How to prepare for retrenchment-related claims after the lockdown

Schoeman Law's Fadia Arnold says there may very well be a barrage of labour disputes after the lockdown.

Employers, from large corporations to small to medium entrepreneurs and businesses, have had no alternative but to implement short-time work, reduce salaries, place employees on unpaid leave as a no work no pay circumstance during the lockdown, or regrettably to resort to the retrenchment of their employees as a direct result of the Covid-19 nationwide lockdown, the consequences of which have led to employers being unable to sustain overheads and salaries.

While this is an unprecedented financially stressful period for both employers and employees in South Africa, many employers may not have gone about the cost-cutting processes in the correct manner due to the limited time frame in which the lockdown was announced and the immediate effect of the financial impact on the employer after the lockdown was implemented. The time frame between the announcement of the lockdown by the President and the implementation of the lockdown was roughly two days and it is highly unlikely that the majority of employers had the time to follow due processes as set out in the Labour Relations Act 66 of 1995 (LRA) in respect of retrenchment, short-time work, and reduction in salaries, all of which by law require consultation, a joint consensus-seeking process and final agreement between the employer and employee.

Failing to follow due process

Aside for urgent matters, such as section 189A and section 188A disputes in terms of the LRA, which may be approved to be heard at other venues during the lockdown, the Commission for Conciliation, Mediation and Arbitration (CCMA) and various bargaining councils are closed to the public for the period of the lockdown. This means that hundreds if not thousands of employees who have no access to the luxuries of the internet or even an email address to utilize to refer disputes timeously, have not referred their labour disputes to the CCMA or bargaining councils and will in all likelihood be late in their referrals when the lockdown is lifted and they can physically access the CCMA or bargaining councils to refer their claims.

Despite the possibility of there being no substantive fault on the part of the employer for the financial situation which they find themselves in as a result of the lockdown and Covid-9 pandemic, employers would still undoubtedly need to defend mass labour disputes in various fora when the lockdown is lifted if they have not followed the procedures as set out in the LRA when implementing short-time work, reduced salaries or retrenchment. Indeed, employers who have failed to follow due process must be prepared for claims referred to the CCMA, Bargaining Councils and the Labour Court after the lockdown is lifted.

Condonation applications and default awards

 Employers who have the view that employees would be late in their referrals and employers would thus be ‘off the hook’ so to speak, may be quite misguided as to what will occur once the lockdown is lifted. Indeed, once the lockdown has been lifted, and employees en masse are able to lodge their claims physically at the CCMA or bargaining councils (and I am in no way saying there will be claims with or without merit), the employer would still need to defend them. If the employer does not attend the CCMA or bargaining council to defend the dispute after they have received the notice of set down, the employer is at great risk of having the Commissioner hear the evidence of the employee in the absence of the employer and issuing a default award in favour of the employee due to the fact that the Commissioner can only rule on evidence heard, which would be one-sided.

If employees have missed the time frame of 30 days from date of dismissal in referring an unfair dismissal dispute due to Covid-19 related reasons or a no-fault dismissal in the form of retrenchment due to Covid-19 related reasons, the employee would need to apply for condonation. This means that the employee would need to, by way of a condonation application, put forth reasons for the lateness of the referral of the unfair dismissal dispute.

Due to the Covid-19 pandemic and the nationwide lockdown period, it is highly likely that most, if not all condonation applications by employees will be granted and their respective matters set down for conciliation and arbitration.

Resolving the dispute via conciliation

In light of the above, employers must be prepared to defend these claims. The first step, taking into account the President and the Minister of Employment and Labour’s pleas to employers to act with compassion in these times and with the view of social solidarity, would be to for employers who are trading once again after the lockdown is lifted to contact those employees whom they have retrenched and offer them re-employment if possible. If re-employment is not possible, the employer would need to revisit the manner in which they may have retrenched employees and, if due process was not followed, seek legal advice

Labour Law compliance in respect of section 189 of the LRA would still have needed to be complied with and there would be no excuse for an employer, who should always comply with the LRA, to have not followed procedure.

The argument that there was simply no time to follow due process, may be a weak one in the face of labour law compliance with the LRA.

Once revisiting the manner in which the retrenchment was executed, the employer may need to consider resolving the dispute at conciliation by acknowledging, without prejudice, that procedure may not have been followed due to the limited time frame and offer the employee suitable compensation or assistance with finding new employment. Such assistance may be provided by issuing the employee with a positive reference letter and reaching out to other employers in their sectors, and possibly forwarding the former employee’s curriculum vitae to their contacts within their respective industries.

Due to the dire current unemployment situation in South Africa, particularly as a result of the lockdown, assistance such as this would be welcomed by the CCMA and can be placed as a term and condition of a settlement agreement whereby the employer would need to show proof by a certain date that it has assisted the former employee in that instance and provided the former employee with a positive reference letter. Employers should also ensure they have issued their former employees with UI19 documentation so they may claim from the Unemployment Insurance Fund as well as a certificate of service, the aforementioned being statutory requirements to be adhered to by employers in terms of the Basic Conditions of Employment Act 75 of 1997 (BCEA).

What happens if a dispute relating to retrenchment cannot be resolved at Conciliation?

If the dispute cannot be resolved at Conciliation, then the employer would need to prepare to litigate at Arbitration or in the Labour Court if more than one employee was retrenched. We would, however, advise that the employer agree to arbitrate the matter at the CCMA and not proceed to defend the dispute in the Labour Court in order to save costs and time spent on the dispute. The Commissioner in these circumstances would also need to agree to the arbitration of the retrenchment under the auspices of the CCMA or relevant bargaining council. Under these unprecedented circumstances, the Commissioner should be inclined to agree to the same.