Are you entitled to a severance package when retrenched?

When an employee is retrenched in terms of Section 41(2) of the Basic Conditions of Employment Act (“BCEA”) the employer is statutorily obliged to pay at least one week’s remuneration for each completed year of continuous service to the employee.

During the consultation process (as envisaged in section 189 of the LRA) the employer is obliged to consider alternatives to retrenchment and retrenchment is only a last resort.

The employer can offer the employee any reasonable alternatives to retrenchment, which the employee has to carefully consider. The employee can “reasonably” refuse the offer of alternative employment proposed by the employer and the employee may thereafter be retrenched and the severance pay due will be paid to the employee.

What if however, the employee unreasonably refuses an offer of an alternative to retrenchment?

In the matter of Lemley v CCMA and Others (2020) 41 ILJ 1339 (LAC) the company embarked on a retrenchment process due to its operational requirements. The employer made two offers to the employee, for alternatives to his retrenchment. The first one was for the employee to relocate, at the same level but in another locality; and the second one was a revised offer for the employer to subsidise the shortfall in the employee’s pension fund to allow him to take early retirement. The employee refused to accept either of the offers and in due course he was dismissed for operational requirements without payment of a severance package in accordance with section 41(4) BCEA.

The employee referred an unfair dismissal dispute to the CCMA. The CCMA Commissioner found that the employee unreasonably refused the offer of an alternative to retrenchment and the dispute was dismissed.

The employee then took the matter to the Labour Court for review and the review application was dismissed.

The employee then applied for leave to appeal, which petition was granted. On appeal the Labour Appeal Court held that the employee unreasonably refused to accept the employer’s offer of alternatives to his retrenchment and he “took no steps to engage with the third respondent in any meaningful way regarding the difficulties he may have faced in accepting the alternative position offered”. As a result, the appeal was dismissed.

Section 41(4) of the BCEA states that an employee who unreasonably refuses to accept the employer’s offer of alternative employment is not entitled to severance pay.

NB: Please note that this article is for informational purposes only and not for the purpose of providing legal advice. Should you require more information on this topic or any issue arising out of this please contact Allardyce & Partners on 011-234 2125 or enquiries@allardyce.co.za.