The misconception in retrenchment situations

Trumping Last In First Out – The misconception in retrenchment situations

Provided By VDMA Attorneys

Topics Labour Law

06 Dec 2018

Everyone knows about or has heard about the principle Last in First Out (“LIFO Principle”) in the context of a dismissal in terms of section 189 of the Labour Relations Act No. 66 of 1995 (“LRA”) (“Retrenchment”). There is a misconception in the workplace, among unions and Commissioners of the Commission for Conciliation, Mediation and Arbitration (“CCMA”) that the LIFO Principle should be strictly adhered to and complied with in the instance of a Retrenchment. However, there is no legal requirement that stipulates that the LIFO Principle must be followed, or that it is the only criterion to be followed in the case of Retrenchment. So, when does attendance and performance as a criterion trump the LIFO Principle?

Often in situations of Retrenchment, management is desirous to retrench employees who are deemed poor workers with bad attendance records, regardless of the amount of years they have been in service, but very often there is nothing to support their allegations of poor work performance and attendance.

In terms of section 189(7) of the LRA the employer must select employees to be retrenched based on a selection criterion, either agreed to by the consulting parties or in the absence of agreement, one which is fair and objective and applied as such.

A period of Retrenchment is an uncertain time for both the employer and employee and it is sensible on the part of the employer and in a company’s best interests, to retain productive and competent employees. However, this by no means allows an employer to use Retrenchment as a “spring cleaning” exercise in order to get rid of poor performers. Therefore, it is important for employers to maintain a record of performance, attendance and even disciplinary records. The employer should make an effort to ensure that the employee is at all times aware of his or her poor work performance and/or attendance and that these issues are addressed during the course of the employees’ employment. Furthermore, it is important that an employee is made aware that these factors may count against them in the instance that the company is ever in a situation of Retrenchment.

The criteria that management selects should be a blend. The LIFO Principle will become relevant and contentious when there are a number of employees, all doing the same job, who are interchangeable.