What constitutes fair and objective selection criteria in dismissals based on the operational requirements of the employer in terms of section 189(7) of the LRA?
In this article I will attempt to give a brief overview of a topic that is quite voluminous.
When employers contemplate dismissing employees based on their operational requirements they are guided by section 189 or section 189A of the Labour Relations Act, No 66 of 1995 (LRA).
Section 189(7) of the LRA states:
(7) The employer must select the employees to be dismissed according to selection criteria—
(a) that have been agreed to by the consulting parties; or
(b) if no criteria have been agreed, criteria that are fair and objective.
It is clear from the above that where consulting parties agree to selection criteria the employer may then select the employees to be dismissed according to those criteria. If no agreement is reached, section 189(7)(b) applies and the employer must select the employees to be retrenched according to selection criteria that are fair and objective.
According to the Code of Good Practice on dismissals related to operational requirements, criteria that infringe a fundamental right protected by the LRA when they are applied can never be fair. These include selection on the basis of union membership or activity, pregnancy or some other unfair discriminatory ground. Criteria that are on the face of it neutral should be carefully examined to ensure that when they are applied, they do not have a discriminatory effect.
Selection criteria that are generally accepted to be fair include length of service, skills and qualifications. Generally the test for fair and objective criteria will be satisfied by the use of the “last in, first out” (LIFO) principle. There may be instances where the LIFO principle or other criteria need to be adapted.
Consideration by the courts
In CEPPWAWU obo Gumede v Republican Press  ZALC 21;  6 BLLR 537 (LC) the respondent company had retrenched numerous employees. The court said the requirement of fairness and objectivity applied both to the criteria and to the way in which they were applied. Applying LIFO per department and within a department, as the company had done, was open to abuse and was manifestly unfair because an employee with years of service with the company could be selected for retrenchment from a department where he or she had worked for only a few months if there were other employees who had longer service in that department.
In the case of General Food Industries Ltd t/a Blue Ribbon Bakeries v Food & Allied Workers Union & others (2004) 25 ILJ 1655 (LAC) the company retrenched employees at one branch while recruiting new employees at another branch. The court found that the retrenched employees could have filled those vacancies by applying LIFO and “bumping” and that their dismissal for operational requirements would have been avoided.
Moreover, it had been established that through “bumping” the employees could have been transferred to other bakeries to take jobs done by employees who had shorter service periods than them but were performing work that the employees could perform. The dismissal was found to be unfair.
In Van Rooyen & others v Blue Financial Services (SA) (Pty) Ltd  10 BLLR 1119 (LC) 13 applicants, all regional managers, were retrenched after the respondent restructured. The restructuring involved a reduction of the number of regional managers’ posts and incumbents were told that the outcome of assessments would determine their eligibility for the remaining posts.
The court noted that employees must be selected according to fair criteria, and after proper consultation. The procedure in terms of which employees are required to apply for posts within a restructured operation has been accepted as legitimate. However, that strategy is not without risk for the employer – the selection criterion then effectively becomes the employees’ failure to be appointed to a new job, or to apply for one. Where selection for posts is made on vague or subjective criteria, the dismissal crosses the line from a “no fault” dismissal to one based on performance.
In Screenex Wire Weaving Manufacturing (Pty) Ltd v Ngema & others  1 BLLR 39 (LAC) the appellant proposed inter alia using the principle of “First in, first out” (“FIFO”) as a criterion to select the first 30 employees to be retrenched in a particular department.
The court noted that FIFO is the polar opposite of LIFO, which is generally agreed to be the most fair and objective criterion. Even if cost-effective because longer-serving employees may be earning more, FIFO cannot be accepted as a fair and objective criterion because it is open to abuse – an employer wishing to get rid of long-serving employees could simply recruit new employees and then, after a few months, retrench its longest-serving employees. Moreover, FIFO was a strange way to reward long-serving employees for their loyalty.
In Super Group Supply Chain Partners v Dlamini & another (2013) 34 ILJ 108 (LAC) the appellant company had been compelled to retrench 600 of its 700-strong workforce when two of its clients cancelled their contracts for warehousing and distribution services with it.
The selection criterion the employer used was the open competition method. They could not use LIFO as a selection method since most employees started together when they obtained the two contracts, respectively, and as such there would have been about 300 to 400 employees eligible for the 100 positions. LIFO was then disqualified as it was not practical to use it. The appellant stated that the best way out was to retain skills by means of an “open competition process”. This entailed employees to apply for positions to avoid retrenchments. By that process, the appellant was of the opinion this would ensure that only the best skills were retained. The respondents were among the people that were invited to apply for these particular positions at that point in time as part of the open competition process.
The reason this was found to be unfair is that they were neither consulted on selection criteria nor informed of reasons why they had been selected for retrenchment.
