CONSULTATION OBLIGATIONS UNDER SECTION 189: THE CODE OF GOOD PRACTICE DISMISSAL & HCSBC COLLECTIVE AGREEMENT

Written by Hulisani Ravhudzulo

South Africa's Hairdressing, Cosmetology, Beauty, and Skincare Industry continues to face significant commercial pressures. Increasing operating costs, rising rental expenses, changing consumer spending patterns, technological advancements, competition from informal businesses and economic uncertainty often compel salon owners and employers to restructure their businesses. In some circumstances, these operational challenges may result in retrenchments.

While employers have the right to reorganise their businesses to remain financially sustainable, this right is balanced by employees' constitutional right to fair labour practices. Section 23 of the Constitution of the Republic of South Africa, 1996 guarantees every employee the right to fair labour practices, while sections 185, 188, 189 and 189A of the Labour Relations Act 66 of 1995 ("LRA") regulate the fairness of dismissals based on operational requirements.

Retrenchment is therefore not merely a commercial decision. It is a regulated legal process that requires employers to engage in genuine consultation with affected employees before any final decision is taken. The consultation process is intended to promote transparency, encourage consensus and ensure that retrenchment remains the option of last resort.

Understanding Operational Requirements

Section 213 of the Labour Relations Act defines operational requirements as requirements based on an employer's economic, technological, structural or similar needs.

Within the Hairdressing, Cosmetology, Beauty, and Skincare Industry, operational requirements may include:

• declining client bookings;

• reduced revenue;

• relocation or closure of salons;

• introduction of new technology;

• restructuring departments;

• business mergers;

• automation of administrative functions; or

• financial distress requiring cost-saving measures.

Although these circumstances may justify restructuring, employers must still demonstrate both substantive and procedural fairness in accordance with section 188 of the Labour Relations Act.

When Consultation Must Begin

One of the most common mistakes employers make is consulting employees only after deciding who will be retrenched.

Section 189(1) clearly requires an employer who contemplates dismissals for operational requirements to consult with the appropriate consulting parties. The word "contemplates" is significant because it requires consultation before decisions become final.

The Labour Appeal Court confirmed this principle in Johnson & Johnson (Pty) Ltd v Chemical Workers Industrial Union, holding that consultation must occur while proposals are still capable of influencing management's decision.

Employers must therefore avoid presenting retrenchment as a completed decision. Instead, consultation should begin once restructuring is being seriously considered.

Who Must Be Consulted?

Section 189(1) establishes a hierarchy of consulting parties.

The employer must consult:

• any person identified in a collective agreement;

• if no collective agreement exists, a workplace forum;

• if there is no workplace forum, any registered trade union representing affected employees; or

• where none of these exist, the employees likely to be affected or their elected representatives.

Within the Hairdressing, Cosmetology, Beauty and Skincare Industry, employers must also consider the consultation provisions contained in the Main Collective Agreement (MCA) where applicable.

Failure to consult the correct representatives may render the retrenchment procedurally unfair regardless of the employer's financial circumstances.

The Section 189(3) Notice

Meaningful consultation begins with the written notice required by section 189(3).

This notice is more than a simple invitation to a meeting. It provides employees with sufficient information to understand the employer's reasons for contemplating retrenchment and to participate meaningfully in the consultation process.

The notice must include:

• reasons for the proposed dismissals;

• alternatives considered and reasons for rejecting them;

• number of employees likely to be affected;

• job categories involved;

• proposed selection criteria;

• proposed timing of dismissals;

• severance pay proposals;

• assistance offered to affected employees;

• possibility of future re-employment; and

• the total number of employees employed by the business.

Providing incomplete or misleading information undermines meaningful consultation and increases the risk of procedural unfairness.

The Meaningful Joint Consensus-Seeking Process

Section 189(2) requires employers and employees to engage in a "meaningful joint consensus-seeking process."

This does not require employers to obtain agreement before implementing restructuring. Instead, it requires employers to genuinely attempt to reach consensus on measures to:

• avoid dismissals;

• minimise dismissals;

• change the timing of dismissals;

• reduce the impact of retrenchments;

• determine fair selection criteria; and

• determine severance pay.

The Labour Appeal Court in Chemical Workers Industrial Union v Latex Surgical Products (Pty) Ltd emphasised that consultation is not a mere formality. Employers must genuinely consider employee proposals and remain willing to modify their plans where reasonable alternatives exist.

Considering Alternatives to Retrenchment

Retrenchment should always be regarded as the option of last resort.

