The Sunday Mail
Tapiwa Kasuso
Jurists are in agreement that labour law is that branch of the law which regulates the voluntary relationships arising from the workplace whose enforcement is guaranteed by the State. It is concerned with the world of work and people’s engagement in it. Without doubt, work is important to any human society.
It is fundamental to the definition of self and provides status, esteem and meaning to anyone fortunate to be engaged in it.
At a social, political and economic level, work remains the principal means through which economic activity is conducted.
The grandness of work was summarised by Adam Smith in the following words, “It was not by gold or by silver but by labour that all the wealth of the world was purchased.”
Given the central role of work in any society, the nature and extent of the regulation of the labour market in general, and of work in particular, is inevitably a contentious political issue. This is so in an environment like ours where Government seeks to provide decent work for all under Zim Asset, but where assertions are made, as they have been, that in comparative terms, the Zimbabwean labour market is overly rigid and expensive and that labour legislation is inhibiting economic development and the creation of jobs.
Recently, Finance and Economic Development Minister Patrick Chinamasa announced a raft of proposed changes to labour legislation, which seeks to achieve a “low wage, high productivity paradigm”.
The proposed reforms prompted debate between employer organisations and trade unionists.
One contentious issue has been on the law of dismissal and termination of the contract of employment. On the one hand, employers have acknowledged that economic challenges, the liquidity crunch, viability problems and other socio-economic phenomena have conspired to hamstring a lot of business entities with the consequent result of threatening their very existence. As a result of these factors, it has been argued that the current framework on termination is inflexible, cumbersome unfair and deters investors, thereby subverting the nation’s fundamental objective of promoting rapid economic growth.
On the other hand, trade unions have argued that the current framework is inadequate and gives too much discretion to the courts who in reality have reduced the right of employees to protection against unfair dismissal under the Labour Act (Chapter 28:01) into a meaningless and ineffective one.
They have called for further reforms to give real meaning to this right and make it consistent with the principles of the new Constitution and international labour standards made under the auspices of the International Labour Organisation (ILO).
To fully appreciate the above contrasting positions in the context of current debate on labour law reforms on termination of employment, it is necessary that the jurisprudential basis of our labour legislation be revisited. A meaningful study of labour law is not complete without at least a rudimentary understanding of the 2013 Constitution.
On May 22, 2013, Zimbabwe adopted a new Constitution with an expanded Bill of Rights.
The most important section in the new Constitution relevant to labour law is Section 65, which specifically deals with labour rights. Section 65 (1) of the Constitution provides for every person’s right to fair and safe labour practices and standards.
It provides both employers and employees with a minimum floor of rights.
Though the Labour Act must be interpreted in a manner that ensures the attainment of its purposes in Section 2A (1) (a) (f), it must also be interpreted in compliance with the Constitution. Our Constitutional Court has not yet had an opportunity to interpret Section 65 (1).
In the circumstances, reliance has to be placed on the interpretation of Section 23 (1) of the South African Constitution, which is equivalent to our Section 65 (1) given by the South African Constitutional Court.
In NEHAWU v University of Cape Town (2003) 24 ILJ 95 (CC), the South African Constitutional Court held that fairness entails balancing the employers’ commercial interests and the legitimate workplace interests of employees since the right to fair labour practices is available to everyone including employers.
Employers have an interest in flexibility namely employment flexibility – freedom to change employment levels quickly and cheaply, wage flexibility- freedom to determine wage levels without restraint, functional flexibility – freedom to alter work processes, terms and conditions of employment quickly and cheaply.
On the other hand, employees have an interest in security, namely labour market security, employment security, job security and representation security. A balance must be struck between these two inherently competing interests and achieve equilibrium – “flexicurity”.
This concept of fairness permeates through all the employment stages, that is, the pre-employment stage, employment stage and termination of employment stage. Of relevance to this discussion is the termination of employment stage, where there is need to balance the employer’s interest in employment flexibility and employee’s interest in job security.
Some might ask, “Does our labour legislation balance these two competing interests?”
Termination of the employment contract can either be for operational requirements, capacity or conduct.
