ConCourt ruling and what Woolies could have done differently

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In the SACCAWU/Woolworths matter, in which judgement was handed down by the Constitutional Court on 6 November 2018, the said Court did not question the principle that businesses need to strategically re-align their workforces as well as optimise costs and efficiencies.

In this matter, until 2002, Woolworths employed a number of its employees on a full-time basis (i.e. they worked a fixed 45 hours per week). In 2002, Woolworths wanted to move to a model in which it would only employ workers on a flexible working hour basis (40 hours per week). In 2012, this had resulted in Woolworths’ workforce consisting of 16,400 flexi-timers and 590 full timers (the latter earned superior wage rates and enjoyed better benefits sometimes by up to 50%).

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After providing a voluntary opportunity for the full-time staff to opt for early retirement, voluntary severance or to become flexi-timers, only 177 employees remained full-timers and Woolworths then progressed to section 189A of the LRA, during which a further 85 out of the 177 full-timers accepted one of the voluntary options. Ultimately, only 92 of them were retrenched, 44 of whom are the second and further applicants in this matter.

The Constitutional Court found that whilst the employer has the right to make the final decision in a s189 retrenchment matter, it had to be preceded by a proper procedural and substantive engagement. This had not been complied with by Woolworths and the aggrieved employees were re-instated to their original full-time positions. The Court confirmed other alternatives should have been considered by Woolworths in this process.

The Court confirmed that other options were open to Woolworths to consider before retrenching, and has ordered the retailer to reinstate the employees.

Alternative options

The trading environment is tough with many businesses experiencing negligible revenue growth and high input costs. What legitimate options are then available to businesses that need to revisit their workforce solutions and who may wish to move from an “as-is” state to a more flexible “to-be” state possibly characterised by a lower payroll burden, greater flexibility (e.g. via a Temporary Employment Service or a direct fixed-term contract or even part-timers)?

The first option is to take a decision to “ring-fence” and “freeze” the existing category of staff that are in focus. In other words, they are not prejudiced in respect of their current remuneration and benefits but a policy is drafted setting out a new earnings dispensation that applies to all future incumbents in that category. In an environment where grading and remuneration is subject to collective bargaining or a collective agreement, the protocols associated with changing that would apply.

A second option would be to follow a s189 or s189A approach as was the case in Woolworths. It could start with a number of voluntary options (such as early retirement, VSP or voluntary conversion to the new dispensation). This could then be followed by a procedurally and substantively fair consultation process where some of the alternatives to retrenchment could include “ring-fencing” or “freezing”, transition to a TES or a direct fixed-term or part-time contract and the like.

A third option would be engaging in an organisational development design initiative to re-profile certain positions and re-grade them in line with what the new business requirement is.

All three of the above approaches would not be arbitrary nor unfair if approached correctly. Any equal treatment or equal pay for work of equal value claims could be defensible.