WHAT IS A TERMINATION BASED ON OPERATION REASONS (RETRENCHMENT)?
Where you terminate the employment of an employee(s) for operational reasons.

The Labour Relations Act does not use the term ‘retrenchment’ but rather refers to “dismissals based on operational requirements”.

HOW TO TERMINATE EMPLOYEES LEGALLY AND FAIRLY
When a Labour Court judge presides over a retrenchment case brought by an employee (or a trade union on behalf of an employee), he/she must look at a number of factors when deciding whether the employer has retrenched the employee fairly:

1. Whether you had sufficient reason for the retrenchment.
2. Whether you used a fair criterion when choosing the employee(s) to dismiss.
3. Whether you consulted fully and in good faith with the employee(s) or his/her
   trade union before making the retrenchment decision.
4. Whether you disclosed to the employee(s) or union all the information to
   be used for purposes of consulting on the retrenchment.

REASONS FOR THE TERMINATION ON OPERATIONAL REQUIREMENTS
You must be able to prove that operational circumstances exist, thus making termination unavoidable. You must also show that no other reasonable measures can be taken to solve the operational problem. Can you save the employee’s job by providing him/her with new or improved skills? Can you redeploy production workers to sales positions?

There are numerous factors that could lead you to terminate:

1. Technological advancement, which could make labour less necessary at your
   workplace.
2. Financial mismanagement or misappropriation of funds resulting in company
   closures or losses and the need to cut labour and other costs to reduce your
   financial losses.
3. Reduction in your customer orders resulting in the reduction of work.
4. Labour laws that are so restrictive, you might cut your workforce and seek
   other means of operating your business. For example, if you are a
   manufacturer of clothing you may decide to stop manufacturing, import
   clothing instead and retrench your factory workers.
5. Industrial action. You could face strikes, stay-aways, go-slows and overtime
   bans, which could alienate your customers and weaken your company
   financially due to loss of orders.
6. Lack of productivity. If you have outdated machinery, poor management or
   demotivated, dissatisfied employees, this will reduce your productivity,
   resulting in financial losses.
7. Mergers and takeovers leading to retrenchment of ‘surplus’ employees due to
   the merging of duplicate jobs.

CONSULTATION WITH EMPLOYEES

DEFINITION OF CONSULTATION
Your discussions with the employees or their representatives on the proposed termination.

In order to show you have consulted properly you must prove that you:

• Thoroughly considered all possible factors and solutions you could think of and that were raised by the employees.
• Did not reject out of hand suggestions made by the employees or their representatives.
• Gave full, genuine and objective reasons for rejecting any of the employees’ suggestions.

HOW TO GET THE TERMINATION PROCESS STARTED
Section 189(3) of the Labour Relations Act requires you to invite, in writing, the employees/representatives to consult on the possible retrenchments. For you, this written invitation is the first legal step in the retrenchment process. It is vital that the letter cannot later be construed as a termination letter due careless wording.