Employers who are embarking on a retrenchment process are often tempted to use records of employees’ performance and adverse disciplinary records as retrenchment selection criteria in identifying employees to be dismissed. They do so in order to facilitate the dismissal of poor performers or employees who have committed misconduct.
The question is whether this may be legitimately done, and whether there is any risk to employers in doing this.
As a point of departure, it is important to recognise the nature of a retrenchment (also referred to as a dismissal based on operational requirements). It is a so-called “no-fault dismissal” because it does not arise from any wrongdoing on the employee’s part. Instead, it is based on the employer’s economic, technological, structural or similar needs.
Section 189 of the Labour Relations Act regulates the procedure to be followed in order to fairly retrench an employee. That section provides for a consultation process between the employer and employees (through their representatives). It provides that the selection criteria used by the employer must either be agreed to between the parties, or if they are not agreed, they must be fair and objective.
The most common selection criteria used by employers, is LIFO (last-in-first-out), which involves the selection of employees with the shortest length of service for retrenchment and retaining employees with longer lengths of service.
Generally, the use of records of employees’ performance and adverse disciplinary records as retrenchment selection criteria will not be fair and objective, but can be used as selection criteria if agreed to between the parties.
However, it is permissible for the employer, in selecting employees for retrenchment, to use criteria that allow it to retain employees with special skills, abilities and qualifications that it needs to retain.This is generally accepted as being a fair and objective basis for selecting other employees for retrenchment.