Transcript Determining substantive fairness in operational

Determining Substantive
Fairness in Operational
Requirements Dismissal
matters
INTRODUCTION
2012 was a challenging year with large job losses partly
related to protracted strikes in the mining and transport
industry and to the domestic and international economic
climate.
Unfortunately, retrenchments are not always undertaken for
the fair reasons recognised by the LRA, namely economic,
technological, structural or similar needs of employers.
‘Problem employees’ are often first on the list.....
Commissioners thus need to have a good understanding
of the requirements for substantive fairness.
THE LRA
Section 188 - A dismissal is unfair if the employer fails to prove
that the reason for dismissal is a fair reason based on
the employer's operational requirements.
Section 189(1) - the employer to consult with employees or
their representatives when it contemplates dismissals.
Section 189(2)(a)(i) - parties to attempt to reach consensus on
appropriate measures to avoid dismissals.
Section 189(3)(b) - employer to provide written reasons for the
proposed dismissals, the alternatives considered and
the reasons for rejecting each one of those
alternatives.
THE ECONOMIC RATIONALE
•
The LAC requires there to be a sound commercial
rationale for a decision to retrench – and a reasonable
basis for such a decision.
•
A court should not defer to the employer in answering the
question as to whether the dismissal is fair or not.
•
The employer needs to prove that an operational
requirement exists for retrenchment.
•
An employer may utilise the selection criteria agreed to
with a consulting party – must be fair and objective.
COURT DECISIONS
The LAC has adopted different tests or approaches at
different times. These are some of them:
Decision must be bona fide and business-like.
Dismissal as a last resort.
Rationality – reasonable decision and not a ‘sham’.
Fairness/ reasonableness - fair to both parties.
COURT DECISIONS
Consideration of the operational needs that gave rise to the
retrenchments. E.g. Cost reduction, a drive towards
competitiveness, etc.
Is retrenchment the only way to achieve such operational
needs? Are there not other ways to reduce costs?
Consideration of alternatives? E.g. re-skilling employees in
order to take up alternative positions, offering transfers,
voluntary severance packages, training layoff scheme, etc.
Method of selecting employees? ‘All the bad eggs out in one
basket’ under the guise of restructuring?’
COURT DECISIONS
• Item 9 of the Code of Good Practice: Dismissal states that
the selection criteria that “are generally accepted to be fair”
include length of service, skills and qualifications.
• The most generally applied criteria are a mixture of LIFO and
skills retention. Bumping – an extreme force of LIFO.
•
Bumping could lead to the disruption of the workforce and
the loss of younger employees.
•
“First-in-first-out” (FIFO) has been rejected by the LAC on
the basis that it is open to abuse and therefore unfair.
Not a way to reward long-serving employees!
CONCLUSION
 It is clear that employers must do considerably more than
merely indicate compliance with the procedural steps
outlined in section 189 of the Labour Relations Act.
 Labour Court and the Labour Appeal Court requires
employers to present evidence relating to:
• how a certain business decision had been taken;
• what the employer’s reasoning was;
• especially, what alternatives were considered; and
• why these alternatives were not applied instead of
resorting to dismissal.
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CONCLUSION
 In large-scale retrenchments, section 189A(19) now
requires a court to consider whether a retrenchment was
economically justifiable on rational grounds — in this
specific case, the approach of the Labour Appeal Court has
now been turned into legislation.
 The Labour Court and the Labour Appeal Court are still
reluctant to second-guess the employer’s business
decisions (especially if technical or expert knowledge is
required), but in many instances, employers may find
themselves measured against the Court’s standards.
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