View Full Version : Retrenchment - can it be neatly sidestepped by an business owner.

12-03-2013, 18:16
A friend of mine is in an awkward position in his day job, facing downsizing. He asked me what I thought and I gave him what I thought was the correct answer. I mentioned it to somebody else, fairly knowledgable, and they told me I was 100% wrong in my thinking.

So... learned friends. The question is a simple one, but let me set the scene.

My friend manages the IT division of his own office in a small coastal city and the IT divisions in a couple of African countries where they have subsidiaries.
The company is downsizing in some ways and growing in others. They intend closing the IT division in his city and supporting it remotely in future, but opening other IT divisions in other African countries.

They would like him to continue managing these new and old divisions but the catch is he has to move to JHB. This is not negotiable in any shape or form. They must be managed out of JHB.

Now, my friend cannot move to JHB. He has aged parents he looks after, and various other things. besides.... he passionately hates JHB. he is not prepared to move. Would rather leave the firm.

SO the simple question. My friend asked me if they have to retrench him or not as they claim they have offered him an alternative position. He says they havent, they know he hates JHB and will never move. (He has 18 ys service)

My answer: Yes of course they have to retrench you. They have not offered you a viable alternative job.
My knowledgable friends answer: Nonsense. They have offered him a job with the same seniority and perks. he declined it. he must resign. no retrenchment payable.

I think my knowledgeable friend has his head up his proverbial.

Any thoughts. ?

12-03-2013, 19:04
No that's what I understand. They did offer an alternative, and it was rejected.
Maybe Nicky can clarify.

13-03-2013, 04:24
Wot Vine said - they have offered him an alternative.

13-03-2013, 07:51
Ok, My argument revolves around the fact that havent offered him a realistic alternative.
Suggesting you sell your house, uproot your life and move to another city in another part of the country cannot be regarded as a viable alternative.

Surely the labour law would state that it must be a reasonable alternative, not just any old thing.

13-03-2013, 08:32
I think most people could make an argument that relocating is reasonable as many of people do it every month but there must be a legitimate reason that the position needs to be in JNB. If he thinks they are relocating him to get him to resign he could maybe try and fight it. Retrenchments should ideally be a negotiation. Could he not justify why he can work effectively where he is based? We obviously don't have all the facts but companies will usually try and keep staff rather than going through the expense of recruiting / training new staff.

13-03-2013, 08:35
Hi Shaughn

There are a couple of questions that need to be answered. Have they offered him full relocation costs etc? A salary increase that will allow him to maintain the same lifestyle in Jhb? and many others...
Does he have a contract / letter of appointment?

No, they are not allowed to change the details of that employment contract without consultation - and he has the right to accept or reject it.
The crunch will be if his rejection is 'reasonable'

Moving aged parents from their doctors, friends and social environment is very traumatic and would be considered a reasonable reason to decline. eg In Jhb they would have no support structure to get them to doctors appointments etc

If he is still in the 'negotiation' phase, he must document everything..
after meetings he must email his understanding of their 'offer/proposal' and emphasise why this is not possible/practical - lay the groundwork for a reasonable rejection.

Constructive dismissal in also a possibility - see below - look at the law

Cases have been won when the person was married - it's not reasonable to expect an employed spouse to relocate

I've posted quite a few articles on where these cases go wrong... in the paperwork and claim details laid before the courts. Use an expert if he doesn't win in the negotiations.
In Barry and African Defence, he lost because he didn't submit evidence to prove his case

Relocating the business: What about the employees

André Claassen & Jan du Toit

SA Labour Guide (http://www.labourguide.co.za/most-recent-publications/relocation-of-business)

What happens when a business relocates to new premises? Are the employees simply retrenched or must they resign? Is there a duty on the employer to consult with the employees or to provide transport to the new premises?

In TUSAA obo Hlongwane / Bergs Refrigeration cc [2007] BALR 612 (MEIBC), the employer relocated its business from Pretoria West to Brits. Some employees were allegedly offered retrenchment packages, but the two applicants in this matter declined the offer.

