RETRENCHMENT AND SECTION 189
When a business is under financial or operational pressure, restructuring can become unavoidable.
But deciding that a position must disappear is only one part of a retrenchment process.
Under section 189 of the Labour Relations Act, employers must engage in a genuine consultation process aimed at reaching consensus on matters including avoiding dismissals, reducing the number of dismissals, changing the timing of dismissals, mitigating the effects of dismissal and selecting employees fairly.
The process cannot simply be treated as a formality.
The Duverge lesson
The 2025 Labour Court judgment in Duverge v Spanish Farm Guest Lodge CC t/a Sky Villa Boutique Hotel provides a useful reminder of the risks involved.
The Court found the dismissal both procedurally and substantively unfair and awarded the employee compensation equivalent to eight months' remuneration.
Among other concerns, the Court found that the employer had adopted a mechanistic, checklist approach to consultation and had failed to genuinely engage with alternatives, including bumping.
The case demonstrates an important principle: consultation is intended to be a genuine consensus seeking process, not a series of meetings held simply to satisfy a procedural requirement.
What should a proper section 189 process address?
A section 189(3) notice should provide the relevant information needed for meaningful consultation, including:
The reasons for the proposed dismissals
Alternatives that the employer considered before proposing dismissal
Alternatives to dismissal that the employer considered
The number of employees potentially affected
The occupational categories and groups involved
The proposed selection criteria
The proposed timing of dismissals
Proposed severance arrangements
Any other relevant information required by the legislation
The parties must then have a meaningful opportunity to engage with the proposals and alternatives.
Alternatives matter
One of the most important lessons from recent case law is that employers should be able to demonstrate that alternatives to dismissal were genuinely considered.
Depending on the circumstances, these could include:
Vacant positions
Reduced working hours
Voluntary severance
Salary adjustments
Reskilling or retraining
Changes to organisational structures
Relocation
Bumping
Not every alternative will be viable.
What matters is that the employer can demonstrate that relevant alternatives were properly considered and, where rejected, that there was a rational reason for doing so.
A note on the 2026 Mbatsana judgment
The 2026 Labour Appeal Court decision in Universal Product Network (Pty) Ltd v Mbatsana N.O. should be used carefully in discussions about retrenchment.
The case itself concerned disciplinary dismissals following strike related misconduct, rather than a retrenchment exercise. The Labour Appeal Court confirmed that procedural unfairness does not simply become substantive unfairness because the procedural defect is serious.
However, the Court specifically noted that in operational requirements dismissals, procedural and substantive issues can become closely connected, particularly where the dismissal was not genuinely a measure of last resort.
For employers, the practical lesson remains clear: do not confuse a procedurally compliant process with a genuinely fair restructuring decision.
Document the process
Every consultation should be properly recorded.
Keep evidence of:
Information provided to employees or representatives
Questions raised
Alternatives proposed
Employer responses
Reasons for rejecting alternatives
Selection criteria discussed
Changes made during consultation
Final outcomes
Documentation should demonstrate that the employer entered the process with an open mind.
Retrenchment is not simply a legal process
A retrenchment affects people, operational continuity and the organisation's reputation.
A properly managed process therefore requires more than issuing a section 189 notice.
It requires preparation, accurate information, meaningful consultation and a willingness to consider alternatives.
The objective is not simply to prove that consultation happened. It is to be able to demonstrate that the consultation actually mattered.
