When a business finds itself in the unfortunate position of considering retrenchments, the driving force is fundamentally a financial one. If there are severe financial constraints, these will necessarily affect the ability of the business to accommodate employees in alternative positions to avoid their retrenchment.

Two recent decisions of the Labour Appeal Court (LAC) and the Labour Court (LC) respectively recognised that there are limits to what an employer must do when offering employees alternative positions to avoid retrenchment.

In L & C Steinmuller (Africa) Ltd & Others v Shepherd , the LAC considered whether an employer was obliged to persuade an employee to accept alternative offers of employment in order to avoid retrenchment. The employer in this case was in the process of restructuring and merging with several other businesses. The employee was offered a position in another company in the group on the same terms and conditions as his existing position. Before accepting the position, he demanded:

• a transfer to a different location
• a tax-free relocation allowance
• compensation for any losses incurred in selling his existing house and buying a new one
• a housing subsidy and collateral security for the new house and payment of his transfer and legal fees
• a tax-free travel allowance, and
• an increase in his car allowance and benefits.

The employer refused these demands on the grounds that they were beyond what was possible then or in the foreseeable future. Three further meetings were held, but the matter was not resolved and the employee’s services were terminated for redundancy.

The CCMA commissioner first deciding the case said the dismissal was unfair because the employer had not made a reasonable effort to convince the employee to accept the job offer or to convince him that his expectations were unreasonable. On appeal, the LAC found that the employer had engaged in meaningful consultations with the employee and beyond that, it was under no duty, in law or in fairness, to try to convince the employee to accept alternative employment. The court went so far as to call such a notion “ridiculous”.

Similarly, in SA Catering Commercial & Allied Workers Union & Others v Gallo Africa, the LC recognised that an employer’s obligations were limited when offering employees alternative positions to avoid retrenchment. In this case, the employer had suffered huge financial losses and wanted to restructure and close several of its plants. Ten meetings were held with the trade union to consult on all aspects of the countrywide retrenchments. Four employees at the company’s Durban branch were offered jobs in Johannesburg in a bumping exercise. They refused to accept the positions unless the company covered their relocation costs. The company could not do so, but offered to assist the applicants with loans. The employees failed to accept the alternative positions and were retrenched.

The court was satisfied that the company had adopted an upfront and cooperative approach to the retrenchment. It looked critically at the employer’s conduct in offering employees positions in another province and then refusing to pay relocation costs, but found, in this instance, that it was not unfair. The particular circumstances in the employer’s favour in this case were:

• its offer of loans to assist the employees
• the fact that the alternative positions offered involved a bumping exercise in which other employees would be retrenched to make way for them
• the company’s financial hardships, and
• the fact that the employees did not avail themselves of the opportunity to participate in individual consultations; the court reiterated that consultation was a two-way process.

Although these two cases clearly limit an employer’s obligations in a retrenchment scenario, they should not be understood to mean that an employer would never be obliged to pay relocation costs or to take other measures to better accommodate employees in alternative positions. A court will carefully consider each set of circumstances on its own merits. Of paramount importance in any retrenchment is whether the employer has conducted meaningful consultations. The employer’s particular financial constraints or otherwise will also be significant in deciding on the employer’s responsibilities in any one case.

Written by Helena Janisch for www.labourwise.co.za

www.labourwise.co.za is an on-line labour relations service aimed at assisting employers with the implementation of effective labour relations. They can be contacted via the website or info@labourwise.co.za.

Disclaimer: The material above is provided for general information purposes only and does not constitute legal or professional advice. Neither the author nor the publisher accepts responsibility for any loss or damage that may arise from reliance on information contained in this article.