Retrenchment does it mean NO alternative to job cuts?
While it is lamentable that a million jobs in South Africa were lost this year, prior to Messrs Vavi and Godsell publicly urging all South Africans to stem the shrinkage of employment opportunities in our economy, it is nevertheless commendable that trade union and big business leaders are applying their minds constructively to the manifest problems posed by the ongoing phenomenon of job losses.
The frequent use of the word 'retrenchment' is unfortunate as it is not to be found anywhere in our labour law because, when used, it immediately directs decision-makers down the narrow path of job cuts. Right now in South Africa the focus needs to be on saving jobs, not regulating their destruction.
The last resort available to employers in our labour law, after proper consultation, is for a type of 'no fault' termination of employment subject to the payment of reasonable notice pay and severance benefits.
The purpose of this process is to regulate work and the termination of employment for valid and fair reasons based on operational requirements, which are the economic, technological, structural or similar needs of a business.
The NEDLAC Code of Good Practice for 'no fault terminations' explains the operational requirement processes as being economic reasons relate to the financial management of a business; technological reasons refer to the introduction of new technology, which affects work relationships either by making existing jobs redundant or by requiring employees to adapt to new technology, or a consequential restructuring of the workplace; and structural reasons relate to the restructuring of the business to make it more competitive or efficient and even to increase profits.
Destruction of employment itself is not an inevitable consequence if proper regard is had to these requirements and when business circumstances dictate possible organisational changes.
In terms of labour law employees have the right not to have their employment terminated unfairly.
Consequently when employers contemplate operational cost cutting measures, employment costs must be aligned and evaluated equally according to the same rules, logic and transparency as all other operational expenditure.
The law is clear on this issue and the labour courts are the final impartial custodians of the processes involved. The Commission for Conciliation, Mediation & Arbitration (CCMA) also plays a vital facilitating role during the consultation process.
Employees who contend that there were reasonable alternative cost cutting opportunities rather than job cuts, but that management did not properly consider them, have the opportunity to challenge the termination of their employment even when all statutory processes have been followed, and even where severance pay and notice pay have been tendered to them.
Under these circumstances, employers must prove that any termination was operationally justifiable on rational grounds and after having properly considered all cost cutting alternatives and comprehensive consultation with the employees or their representatives.
In many instances this is significantly different to the approach adopted by some employers.
Clearly where a business is no longer sustainable, 'no fault' terminations are unavoidable.
However, where businesses will continue trading but under different operational and financial circumstances, the requirement to justify termination on economic grounds requires a far more comprehensive disclosure of financial matters and some thinking out the box.
In getting to this level of disclosure, employers and employees will have opportunities to explore, not only operational cost issues, but also the costs and values that exist as a result of the employment relationship.
Over the years employment relationships have been under growing pressure and polarisation towards a 'them and us' or a win / lose situation.
The circumstances now faced in South Africa require a joint approach where the outcome is not only focused on immediate survival but also future growth and profit or rather a win / win situation.
As mentioned in the Business Day Editorial on 11 December a collaborative approach will be required if an overhaul of orthodox operational and employment practices is to create more flexible approach to survival options.
However, the big question is 'Does the willingness exist to collaborate and search for mutually beneficial alternatives?'
In reality, it is about willingness, because our legal, accounting, human resource management and empowerment imperatives already provide frameworks to guide such organisational change and development.
Willingness to disclose operational costs is one of the toughest hurdles to overcome but as recommended by the NEDLAC Code, it is the one way of ensuring that all possible cost cutting alternatives are considered, and that the outcome, when finally agreed, will not be challenged.
If managements are willing to engage with employees on the issue of operational costs and cost savings, they will be encouraged by the actual level of understanding and disclosure that individual employees will offer regarding their immediate area of influence.
Employees are stakeholders in the success of the business, and in distressed times like these, they usually do have enough common sense to put interests of mutual benefit ahead of any personal gains.
Disclosure of information does not have put any operational confidences at risk. There are enough established financial analysis tools to facilitate the comparison, measurement of impact and evaluation of all relevant business performance indicators, to support the best course of relief actions required, without baring the soul of the business.
In some instances managers engaging with employees as stakeholders, around significant financial disclosure, will be making major concessions. Flowing from this the next major question is 'what concessions do labour need to make to ensure collaborative outcomes?'
No party can have a better understanding of the specific operational circumstances of a business than the managers and employees involved. Exploring operational alternatives will involve a far wider scope and detail of operational information than that which is normally negotiated with unions. It also means that the relationship between management and employees needs to be far more responsive to operational circumstances and change than has been the case in recent times.
Good responsive workplace relationships need to be re-invented if we are to survive the tail of the economic downturn and preserve the remaining stock of 'decent jobs' to take full advantage of the economic opportunities that will occur in the immediate short-term.
The only way in which this can be achieved is if all stakeholders adopt behaviours that facilitate reaction to change and learning, rather than those which are bound into mandates, feedback, prolonged negotiations and missed opportunities.
It is disturbing to read that most business distress reactions seem to focus on employment costs job cuts, pay cuts, short-time, etc. These are just a narrow band of operational expenditures. Pay will always be a motivational factor and how can we expect employees to work smarter and cheaper when they are under the continuous threat of significant risks to their employment opportunities.
Each and every employee knows that they have an impact on the financial performance of a business, even if only the negative perception that they may become a cost-saving job cut but do they know what influence they can have in implementing more sustainable operational practices?
The NEDLAC Code of Good Practice has been part of our labour law since 1999. The vital question is 'If this code is not part of the performance planning, consultation and facilitation processes when evaluating distressed business situations, who is accountable for this serious omission, and the destruction of decent employment opportunities?'
CODE OF GOOD PRACTICE REGARDING DISMISSALS BASED ON OPERATIONAL REQUIREMENTS
SCHEDULE 8 OF THE LABOUR RELATIONS ACT, 1995
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FRAMEWORK FOR SOUTH AFRICAS RESPONSE TO THE INTERNATIONAL ECONOMIC CRISIS
19 February 2009
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Daan Groeneveldt
January 2010
