It is very easy to challenge retrenchments and win if they're done incorrectly
Labour law expert Ivan Israelstam says retrenching workers incorrectly can be extremely expensive.
The fact that the CCMA is entitled to arbitrate some retrenchment disputes makes it more likely that retrenched employees will oppose retrenchments due to the quicker and simpler processes at the CCMA as compared to the Labour Court. Despite the strict and clear retrenchment legislation employers are still having to pay large sums of money to employees who have been retrenched incorrectly. There are three areas where employers commonly infringe the law on retrenchment. The first is where they fail to follow the very detailed and rigidly enforced procedure for retrenchment. the second occurs when making the decision to retrench for the wrong reason. For example, it is illegal to retrench any employee for any reason related to a takeover of business (or part thereof) as a going concern. The third area is when employers use legally unacceptable criteria for deciding on which employees to retrench. That is, targeting an employee for subjective reasons is unfair.
In the case of Mokoena vs Power Man (2005, 10 BALR 1047) the employee, an electrician, was retrenched after the division he worked in was closed down. However, the employer failed to prove that there was a need to close down the division and retrench the employee. The employer also failed to follow the legally prescribed procedures for retrenchment.
In addition, the employer was unable to explain why it had employed new electricians shortly before the employee’s retrenchment and why the new employees had not been retrenched instead of Mokoena. Thus, in this case, the employer managed to infringe all three fairness criteria of procedure, fair reason and fair criteria for retrenchment. The arbitrator ordered the employer to pay the employee eight months’ remuneration in compensation.
Also, if there is a different post to which the employee could, in terms of his/her skills, be appointed, it is unfair to retrench him/her unless he/she turns it down. In the case of Masilela vs Leonard Dingler (Pty) Ltd (2004, 4 BLLR 381) Masilela, the IR Manager, was retrenched after an HR manager with Masilela’s skills was appointed as the employee’s senior. This created duplication of skills because the new HR Manager was able to carry out Masilela’s duties. However,
Masilela was given a letter informing him that he could apply for a new junior post. The Court found that, while it was fair to make Masilela’s post redundant due to the duplication of industrial relations skills, the employer should have given Masilela the new junior post instead of requiring him to apply for it. Thus, the retrenchment was declared unfair and the employer had to pay the employee eight months’ remuneration in compensation.
New case decisions continue to refine and make subtle changes to labour legislation. This means that employers and employees cannot become complacent. Employees risk losing their jobs unnecessarily and employers run the very serious risk of having to reinstate employees and/or to pay huge amounts in compensation in addition to retrenchment packages.