In Gijima AST (Pty) Ltd v Hopley (2014) 35 ILJ 2115 (LAC) the employer commenced a restructuring exercise and created a new structure for the unit, as a result of which the employee’s position became redundant. The employees were consulted about the change and invited to apply for positions on the new structure. The selection criteria to be applied were skills and knowledge; and/or relevant qualifications and experience; and/or years of service. The employee applied for the positions of availability service manager and customer service manager in the financial sector. He was shortlisted and interviewed for the posts but was not successful. The employer’s witnesses indicated that the employee did not fare well during the interview process. Although the candidates were not formally scored, the panel concluded that other candidates had fared better than the employee.
His years of service were only considered at the shortlisting stage and the employer agreed that it did not apply LIFO or “bumping”. It could not dispute that if those criteria had been applied, the employee would not have been dismissed.
The court confirmed that the dismissal was substantively unfair.
In SA Breweries (Pty) Ltd v Louw (2018) 39 ILJ 189 (LAC) the court held that when an employer contemplates retrenchment due to redundancy and when only some of a number of existing posts are to be retained, a selection method that is fair must be chosen to decide who is to stay and who is to go. However, the redundancy of a particular post, which is one of a kind, does not trigger the need for “selection criteria” in any meaningful sense as no selection for redundancy takes place when only one post is made redundant.
In CWIU & others v Latex Surgical Products (Pty) Ltd  2 BLLR 142 (LAC) the court, as to the selection criteria, noted that when consulting parties are unable to reach agreement (as per section 189(7)(a)), the employer is obliged to use criteria that are fair and objective. If an employer wishes to use criteria which are unfair and subjective, it must endeavour to obtain the employees’ agreement. The parties in this case had not agreed on selection criteria.
The criteria, after employees had to apply for positions, were “qualifications, special skills, performance and disciplinary record, years of service, willingness and performance at the interview”.
Two (willingness and interview) of the six criteria used by the respondent were subjective. However, those two criteria played a significant role in the employees’ overall rating. The selection criteria were considered to be unfair.
In National Union of Mineworkers and others v WBHO Construction (Pty) Ltd  JOL 42266 (LC) the court dissected “bumping” as a selection criterion:
 It must always be remembered that bumping is intended to protect long serving employees against retrenchment. This is done by selecting employees in comparable positions in other unaffected departments, but with shorter service, for retrenchment, in place of the long serving employees in affected departments. But because the exercise of bumping is simply the application of the selection criteria, it can be legitimately limited, provided the conducting of selection always remains fair and objective.
(2) Bumping is situated within the ‘last in first out’ (LIFO) principle which is itself rooted in fairness for well-established reasons. Longer serving employees have devoted a considerable part of their working lives to the company and their experience and expertise are an invaluable asset. Their long service is an objective tribute to their skills and industry and their avoidance of misconduct. In the absence of other factors, to be enumerated hereinafter, their service alone is sufficient reason for them to remain and others to be retrenched. Fairness requires that their loyalty be rewarded.
(3) The nature of bumping depends on the circumstances of the case. A useful distinction is that of dividing bumping into horizontal and vertical displacement. The former assumes similar status, conditions of service and pay and the latter any diminution in them.
(4) The first principle is well established, namely that bumping should always take place horizontally, before vertical displacement is resorted to. The bumping of an individual, in the absence of the other relevant factors, seldom causes problems and the fact of longer service establishes the inherent fairness thereof. Vertical bumping should only be resorted to where no suitable candidate is available for horizontal bumping. Where small numbers are involved the implementation of horizontal or vertical bumping should present few problems.
 As a matter of common sense, bumping can also only find application if the employee to be bumped into a position has the necessary skills, acumen and experience to fulfil the duties associated with that position. In other words, it must be a position the employee is objectively competent to fill. It must also be remembered that bumping only works horizontally and vertically downwards. Bumping upwards into a higher or promoted position is thus not a valid consideration.
It is important that during consultation proceedings in accordance with section 189 proceedings, the consulting parties attempt to reach agreement on the selection criteria. If there is no agreement, the employer has to prove that its selection criteria are fair and objective. Whether selection criteria are fair and objective may differ in each case in line with the facts of that case.
- The Labour Relations Act, No 66 of 1995
- CEPPWAWU obo Gumede v Republican Press  ZALC 21;  6 BLLR 537 (LC)
- General Food Industries Ltd t/a Blue Ribbon Bakeries v Food & Allied Workers Union & others(2004) 25 ILJ 1655 (LAC)
- Van Rooyen & others v Blue Financial Services (SA) (Pty) Ltd  10 BLLR 1119 (LC)
- Screenex Wire Weaving Manufacturing (Pty) Ltd v Ngema & others  1 BLLR 39 (LAC)
- Super Group Supply Chain Partnersv Dlamini & another (2013) 34 ILJ 108 (LAC)
- Gijima AST (Pty) Ltd v Hopley (2014) 35 ILJ 2115 (LAC)
- SA Breweries (Pty) Ltd v Louw (2018) 39 ILJ 189 (LAC)
- CWIU & others v Latex Surgical Products (Pty) Ltd  2 BLLR 142 (LAC)
- National Union of Mineworkers and others v WBHO Construction (Pty) Ltd  JOL 42266 (LC)