Davies Ndumiso Sibanda Labour
MANY workers who were terminated on notice have an expectation that they will receive retrenchment packages as prescribed by the Labour Amendment Act 2015 yet there are occasions where workers might not get anything.

My reading of the Amendment Act is that an employer who cannot afford to pay the retrenchment package and alleges financially incapacity (Section 12C(3)) can apply in writing for exemption from paying the minimum retrenchment package or paying nothing at all. In my view, many employers who terminated workers on notice due to financial challenges are likely to apply for exemption from paying anything. This is one aspect of the legislation that has not been explained to workers as a result an expectation to be paid a retrenchment package has been created in the minds of many workers.

Section 12C(4)(a) reads “In considering its response to a request for exemption in terms of subsection (3) the employment council or Retrenchment Board

(a) Shall, where the employer alleges complete inability to pay the minimum retrenchment package, be entitled to demand and receive such proof as it considers requisite to satisfy itself that the employer is so unable, and if so unable on the date when the notice of termination of employment takes effect, may propose to the employer a scheme to pay the minimum retrenchment package by instalments over a period of time.”

This section clearly puts workers in a difficult position where the employer provides prescribed proof that he has no capacity to pay the package even if given the window to pay in instalments. This means at this point the Retrenchment Board, legally, will have no choice but discharge the employer from the obligation to pay workers anything. The question I have is whether it was the intention of the legislature to do that disadvantaging many workers who were dismissed by organisations that are well known to be financially embarrassed.

I can foresee a lot of litigation by organisations where the Retrenchment Board orders payment of retrenchment packages by organisations that cannot afford it. Where the organisation cannot afford to pay retrenchment packages in terms of section 12C(4)(a) and can present facts to support its argument, I am the view that when that happens workers could either be awarded staggered payments if the organisations can afford it or pay nothing to the workers if the organisation cannot afford the package. The courts could support employers position taking us back to the challenge we were in.

The legislation does not provide for severance pay nor does it provide for relocation allowance or any other payments that would be made in terms of the old process. I am of the view that all these can be negotiated individually, at Works Council or NEC. However I can foresee many employers objecting to negotiating any of these issues. If workers litigate over these non-prescribe components of retrenchment packages their prospects of success could be very limited.

Talk amongst employers is that due to the introduction of retrenchment legislation, all workers are now protected on leaving work and see no reason to have private in-house pension schemes considering that there is NSSA pension as well. My view is that withdrawal of pension contributions by employers could result in collapse of pension funds which would leave workers worse off once the retrenchment package money is lost. Had there been more consultations safeguards for pensions could have been included.

In conclusion, it can be said that the legislation is likely to produce a lot of litigation over retrenchment packages and not all workers will benefit from the legislative changes. In fact, it provides possibly one of the cheapest method for downsizing in cases of financial challenges for employers, where the employer gets proper legal guidance.

Davies Ndumiso Sibanda can be contacted on: E: [email protected]; C: 0772 375 235