On 21 April 2020 President Cyril Ramaphosa outlined an unprecedented R500 Billion social relief and economic support package in response to the devastating effects of the COVID-19 pandemic. This includes R40 Billion set aside for lost wages, of which R1.6 Billion had already been paid out. Various Tax incentives and an R200 Billion loan guarantee scheme to assist an expected 700 000 struggling businesses have been introduced to assist enterprises with operational costs, salaries, rent and payment of suppliers. Together with the 200-basis point drop in the repo-rate previously announced, this will go a long way to stimulate the economy and ultimately safeguard jobs.
While the President promises that “We will recover. We will overcome. We will prosper” – A harsh reality for many employers is that the economic response outlined will unfortunately not be sufficient to avoid retrenchments in the weeks and months following the lockdown. Many employers, faced with a struggling economy in recession prior to the lockdown, may have already been considering retrenchments.
It is important to remember that retrenchments are by their very nature a “no-fault” process and it is expected that any determination on the fairness of retrenchment will scrutinise the process followed, now more than ever. The National State of Disaster does not change the requirements set out in section 189 of the Labour Relations Act, which dictates that the employer must disclose in writing and consult fully on:
- The reasons for the retrenchment;
- Alternatives considered and why they were rejected;
- The proposed method of selection;
- Timing of the dismissals;
- Severance package proposed;
- The assistance that will be offered;
- Possibility of future employment;
It is expected that the issue of “alternatives considered and why they were rejected” will be under scrutiny in light of the various economic relief schemes available. Employers are encouraged to seek such relief where possible and practical. That being said, where employers can show that they did consider “measures to avoid the dismissals” but found them to be inadequate or not reasonable – retrenchment may be a lifeboat for businesses in severe distress.
While our law does recognise “retrenchment for profitability”, it is as yet unclear what impact the current State of Disaster may have on the approach adopted by the Courts in the future. As the President stated “Our country and the world we live in will never be the same. We are resolved not merely to return our economy to where it was before the coronavirus, but forge a new economy in a new global reality.”
Unfortunately, many people will lose their jobs as a result of the crises and retrenchments are for some, unavoidable. Each matter should, however, be considered on its own merits and we recommend that you contact a SEESA Legal Advisor to discuss any retrenchments post-lockdown.
SEESA has always been committed to providing ongoing quality service to all of our clients. Should you require any Labour assistance, please contact your nearest SEESA Office alternatively leave your contact details on our website at www.seesa.co.za
Sources:
Labour Relations Act, 66 of 1995
Statement by President Cyril Ramaphosa (21 April 2020)
(sacoronavirus.co.za)
ABOUT THE AUTHOR
Charl Vollgraaff obtained his LLB degree from the Nelson Mandela Metropolitan University in Port Elizabeth. After graduating, he commenced practical training through Legal Education & Development at NMMU. During this time he received a Lexis Nexis Award for Best Performance Nationally. After completing his articles at Greyvensteins Attorneys in Port Elizabeth he was admitted as an Attorney in 2010. He practised as a Civil Litigation and Commercial Attorney for 6 years post-admission before joining SEESA Labour in March 2016. He is also in the process of completing a Master’s Degree (LLM) in Labour Law.