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Court ruling: Restructuring dispute

Constitutional Court ruling on restructuring dispute is good for employers


Can you dismiss an employee if they refuse to accept less favourable working conditions, such as lower wages? The short answer… Yes, as long as the process remain fair.   


Many employers find themselves in a position where they are forced to make changes to the working conditions of their employees in order to stay viable in the current economic conditions.  The employer may have no choice but to dismiss staff members that refuse to accept these changes.   Unfortunately, when these changes are less favourable than the current working conditions, the unions resist the changes.  Unions would rarely accept conditions for their members that is less favourable, despite the deemed necessity of such conditions. 


As a result, unions had often used Section 187(1)(c) of the South African Labour Relations Act, 1995 (the “LRA”) as amended in defence against the unilateral changes of working conditions.  Section 187(1)(c) stipulates that it would be considered an automatic unfair dismissal if the reason for the dismissal is “a refusal by employees to accept a demand in respect of any matter of mutual interest between them and their employer.


Fortunately, the Constitutional Court pointed out that Section 187(1)(c) of the Labour Relations Act was not meant to undermine the fundamental purpose of Section 189 of the Labour Relations Act, pertaining to operational requirements.  As such, a fair retrenchment process may include changes to the working conditions, if it is reasonable to do so

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A similar dispute arose between the union NUMSA and Aveng Trident Steel (See the constitutional court case: National Union of Metal Workers of South Africa and Others v Aveng Trident Steel (a division of Aveng Africa (Pty) Ltd) and Another (CCT178/19) [2020] ZACC 23 (27 October 2020)).  Fortunately for employer, the constitutional court ruled that if there is a bona fide and rational reason to change the working conditions, it would be fair to do so via the retrenchment process. If workers refuse to accept these conditions, they may be dismissed without severance pay, in line with Section 41(4) of the Basic Conditions of Employment Act as amended. The court found that it is in the best interests of society that an employer remains economically viable. “In an ever-changing economic climate characterised by increasing global competition, operational reasons not only relate to the downsizing of the workforce, but also to restructuring the manner in which an existing workforce carries out its work,” the judgment reads.


In other words, when there is an operational need, the employer may start a retrenchment consultation process with the respective employees/unions.  If the retrenchment consultations do not reveal any reasonable alternatives to retrenchments, the employer may propose changes to the employee’s employment contracts, with the threat of dismissal.  These changes could include changes to their salary or job descriptions.  Should the employees refuse, they could be fairly dismissed, without paying a severance package.  Note that the above may not be used to frivolously dismiss unwanted staff members, as the decision must still abide by the Labour Relations Act.  The true reason for the dismissal must remain the employer’s operational requirements.