How to embark on a restructuring exercise

Herewith the process a business would need to follow in the event that there is an operational requirement to contemplate making any employees in question redundant:

s189 of The Labour Relations Act governs the process an Employer needs to follow.

You would need to launch this process by issuing the affected Employees with a Section 189 “notice” to advise them that their positions are being contemplated as being made redundant as a result of operational requirements and thereby inviting them to consult.

Consultations would need to take place with the possibly affected Employees in a meaningful and consensus-seeking manner to attempt to reach consensus on as per s189 (2)(a) of The LRA re appropriate measures to:

  • (i) attempt to avoid the dismissals; (hence the business rationale to contemplate retrenchments needs to be  thorougly canvassed and should be based on sound business rationale to be deemed to be susbtantively fair);
  • (ii) attempt to minimise the number of dismissals;
  • (iii) attempt to change the timing of the dismissals; and
  • (iv) attempt to mitigate the adverse effects of the dismissals;
  • and (b) the selection criteria of the employees contemplated as being made redundant also need to be consulted on as well as  the proposed (c) severance pay for those employees made redundant.

Invite all the Employees who are in positions which are deemed to be impacted by the contemplated restructuring to a joint meeting in which you address all of them simultaneously to explain the high level business rationale for contemplating making some positions redundant as well as to explain the s189 process to them.

The business may then issue the possibly affected Employees with the s189 notice at this meeting.  The Employer should then schedule at least 2 one-on-one consultations with the affected Employees for the next 2 weeks (or longer where timelines makes provisions for such),  in order to meaningfully consult with them. The Employee, their direct superior and HR (where possible) should be in these consultations.

Whilst the possibly affected Employees are invited in their s189 Notices, to submit proposals to attempt to avert their positions being made redundant, the onus is on the Employer to meaningfully engage hence it is my advice that the Employer schedule at least 2 consultation sessions per individual prior to concluding the s189 process.

Note: In the event that any Employee accepts an alternative position offered to him/her then you should issue him/her with a new contract of employment or an amendment to their existing contract and a cover letter informing him/her that the s189 process has been superseded by his/her acceptance of the alternative role offered to him/her.

In the event that an Employee rejects any reasonable alternative positions offered to him/her they may still be made redundant but may forfeit their automatic right to a severance package, unless they can make justifiable representation as to why they are unable to accept the alternatives.

In the event that no other alternatives are found/agreed to after the consultation process has been concluded, then the employees in question may be issued with a Retrenchment Agreement.

In the event that some Employees are indeed made redundant then they are to be issued with the following:

  • Severance package Annexure (and the employer needs to apply for tax directive)
  • Certificate of service
  • Reference letter
  • UI19 form

The above steps are necessary to safeguard the Company in the event that employees are indeed retrenched and if they elect to refer a dispute to the CCMA citing an “unfair retrenchment”.

The CCMA have jurisdiction to award a maximum of 12 months’ salary in the event that an employee is retrenched procedurally or substantively unfairly…or both…

In the event that more than 1 Employee is made redundant, and in the event that an Employee refers a dispute to the CCMA, citing an “unfair retrenchment”, the CCMA do not have automatic jurisdiction to arbitrate such a dispute hence such disputes may be referred to the Labour Court, which needless to say can be a very costly dispute.

Herewith an extract pertaining to s189 of The Labour Relations Act:

S 189 Extract of The Labour Relations Act:

1.        Dismissals based on operational requirements

  • (1)        When an employer contemplates dismissing one or more employees for reasons based on the employer’s operational requirements, the employer must consult-
    • (a)        any person whom the employer is required to consult in terms of a collective agreement;
    • (b)        if there is no collective agreement that requires consultation –
      • (i)         a workplace forum, if the employees likely to be affected by the proposed dismissals are employed in a workplace in respect of which there is a workplace forum; and
      • (ii)        any registered trade union whose members are likely to be affected by the proposed dismissals;
    • (c)        if there is no workplace forum in the workplace in which the employees likely to be affected by the proposed dismissals are employed, any registered trade union whose members are likely to be affected by the proposed dismissals; or
    • (d)        if there is no such trade union, the employees likely to be affected by the proposed dismissals or their representatives nominated for that purpose.
  • (2)       The employer and the other consulting parties must, in the consultation envisaged by subsections (1) and (3), engage in a meaningful joint consensus-seeking process and attempt to reach consensus on –
    • (a)        appropriate measures- 
      • (i)         to avoid the dismissals; 
      • (ii)        to minimise the number of dismissals;
      • (iii)       to change the timing of the dismissals; and 
      • (iv)       to mitigate the adverse effects of the dismissals; 
    • (b)        the method for selecting the employees to be dismissed; and 
    • (c)        the severance pay 

Please view the various Restructuring related procedures and templates on our Easy HR, HR Document Store.

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