures to avoid
dismissals. In order for this to be effective, the consultation process
must commence as soon as a reduction of the workforce through
retrenchments or redundancies, is contemplated by the employer, so that
possible alternatives can be explored. The employer should in all good
faith keep an open mind throughout and seriously consider proposals put
(4) The Act also provides for the disclosure by the employer of
information on matters relevant to the consultation. Although the matters
on which information for the purposes of consultation is required are
specified in section 189 (3), the list in that section is not a closed
one. If considerations other than those that are listed are relevant to
the proposed dismissal or the development of alternative proposals, they
should be disclosed to the consulting party. In the event of a
disagreement about what information is to be disclosed any party may refer
the dispute to the CCMA in terms of section 16 (6) of the Act.
(5) The period over which consultation should extend is not defined in
the Act. The circumstances surrounding the consultation process are
relevant to a determination of a reasonable period. Proper consultation
(a) The opportunity to meet and report back to employees;
(b) the opportunity to meet with the employer; and
(c) the request, receipt and consideration of information.
(6) The more urgent the need by the business to respond to the factors
giving rise to any contemplated termination of employment, the more
truncated the consultation process might be. Urgency may not, however, be
induced by the failure to commence the consultation process as soon as a
reduction of the workforce was likely. On the other hand, the parties who
are entitled to be consulted must meet, as soon, and as frequently, as may
be reasonably practicable during the consultation process.
(7) If one or more employees are to be selected for dismissal from a
number of employees, the Act requires that the criteria for their
selection must be either agreed with the consulting parties or, if no
criteria have been agreed, be fair and objective criteria.
(8) Criteria that infringe a fundamental right protected by the Act when
they are applied, can never be fair. These include selection on the basis
of union membership or activity, pregnancy, or some other unfair
discriminatory ground. Criteria that are neutral on the face of it should
be carefully examined to ensure that when they are applied, they do not
have a discriminatory effect. For example, to select only part-time
workers for retrenchment might discriminate against women, since women are
predominantly employed in part-time work.
(9) Selection criteria that are generally accepted to be fair include
length of service, skills and qualifications. Generally the test for fair
and objective criteria will be satisfied by the use of the “last in,
first out” (LIFO) principle. There may be instances where the LIFO
principal or other criteria need to be adapted. The LIFO principle, for
example, should not operate so as to undermine an agreed affirmative
action program. Exceptions may also include the retention of employees
based on criteria mentioned above which are fundamental to the successful
operation of the business. These exceptions should, however, be treated
dismissed for reasons based on the employer’s operational requirements
are entitled to severance pay of at least one week’s remuneration for
each completed year of continuous service with the employer, unless the
employer is exempted from the provisions of section 196. This minimum
requirement does not relieve an employer from attempting to reach
consensus on severance pay during the period of consultation. The right of
the trade union, through collective bargaining, to seek an improvement on
the statutory minimum severance pay is not limited or reduced in any way.
(11) If an employee
either accepted or unreasonably refused to accept an offer of alternative
employment, the employee’s right to severance pay is forfeited.
Reasonableness is determined by a consideration of the reasonableness of
the offer of alternative employment and the reasonableness of the
employee’s refusal. In the first case, objective factors such as
remuneration, status and job security are relevant. In the second case,
the employee’s personal circumstances play a greater role.
dismissed for reasons based on the employer’s operational requirements
should be given preference if the employer again hires employees with
comparable qualifications, subject to:
(a) The employee, after having been asked by the employer, having
expressed within a reasonable time from the date of dismissal a desire to
(b) A time limit on preferential rehiring. The time limit must be
reasonable and must be the subject of consultation.
(2) If the above
conditions are met, the employer must take reasonable steps to inform the
employee, including notification to the representative trade union, of the
offer of re-employment.