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Retrenchment law no economic obstacle

SEVERAL international human rights instruments embody the rights of workers, particularly the International Labour Organisation (ILO) — a United Nations Body created in 1919, tasked with promoting industrial relations and to set international standards to curtail unfair competition and protect vulnerable employees, among others.

Zakeyo Mutimutema

In terms of ILO standards, retrenchment is covered under the Termination of Employment Convention, 1982 (No 158) and Termination of Employment Recommendation, 1982 (No 166).

Article 4 of the convention provides that “the employment of a worker shall not be terminated unless there is a valid reason for such termination connected with the capacity or conduct of the worker or based on the operational requirements of the undertaking, establishment or service”.

This provision makes it mandatory for the employer to justify the need to terminate a contract through retrenchment and such reason has to be valid and based on the operational requirements of the business.

The justification to employees or their representatives and government to satisfy that there is a genuine reason to take such a measure (retrenchment).

According to article 13 of the convention, the employer is compelled to provide workers’ representatives, in good time, with relevant information as to the reason for termination, number of workers and categories of workers likely to be affected, the selection criteria, period in which the retrenchment is to be undertaken and any major changes in production that may result from termination of employment.

The details must be communicated to the workers’ representatives as early as possible to give them enough time to consult their members so as to possibly avert the termination of employment and to adopt measures to mitigate the adverse effects of the retrenchment.

The duty of consulting is not mere formality, but should be able to influence the decision taken or proffer alternatives.

Transparency is a major element during consultations in order to satisfy the employees or their representatives that there is a genuine concern.

There is also the duty to notify the competent authority, which is government.

Parties are required to avert or minimise as far as possible termination of employment. Government has a duty to assist the parties in seeking a solution to the problems raised before terminating employment.

Measures to avert or minimise retrenchment include a recruitment freeze, spreading the workforce reduction for a certain period to allow for natural reduction, internal transfers, training and retraining, voluntary early retirement with appropriate income protection, restricting overtime, reduction of working hours, work sharing, redeployment, transfers, placement in suitable employment with other employers, allowing employees on notice time to look for alternative employment, etc.

Where employees are to be re-trained, they should be given income protection during any period of training such as reimbursement of costs and mitigating costs of relocation. Government should consider providing financial resources in implementing this measure.

According to paragraph 23 of the recommendation, the selection of employees to be retrenched must be done in advance.

The criteria must be objective in order to avoid arbitrary decisions and discrimination and ensure workers’ representatives are not arbitrary dismissed.

Some countries protect vulnerable groups like disabled persons (Belarus) while the Republic of Korea requires fair and reasonable criteria for selecting employees.

In the event of all the measures having failed, the remaining option is to terminate employment. Here the employee shall be entitled to a severance allowance or other separation benefits based on, inter-alia, length of service and level of wages paid directly by employer or a fund contributed by the employer, and benefits from unemployment insurance, or other forms of social security or a combination of such allowance and benefits. There must be a right of appeal to competent or independent bodies if one is not satisfied with such a decision.

The Zimbabwean Labour Act Chapter 28:01 to a larger extent incorporates the provisions of this convention and its recommendations.

In section 2, it defines the term retrench as “in relation to an employee, means terminate the employee’s employment for the purpose of reducing expenditure or costs, adapting to technological change, reorganising the undertaking in which the employee is employed, or for similar reasons, and includes termination of employment on account of closure of the enterprise in which the employee is employed”.

The Act provides for two procedures in retrenchment. The retrenchment of less than five employees is regulated by the Labour Relations (Retrenchment) Regulations, SI 186 of 2003, while the retrenchment of five or more employees is regulated by section 12C and 12D of the Act. The procedures in the regulation are similar to the Act.

Section 12D of the Act compels an employer to inform and consult employees at the earliest possible instance of any major changes in production, programmes, organisation or technology.

Before giving notice of intention to retrench, an employer may agree with the employees concerned, workers’ committee, works council or employment council to implement measures to avoid retrenchment.

A works council is a workplace body composed of management and workers’ representatives while the employment council is an industrial body composed of trade union and the employer’s organisation operating in that industry.

The measures to be adopted may be of short time work, shift work or both and that no shift shall be without work for more than one month at a time, or for an aggregate of six months in any period of 12 months and the employer must not pay less than 50% of the employee’s current wage while the employee is on short time work. The employer is obliged to give seven days’ written notice to implement the measures.

Written notice

If the measure to avoid retrenchment fails, the employer can give written notice of intention to retrench to the works council and if there is no works council, by agreement of the majority of employees notifying the employment council or where there is no works council or employment council, notification of the retrenchment board.

The notice must provide the details of employees to be retrenched, the reasons for retrenchment. Such body shall “forthwith” attempt to secure agreement between the employer and employees concerned or their representatives on whether or not the employees should be retrenched and if necessary the terms and conditions of retrenchment.

There is an obligation for general considerations in determining retrenchment.

The law requires that retrenchment be avoided as far as possible without prejudice to the enterprise; the consequences of retrenchment should be mitigated, taking into consideration the reasons proffered, effect of the proposed action on the employees and prospects of getting alternative employment and the terminal benefits to be paid.

If the works council or employment council secures agreement within one month of receiving the notice of retrenchment, such body shall send a written approval to the employer, and copy to retrenchment board.

If there is no agreement within one month of receipt of notice, the works council or employment council shall refer the matter to the retrenchment board together with details of areas of agreements or disagreement, copies of all documents submitted, minutes of proceedings and deliberations.

The board may invite representations from any interested parties.

The board shall within two weeks of referral of the matter recommend to the minister (of Public Service, Labour and Social Welfare) in writing on whether or not the retrenchment should be permitted, and if so, the terms and conditions to be effected.

The minister has an obligation to consider without delay recommendations of the board and other general considerations and shall approve the proposed retrenchment subject to such terms and conditions as he may consider necessary or desirable to impose or refuse to approve the retrenchment.

There is no right of appeal against the minister’ decision, but an aggrieved party may approach the Labour Court for a review of the processes or the package approved by the minister.

In most circumstances, workers approach the court seeking for an increase in the package while an employer may seek a reduction of the same.

In this way the court, as an independent institution, takes into consideration the circumstances of the case and determine what it considers just.

In view of the outlined, I am of the view that Zimbabwean law on retrenchments meet international obligations in fundamental aspects. It recognises the need for consultation between the employer and the employees or their representatives, thereby promoting workplace and industrial democracy.

Package agreement
The parties deliberate the measures to avoid retrenchment and may agree on the package to be paid. If the parties agree on a package, they are simply compelled to notify the retrenchment board. If they disagree, government through the retrenchment board composed of employers and workers and government representatives comes in to balance the competing interests of the parties. The board makes recommendation to the minister to approve or reject the retrenchment.

The law recognises payment of a separation benefit which is negotiable.

The law does not stipulate figures to be paid as argued by some. The retrenchment package is wholly negotiated between the employer, employer’s organisation, the employee, trade union and government intervention where necessary, if parties are deadlocked.

The package varies from company to company depending on the circumstances.
There is no one-package-suites-all approach. Those quarters arguing that there is a severance package equivalent to 12 months’ salaries for each year worked must be ashamed of lying to the public.

Mutimutema is a Labour Law expert and legal advisor to the Zimbabwe Congress of Trade Unions.


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