Is Lifo The Only Way To Go: With Reference To Numsa Obo Members // Kenco Engineering

The Applicant on behalf of its members applied to court to challenge their retrenchment alleging that it was substantively unfair and the relief sought before the court was their reinstatement or alternatively compensation of the union members who had been retrenched on the 29 May 2011.The Respondent, Kenco Engineering sub-contractor came to an end on 31 March 2011 and as a result, the company was faced with a possible retrenchment and there was no other viable alternative that could have been explored. The Respondent offered the employees severance packages at the company’s discretion and that it will re-employ some of the employees should it obtain a new contract within three months. Subsequent to the announcement both parties commenced with consultations however they failed to engage meaningfully .Ultimately the employees received notices of retrenchment at the end of April 2011.

Kenco Engineering successfully acquired alternative source of work from another sub-contractor, a design firm, Gauge Engineering, on condition that the Respondent provides a workforce that will be able to perform and deliver work that is in line with the nature and the standards of the new sub-contractor. As a result of these requirements, retrenchment was inevitable. Both the Respondent and the new sub-contractor agreed on a selection criteria to be used in order to determine the employees’ best suited to provide the workforce required by the new sub-contractor. The criteria which was adopted assessed skills, work performance, attendance record and safety records. Each criteria was allocated a score of 40%.

The Respondent further submitted that it was vital for them to adhere to the strict requirements set by the new sub-contractor in order to sustain their business. Failure to comply would result in the loss of the contract and for those circumstances they found themselves in, there was a general need to retrench and retain those employees that had the character of the workforce required by the new sub-contractor.

The Applicant disputed the submissions made by the Respondent and argued that the retrenchment was substantively unfair as it failed to follow fair and objective procedure i.e. LIFO. They further submitted that the employees were retrenched as a result of their union affiliation and according to the Applicant they were experienced employees who could carry out the work as per the new sub-contractor’s requirement and they were not part of the Bateman’s contract. Lastly they argued that the Respondent failed to consider possible alternatives to the retrenchment.

The court in determining whether the adopted criteria was substantively unfair, it evaluated the presentations made by both parties and found that based on the evidence before the court ,there was no indication that both parties agreed that the selection criteria should be adopted. On the other hand the Applicant failed to submit any cogent challenge to the general need to retrenchment and therefore their reasons where not justiciable. Their only focus was on the section criteria.

The court found that the was a general need to retrench in order for the Respondant to be able to deliver the workforce required by the new sub-contract, which will ensure the sustainability of their Joint venture and ultimately their business. Failure to adopt LIFO does not necessary render the chosen criteria substantively unfair. However in this case the Respondent failed to submit evidence to demonstrate than the employees were evaluated and that the retrenched employees scored far less than the employees who were retained. Therefore for those reasons the criteria was found to be substantively unfair and the Respondent was ordered to pay each applicant a remuneration for a period of eight months.

This judgement elaborates that employers intending to substitute the LIFO requirement with an alternative criteria, they must be in a position to prove and demonstrate before the court that the followed criteria is both fair and objective and failure to do so, the employer will encounter an unfavorable outcome where the court may grant an order directing the employer to either reinstate or compensate the employees.

By Boitumelo Shongwe