Labour Amendment Bill: Retrenchment

Introduction

The legislature seeks to amend the whole of section 12C of the Act which provides for the retrenchment and compensation for loss of employment. A review of the provisions shows sweeping changes to the law on retrenchment in Zimbabwe. In summary, we note that the Bill is introducing a dispute resolution mechanism regarding non-payments of retrenchment packages, enforcement mechanism for the retrenchment package as well as personal liability for those who engage in fraudulent actions that have a bearing on the whole process, among other significant changes. The provisions and what they entail are discussed below.

Retrenchment Package

The Bill refers to two types of retrenchment packages, a minimum retrenchment package as per the 2015 amendments[1] as well as an enhanced retrenchment package[2], which is negotiated and agreed between an employer and employees.

Payment of the Package

The bill proposes that the retrenchment package should be paid within 60 days unless the affected employees agree otherwise.[3] For the minimum retrenchment package, the 60 days are calculated from the time the retrenchment takes effect (which is 14 days from the date of notification). However, if the employees satisfy the Retrenchment Board that the employer has the capacity to pay an enhanced package, the 60 days are computed from the time the Retrenchment Board advises the parties of its decision.[4]

Procedure for Retrenchment

The retrenchment procedure can be outlined as follows:

Notice of Retrenchment

The notice of retrenchment is 14 days, and this should be given to the Works Council or the NEC (in the absence of the Works Council) and the Retrenchment Board as well as the employee or employees affected by the exercise. [5]

The Bill further states that if the retrenchment agreement is not there, the works council, employment council and retrenchment board should be provided with the details of every employee to be retrenched and the reasons for the retrenchment.[6]

Negotiations for a Retrenchment Package

The bill provides:

“Where negotiations for a retrenchment package better than the minimum retrenchment package are undertaken after the notice given to the Retrenchment Board under subsection (3)(a)(ii) and an agreement is secured (including the date or dates when it shall be paid to the employees), any payments required to be made in terms of the retrenchment package must be made on the day or days so agreed and the signed retrenchment package shall be notified in writing in accordance with subsection (5)(a) to the Retrenchment Board no later than the end of the notice period or seven days thereafter”.

In our view, this provision which is meant to govern the negotiations for a retrenchment package is crafted in non-peremptory terms resulting in a situation where negotiations for a better retrenchment package are not obligatory. We believe that this is regrettable as in many of the times this leaves employees at the mercy of the minimum retrenchment package even in circumstances where the employer can afford an enhanced package.

Notice of the Actual Retrenchment

Once the employee is retrenched, there is an obligation on the employer to notify the Retrenchment Board once again. This notification will contain the fact that the individual or individuals have been retrenched as well as the details of the agreed package. The Retrenchment Board will issue a certificate called the “notification certificate” which will confirm that the retrenchment package is better than the minimum stipulated packages.[7]

When there is no agreed package, the board will also issue the same notification to the effect that the minimum package is being paid or it is to be paid.[8]

The retrenchment board is required to post such notice on a public notice board for a period of not less than seven consecutive days. The proposed law further provides that the certificate shall be prima facie proof of the notification made to the Retrenchment Board.

Enforcement of a Retrenchment Package

There Bill further proposes a dispute resolution mechanism in the event of non-payment of the retrenchment package within the period stipulated in the retrenchment agreement.[9]  The first stage in the dispute resolution is provided as follows:

“If it is alleged by any employee or employees or their representatives that any agreed retrenchment package or minimum retrenchment package has not been paid within the time or times stipulated or agreed, such employee, employees or their representatives must, before proceeding to enforce the package in terms of subsection (7), satisfy the Retrenchment Board to that effect in the form of an affidavit in which the extent of non-compliance shall be clearly set forth, whereupon the Retrenchment Board shall notify the employer of the allegation in writing and afford him or her an opportunity to make representations to the Board in writing in rebuttal of the allegation, and if no such representations are received or the Board is satisfied that compliance has not been made with the minimum or agreed package , the Board shall issue a certificate (hereinafter called a “non-compliance certificate”) to that effect in which the extent of non-compliance shall be clearly set forth”.

