What can employees do if the company they work for fails and they are retrenched without consultation?

The long answer

Labour Guide says that, in the case of retrenchments, Section 189 of the Labour Relations Act (LRA) applies, which says that a joint consensus-seeking process on the appropriate course of action must be undertaken by the employer. This is intended in the first place to avoid retrenchments, if possible, but if not, to mitigate the effect of the retrenchments and to discuss severance pay.

As your employer has not held any consultative process with the employees, and you are left in the dark as to whether your notice period will be paid and what severance pay you will receive, the employer has not followed Section 189 of the LRA as he is required to do. 

The LRA prescribes a minimum severance payment of one week’s pay for every completed year of service. 
Labour Guide also says the following about notice pay: “Retrenchments are ‘no fault’ dismissals. It is not the fault of the employee that the company cannot afford the salary of the employee anymore and as such notice periods agreed upon must be honoured. The employer may ask the employee not to return to work but must then pay the notice period.”

Accumulated annual leave must also be paid.

Cliffe Dekker Hofmeyr Incorporated (CDH Inc.) says that if an employer has not complied with the consultation process prescribed by Section 189, the retrenched employees can apply urgently to the Labour Court. (But of course, this may be costly.)

If your employer’s business is in the process of being liquidated or has been put into business rescue, the employees will be regarded as creditors and will have a claim against the company.

This is the order in which creditors will be paid if the company is in liquidation:

1. Secured creditors (like mortgage or landlord)
2. Costs of the liquidation (like sheriff’s costs, Master’s fees payable in connection with the liquidation)
3. Costs of execution (like taxed fees of the sheriff in connection with any execution upon property owned by the company)
4. Former employees of the company (for salary or wages due to the employee, for a period not exceeding three months, payment of annual leave accrued in the year the company became insolvent or the previous year).

But CDH Inc. also says, “If there is no money left to pay the employees of the company under business rescue or if the company under business rescue is only able to partially pay the employees of the company, and this is set out in an approved business rescue plan, the employees of the company will not be entitled to claim the balance of their claims against the company.”

However, Section 38(3) of the Insolvency Act states that an employee whose contract of service is suspended is entitled to UIF benefits from the date of such suspension. Depending on what the situation is, you could approach the CCMA and ask for assistance. These are their contact details:
Website: www.ccma.org.za 
Tel: 011 220 5000 / 0861 161616

You could also approach Legal Aid for assistance: 
These are their contact details: 
Tel: 0800 110 110 (Monday to Friday 7AM - 7PM) 
079 835 7179 (Please Call Me) 
Email: communications2@legal-aid.co.za

The Legal Practice Council says the following on their website: 
“Any member of the public can lodge a complaint against a legal practitioner, Section 3 of the LPA providing that one of the purposes of the Act is to provide a fair effective, efficient, and transparent procedure for the resolution of complaints against legal practitioners and candidate legal practitioners.” 

This is how to lodge a complaint with the LPC:
Website: https://lpc.org.za/members-of-the-public/how-to-lodge-a-complaint/ 
Email: info@lpc.org.za

Wishing you the best,
Athalie