After the relocation had taken place, the employees informed the employer that they could not afford the extra transport costs to travel the further distance from their homes to the new workplace. The employer informed them that they should build shacks near Brits, as they were already living in shacks near the former workplace. The employees then abandoned the employment, claiming that they had been constructively dismissed.

The two applicants in this matter alleged that they were never consulted or informed of what was to happen to them after the relocation. They alleged further that they had asked the employer what will happen to them after the relocation, but despite promises from the employer, they were never told. The applicants informed the employer that they had a serious transport problem in reporting for work at the new premises and they were told by the employer that if they were not willing to relocate, they would be provided with the resignation forms.

They could not relocate as they had school going children and could not afford the transport costs as they had each spent R60 to report for work at the new premises on the first day. They then decided not to continue with work as the employer had made continued employment impossible and the employer was not willing to consider subsidising their transport.

They referred a dispute of constructive dismissal to the MEIBC, alleging that the employer had made working conditions intolerable. The applicants stated that the employer's attitude was that they must relocate to Brits, and that the employer would provide corrugated iron for them to build shacks. The employer had told them that if they were not willing to relocate then they must resign.

The employer said that when the business relocated, all employees were offered retrenchment packages, but the two applicants declined the offer as they wanted to move with the business. However, the business subsequently closed its doors.

The employer did not see the applicants again after 17th July, when the relocation had been completed.

The arbitrator noted that the onus is on the applicants to prove constructive dismissal, and the critical issues to be proved are whether it was the applicants who brought the contract to an end; whether the reason for the applicant's action was that the respondent had rendered the prospect of continued employment intolerable, and whether the applicants had no reasonable alternative other than terminating the contract.

The applicant's representative testified that the respondent did not discuss the conditions of the relocation with the applicants and nor were they offered retrenchment packages.

Retrenching employees that cannot relocate and severance pay?

In Barry and African Defence Systems (Pty) Ltd (2004) 13 CCMA 5.5.1 the company decided to close and relocate its branches in KZN and the Cape Province to Midrand. Severance package were offered to “non-core staff” that would be redundant in terms of the new structure in Midrand. The applicant was a core staff member and the company offered to pay for his relocation costs as well offered him a relocation bonus and a salary increase if he agreed to relocate. Due to personal circumstances the applicant could not relocate to Midrand and opted to be retrenched. Procedurally and substantively the retrenchment was fair but the company failed to pay the employee severance pay, arguing that the employee refused to accept a reasonable offer of alternative employment in Midrand and therefore forfeited his right to such payment. The applicant claimed R427812 severance pay arising out of having worked for the company for more than twenty eight years prior to his employment being terminated.

The commissioner ruled;

“The crux of this case turns on whether or not the applicant’s decision not to accept the new position offered to him in Midrand was unreasonable. It is my finding that his refusal was unreasonable and that therefore his application must fail.

… turning to the question of whether or not the applicant’s refusal to accept relocation was unreasonable, the onus rested with the applicant to prove that it was unreasonable to expect him to accept the alternative position offered to him in Midrand. And although it may well be that this was the case, from the evidence submitted by him I am of the opinion that he failed to discharge this onus.”

From the above it is clear that employees will have to be retrenched in terms of section 189 of the Labour Relations Act if a company decides to relocate and the employees cannot relocate with the company. Severance pay will have to be paid but not to employees that unreasonably refuse to accept alternative employment.

In the Barry and African Defence Systems case above the outcome would have been different if the employer did not offer the financial assistance it did; in such event the company would have had to pay the severance pay when they retrenched the employee.

13-03-2013, 09:27
The next question, is whether this company is a South African Company, or an overseas company with a SA office?

13-03-2013, 09:59
Thanks Sharon.

Vine, its a South African company.

13-03-2013, 13:43
If they have made an offer to pay for the move to Jhb and have indicated that they would pay according to his responsibilities, then it will be very difficult to prove, even at the CCMA that this is constructive dismissal.

We tend to forget when we mention that we have worked in this company for so many years and are loyal, that you were effectively paid for the work you did do while you were there, it's not that you worked with out pay, and are now owed a lifetime of remuneration at some point in the future.