In modest terms, an allegation that there has been non-compliance with a retrenchment agreement is entertained by the Retrenchment Board first before approaching the Labour Court. The effect of the “non-compliance certificate” is that the retrenchment package agreed by the parties becomes binding. It’s only after the “non-compliance certificate” has been issued that a party can approach the Labour Court for the enforcement of the retrenchment package. The order given by the Labour Court will also have to be submitted for registration with a relevant Court.

We submit that the procedure being proposed is cumbersome. This is in consideration of the fact that the retrenchment package would have been agreed or the employer would have committed to pay the package the result of which would have resulted in a “notification certificate” from the retrenchment board. The fact that a notification certificate has been issued means the retrenchment package has been agreed upon and that it is binding. In any case, what’s more binding than the initial agreement to retrench? Requiring an aggrieved employee to get a non-compliance certificate in these circumstances is unjustified. It creates an unnecessary process in the enforcement of retrenchment packages.

Lack of capacity to pay the package

An employer has an option of applying to the retrenchment board or the employment council, notifying either of these bodies of the incapacity to pay the minimum retrenchment package. The retrenchment board or the employment council is required to call a hearing of the parties where this lack of capacity is dealt with.[10] If the retrenchment board or NEC does not deal with the issue within 30 days the employee can approach the Labour Court for a resolution.[11]

Allegation of capacity to pay an enhanced retrenchment package

The Bill provides that employees can allege and provide proof of the fact that the employer has the capacity to pay an enhanced retrenchment package. This should be done within 60 days of an employee’s receipt of the notice to retrench.  The employer is obliged to provide audited financial statements and to respond by way of an affidavit.[12]

The NEC or the retrenchment board will move to call parties to a hearing and seek to resolve the dispute within 30 days. If this does not happen, the aggrieved party may approach the Labour Court for a resolution of the dispute.[13]

Personal Liability for the Retrenchment Package

A new section 12CC is being proposed whose effect is to make an owner of a company, a director or a partner of a company personally liable for the payment of a minimum retrenchment package if it is proved that:

“(a) the employer deliberately stripped the assets of the business or otherwise degraded it in contemplation of retrenchment;

(b) the business of the employer was or is being carried on—

(i) recklessly; or

(ii) with gross negligence; or

(iii) with intent to defraud any person or for a fraudulent purpose;”[14]

The section provides for the procedure to be followed in the event of such an allegation. In summary, this involves the employment council or retrenchment board making such a finding which is then taken to the Labour Court. The entire process also involves giving all those involved the opportunity to be heard.

Conclusion

Some provisions in the Bill are progressive. However, we submit that a less cumbersome process for retrenchment dispute resolution is advisable. The Bill should also provide for a serious obligation on the part of the parties to negotiate a retrenchment package before the employer resorts to paying the minimum retrenchment package. The liability of persons who deliberately engage in fraudulent, reckless, or grossly negligent conduct in contemplation of retrenchment is a welcome development in our law. It seeks to protect employees who tend to be vulnerable in retrenchment processes.


[1]              Proposed Section 12C (1) of the Act.

[2]              Proposed Section 12C (1) of the Act.

[3]              Proposed Section 12C(2)(a) of the Act.

[4]              Proposed Section 12C(2)(b) of the Act.

[5]              Proposed Section 12C(3)(a) & (b) of the Act.

[6]              Proposed Section 12C (3) (b) of the Act.

[7]              Proposed Section 12C (5) (a) of the Act.

[8]              Proposed Section 12C (5) (b) of the Act.

[9]              Proposed Section 12C (6) of the Act.

[10]             Proposed Section 12C (9) (a) of the Act.

[11]             Proposed Section 12C (12) of the Act.

[12]             Proposed Sections 12C (13) – (16) of the Act.

[13]             Proposed Sections 12C (13) – (16) of the Act.

[14]             Proposed Section 12CC (1) of the Act

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