RETRENCHMENT DISPUTES & CCMA / BARGAINING COUNCIL / LABOUR COURT SCRUTINY

Written by Errel Mbuyisa

Retrenchment is one of the hardest decisions any salon, spa, or skincare clinic owner will face. Falling client numbers, rising rent, or a service that no longer pays for itself can force a business to cut staff. When this happens, the law requires more than just handing over a letter, and getting it wrong can lead to a costly dispute at the CCMA or a Bargaining Council.

This article sets out, in plain terms, what South African law requires of hairdressing, cosmetology, beauty, and skincare employers before and after a retrenchment, what happens when an employee refers a dispute, and how to prepare a case that will stand up to scrutiny.

What the law requires before you retrench

Section 189 of the Labour Relations Act 66 of 1995 requires an employer to consult employees before dismissing them for operational requirements — meaning reasons connected to the needs of the business rather than the employee's conduct or capability. Consultation means more than informing a stylist, therapist, or technician that a decision has already been made. It means engaging honestly, before the decision is final, and genuinely considering what the employee has to say.

The Labour Appeal Court confirmed this in CWIU v Algorax (Pty) Ltd [2003] 11 BLLR 1081 (LAC), holding that consultation must be conducted in good faith and aimed at exploring alternatives to dismissal. An employer who has already decided who will be let go, and merely announces this in a short meeting, is unlikely to satisfy this requirement. The same principle was confirmed in Fry's Metals (Pty) Ltd v National Union of Metalworkers of South Africa [2003] 2 BLLR 140 (LAC).

You do not need your employee's agreement before proceeding — the final decision remains yours. What the law requires is a genuine attempt to reach consensus on:

• Ways to avoid the retrenchment (for example, reduced hours, redeployment, or a temporary pay adjustment)

• Ways to keep the number of retrenchments as low as possible

• The criteria used to decide who is affected

• The timing of the retrenchment

• Severance pay

• Assistance offered to affected employees, such as references or help finding new work

What happens when a dispute is referred

Receiving a CCMA or Bargaining Council referral does not mean the retrenchment was unfair. Employees have a statutory right to challenge a dismissal, and many referrals are made because the employee disagrees with the outcome, not because the process was legally defective.

The first stage is conciliation, an informal and confidential process. No evidence is led under oath, and no witnesses testify. Employers should attend prepared to explain, clearly and without jargon, why the retrenchment was necessary and how consultation took place.

If conciliation does not resolve the dispute, the matter proceeds to arbitration or, in some cases, the Labour Court. This is where thorough preparation becomes essential, because commissioners and judges decide cases on the evidence before them, not on assumptions about what “probably” happened.

Two questions a commissioner will ask

Every retrenchment dispute turns on two separate questions, and an employer must satisfy both.

First, was there a genuine operational reason for the retrenchment? This is called substantive fairness. A drop in bookings, a service line that is no longer profitable, or the loss of a major contract can all qualify, provided the reason is real and can be supported by evidence such as financial records or booking data.

Second, was a fair process followed? This is called procedural fairness. Did the employer consult properly, in good time, and before the decision was final?

A genuine business reason does not excuse a rushed or one-sided process, and a well-run consultation process cannot save a retrenchment that was not actually necessary. The Labour Appeal Court confirmed in Fry's Metals that both requirements must be met.

The employer does not have to prove there was no alternative whatsoever

A common misunderstanding is that an employer must prove that every possible alternative to retrenchment was exhausted. The Labour Appeal Court rejected this approach in Fry's Metals, holding that commercial decision-making belongs to the employer, and that a commissioner may not substitute their own business judgment simply because they might have chosen differently.

This principle was applied again in National Union of Metalworkers of South Africa v Aveng Trident Steel (a division of Aveng Africa (Pty) Ltd) [2019] ZALAC 36; (2019) 40 ILJ 2024 (LAC); [2019] 9 BLLR 899 (LAC), where the Labour Appeal Court confirmed that the Labour Relations Act does not prevent an employer from restructuring a business for reasons of efficiency or commercial survival. The role of the court is not to decide whether the employer made the best possible decision, but whether the retrenchment was fair in the circumstances.

This protection only helps an employer whose reasoning was honest, consistent, and properly explained to the employee at the time.

Documents to gather immediately

As soon as a referral is received, begin compiling records. Do not wait until a hearing date is set, since by then memories fade, messages are deleted, and records may go missing.

Collect the following, organised in date order:

• The section 189 notice

• Any invitations to consultation meetings

• Minutes or notes of each consultation meeting

• Correspondence with the employee, including emails and messages

• Financial records supporting the operational reason (takings, booking data, rent increases, supplier costs)

• The selection criteria used, and how they were applied

• The letter confirming the outcome of the consultation

• The notice of termination

• Proof that severance pay was calculated and paid

Contemporaneous documents — meaning records made at the time — carry far more weight than a version of events reconstructed after the dispute has begun. Never create or backdate documents after a referral has been received. Commissioners are experienced at identifying this, and it will seriously damage an employer's credibility.

Common mistakes to avoid

• Deciding who will be retrenched before consultation begins, and treating consultation as a formality

• Holding a single, rushed meeting instead of a genuine consultation process

• Failing to keep written records of what was discussed

• Applying selection criteria inconsistently, or without a clear, documented rationale

• Giving one reason for the retrenchment at the time, and a different reason once the matter reaches arbitration

• Withholding financial information that is reasonably needed for the employee to engage meaningfully

The Labour Appeal Court has been critical of employers who go through the motions of consultation while having already decided the outcome. This was made clear in Algorax, where the court found that a predetermined outcome can render an otherwise legitimate retrenchment procedurally unfair.

Checklist on receiving a referral

1. Read the referral and identify precisely what is being disputed

2. Contact a labour consultant or attorney without delay

3. Compile all consultation records in chronological order

4. Preserve relevant emails, messages, and financial records

5. Meet with witnesses while their recollection is fresh

6. Confirm that the consultation process met the requirements of section 189

7. Assess honestly whether settlement is commercially sensible

8. Prepare thoroughly for conciliation, arbitration, or Labour Court proceedings

In conclusion, a retrenchment dispute is not lost simply because a business genuinely struggled, and it is not automatically won because the financial case was sound. What decides the outcome is whether the employer consulted honestly, kept accurate records, and can demonstrate exactly how the decision was reached. For salon, spa, and skincare employers, this means treating consultation as a genuine process, supported by proper documentation from the outset, rather than a formality completed on the way to a decision already made.