During consultation, employers should explore alternatives such as:

• reduced working hours;

• short-time arrangements;

• temporary layoffs;

• voluntary severance packages;

• transfers between branches;

• redeployment;

• salary restructuring by agreement;

• early retirement;

• natural attrition; or

• reducing overtime.

For example, a salon experiencing declining income may temporarily reduce operating hours instead of immediately retrenching stylists/therapists. Likewise, administrative staff may be redeployed to customer service functions where vacancies exist.

Proper consideration of alternatives demonstrates procedural fairness and often preserves valuable skills within the business.

Selection Criteria Must Be Fair and Objective

Section 189(7) requires employers to apply either agreed selection criteria or, failing agreement, criteria that are fair and objective.

Commonly accepted criteria include:

• Last-In-First-Out (LIFO);

• qualifications;

• experience;

• specialised skills;

• disciplinary record;

• attendance; and

• operational requirements linked to future business needs.

Employers should avoid subjective criteria such as "attitude," "personality" or "management preference" unless these can be objectively measured and consistently applied.

The Labour Appeal Court in SA Clothing and Textile Workers Union v Discreto confirmed that fairness depends upon objective selection methods rather than arbitrary decision-making.

Large-Scale Retrenchments under Section 189A

Section 189A applies to employers exceeding the statutory thresholds prescribed by the Labour Relations Act.

Additional protections include:

• CCMA facilitation;

• prescribed consultation periods;

• restrictions on implementing dismissals prematurely;

• access to protected industrial action; and

Labour Court remedies where consultation requirements are ignored.

CCMA facilitation often assists employers and employees in conducting structured negotiations under the guidance of an independent facilitator, reducing conflict and promoting consensus.

The Role of the Code of Good Practice

Section 203 of the Labour Relations Act requires courts, arbitrators and employers to consider the applicable Codes of Good Practice when interpreting the Act.

The Code of Good Practice on Dismissal Based on Operational Requirements reinforces that consultation should begin as early as possible and should remain transparent, honest and solution-oriented.

The Code encourages employers to:

• disclose relevant information;

• consult with an open mind;

• seriously consider alternatives;

• apply objective selection criteria;

• treat employees with dignity; and

• mitigate the social and financial consequences of retrenchment.

For employers within the Hairdressing and Beauty Industry, adherence to the Code promotes not only legal compliance but also responsible employment practices.

The Importance of the Main Collective Agreement

Employers operating within the Hairdressing, Cosmetology, Beauty and Skincare Industry must ensure that any retrenchment process complies not only with the Labour Relations Act but also with the applicable provisions of the Main Collective Agreement.

The MCA complements statutory obligations by regulating employment conditions within the sector and may contain additional procedural requirements affecting consultation, notice periods, benefits and dispute resolution.

Failure to comply with both the Labour Relations Act and the Main Collective Agreement may expose employers to disputes before the National Bargaining Council, the CCMA or the Labour Court.

Practical Guidance for Employers

Before implementing retrenchments, employers should:

• identify the genuine operational reason for restructuring;

• issue a comprehensive section 189(3) notice;

• consult the correct representatives;

• disclose all relevant information;

• properly investigate alternatives;

• keep detailed consultation minutes;

• objectively evaluate employee proposals;

• apply fair selection criteria;

• calculate severance pay in accordance with section 41 of the BCEA; and

• communicate decisions respectfully and transparently.

Comprehensive documentation remains one of the employer's strongest safeguards should the retrenchment later be challenged.

In conclusion, retrenchments based on operational requirements are among the most sensitive and legally regulated dismissals in South African labour law. Sections 189 and 189A of the Labour Relations Act, read together with section 23 of the Constitution, section 41 of the Basic Conditions of Employment Act, the Code of Good Practice on Dismissal Based on Operational Requirements and the Main Collective Agreement for the Hairdressing, Cosmetology, Beauty and Skincare Industry, establish a comprehensive framework designed to balance business sustainability with employee protection.

Employers are not prohibited from restructuring their businesses when economic, technological or structural challenges arise. They are, however, required to engage in a genuine and meaningful joint consensus-seeking process before implementing retrenchments. Consultation must occur before decisions are finalised, employees must receive sufficient information to participate effectively, reasonable alternatives must be explored, and fair and objective selection criteria must be applied.

Ultimately, employers who embrace consultation as a collaborative process rather than a procedural obligation are more likely to preserve workplace relationships, minimise disputes and ensure that retrenchments withstand scrutiny before the CCMA, Bargaining Council or Labour Court. By following the legislative framework and the principles developed by the courts, businesses within the Hairdressing, Beauty, Cosmetology and Skincare Industry can navigate operational restructuring lawfully, fairly and with due regard for the dignity of their employees.