As a result of poor performing, economy retrenchment has become a common phenomenon in the workplace. The process is time-consuming and severance packages often cost employers an arm and a leg. Section 41(2) of the Basic Conditions of Employment Act (BCEA) determines that an employee is entitled to at least one week’s remuneration for every completed year of service.
The BCEA, however, makes provision to avoid incurring the often large amounts of severance pay. Section 41(4) of the BCEA provides:
41(4) An employee who unreasonably refuses to accept the employer’s offer of alternative employment with that employer or any other employer, is not entitled to severance pay.
The above-mentioned provision is further explained in Section 11 of the Code of Good Practice: Dismissal based on Operational Requirements, which states the following:
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 bigger role.
The aforementioned provisions were the cause of much confusion in the CCMA and Labour Court and lead to various contradicting findings. The matter was finally settled by the Labour Appeal Court in the Irvin & Johnson Ltd v CCMA & Others [2006] 7 BLLR 613 (LAC) matter. The court determined that Section 41(4) was drafted in an attempt to persuade employer’s to procure alternative employment for all employees facing potential dismissal as a result of operational requirements and that an employee cannot receive both a reasonable, alternative employment offer and severance pay. It is paramount to note that the employer must play an instrumental role in obtaining alternative employment.
The court further held that there are three scenarios which can occur when an employee is offered alternative employment arranged by the employer:
- The alternative employment is refused by the employee on unreasonable grounds, in which case the severance pay is forfeited;
- The alternative employment is refused on reasonable grounds, in which case the employee is still entitled to severance pay;
- The alternative employment is accepted by the employee, resulting in the severance pay being forfeited.
The Court found that the purpose of Section 41(4) is to reward an employer for securing alternative employment for his employee. It is accordingly advisable that an employer contemplating retrenchment should always attempt to secure reasonable alternative work for his employees as the employer would then avoid having to pay severance packages.
ABOUT THE AUTHOR:
Carla Pauw graduated with an LLB from the University of Stellenbosch in 2015. She is a Legal Advisor at SEESA Labour, Cape Town.