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Ulterior motives for retrenchments not on

Article by lvan lsraelstam, Chief Executive of Labour Law Management Consulting

Employers must be careful not to mix up the retrenchment of an employee with his/her dismissal for misconduct such as, for example, dereliction of duty.

Often the CEO or MD lands on the carpet in front of the board of directors due to poor business performance and then gets ‘retrenched’. Sometimes the accusing finger is in fact pointed in the right direction but just as often the wrong head rolls because the culprits have conspired to scapegoat an easy target or someone outside the main clique.

Scapegoating can result not only in the unnecessary loss for the employer of key skills but can also tarnish the reputation of the employer. From the employee’s point of view their name will have been muddied and their career prospects may have been damaged. However, in certain circumstances employees can block attempts at scapegoating.

For example, in the case of Van As vs African Bank Ltd (2005, 3 BLLR 304) the employer suffered serious financial losses and hence instituted disciplinary proceedings against its Chief Executive Officer who was suspended pending a hearing. Before the hearing was convened the employer and the CEO signed a retrenchment agreement in which it was agreed that the CEO would leave the company for reasons of operational requirements. Despite this the employer decided to proceed with the disciplinary hearing.

The CEO applied to court for an order interdicting the employer from dismissing him for misconduct. He contended that:

  • the employer could not discipline him after a retrenchment agreement had been concluded, and
  • the employer was merely trying to scapegoat him for the losses incurred by the bank.

The Court found that, by entering into the retrenchment agreement the employer had waived its right to dismiss the CEO for misconduct. It ordered the employer to desist from such dismissal and to adhere to the terms of the retrenchment agreement. It also awarded costs against the employer.

The cost of this matter to the employer must have been high because not only did it have to bear its own legal costs it also had to pay those of the employee and waste valuable time on the court case.

This could have been avoided had the employer made proper use of the appropriate experts to:

  • assess the matter holistically
  • investigate whether the CEO could really be blamed for the losses and whether there was sufficient proof of this
  • decide whether discipline or retrenchment was most appropriate in practical terms and from a legal point of view, and
  • help decide on a strategy that would satisfy the employer’s practical needs but at the same time avoid infringing the law.

Labour Law Management Consulting is a proud member of the National Small Business Chamber (NSBC).

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