The discussion will start with termination for operational requirements. Under these circumstances, the contract of employment is terminated as a result of the employer’s constraints and has nothing to do with the employee’s conduct or capacity, in other words the employee is not at fault.
It is commonly referred to as retrenchment.
Section 2 of the Labour Act defines retrenchment as, “to terminate an employee’s employment for the purposes of reducing expenditure or costs, adapting to technological change, closing down or reorganising the undertaking in which the employee is or was employed, or for similar reasons and includes the termination of employment on account of the closure of the enterprise in which the employee is employed.”
Retrenchment in Zimbabwe is governed by Section 12C and 12D of the Labour Act read with the Labour Relations (Retrenchment) Regulations, 2003.
These provisions are inspired by the ILO Termination of Employment at the Initiative of the Employer Convention 158 of 1982
(C 158 of 1982), which sets minimum requirements of substantive and procedural fairness of a retrenchment to qualify as a “fair dismissal”.
These include that retrenchment must be for a valid reason, which pertains to operational requirements, full consultation of workers and payment of severance allowances and benefits.
Though our retrenchment laws are generally in line with international labour standards, there are two disquieting aspects which tend to tilt the scale in favour of employees to the detriment of employers. These relate to the rigid, lengthy and cumbersome retrenchment process and the aspect of the retrenchment package payable.
It has been argued by Minister Chinamasa that our retrenchment laws do overprotect employees and stifle business.
If an employer intends to retrench five or more employees, he/she has an obligation in terms of Section 12D of the Labour Act to implement special measures such as short time work or the shift system to avoid retrenchment. It is only after such special measures have failed that the employer can issue a written notice of intention to retrench to the appropriate authority, which can either be the works council or employment council.
This would be followed by negotiations on whether the employees should be retrenched or not and if so, the retrenchment package payable. The works council or employment council have no authority to make a binding decision. Their role is that of mediation. If negotiations fail, the matter will be referred to the Retrenchment Board and finally to the Minister of Labour, who will make appropriate recommendations.
During this period, the potential retrenchees remain employees of the employer and are entitled to all their salary and benefits. The contract of employment will only be terminated if the employer accepts the recommendations by the Minister and issues a notice of termination in terms of Section 12C (5) of the Labour Act.
The employer can accept or decline the recommendations by the Minister and the Minister’s decision can also be challenged in the Labour Court.
Clearly, these proceedings are cumbersome given the intricate web of procedures involved. It is also costly to the employer who remains with an obligation to pay the employees as they remain employees, pending finalisation of the retrenchment exercise.
The exercise does not at all take into account the employer’s capacity to pay wages and may, in the end, defeat the whole purpose of embarking on a retrenchment exercise. As such, there is need to balance the needs of employers and those of employees by curtailing the processes involved.
Furthermore, there is need for a single statute, which regulates retrenchment so as to avoid confusion created by having two sets of laws regulating the same process.
As for the retrenchment package, the Labour Act does not provide a formula as to how it must be calculated. Currently, reliance is placed on the formula developed in Continental Fashions v Mupfumiri and Others 1997 (2) ZLR 2005 (S).
In this case, it was held that a retrenchment package must include the following (a) severance allowance for recognition of loss of job, which is a lumpsum to help an employee with immediate costs following loss of regular employment (b) severance allowance for recognition in pay for each year of service (c) relocation allowance (d) statutory payments in terms of Section 13 of the Labour Act (d) miscellaneous benefits – any benefits, which the employee enjoyed, which can be sold to him at book value.
This formula is flawed and has resulted in high retrenchment packages, which businesses are failing to sustain in this depressed economy. The purpose of a retrenchment exercise is to avoid the collapse and liquidation of a company. The survival of the company is the immediate motivating consideration and the purpose of the exercise is to save the company and the jobs of the remaining workers.
This must be balanced with the need to mitigate the consequences attendant to the employee being retrenched. However, sight must not be lost of the fact that the ability of the employer to pay the retrenchment package is the ultimate criterion.
Thus, in recognition of the employer’s interest in achieving employment flexibility and contribute to economic development, labour legislation must provide a formula for calculating retrenchment packages or minimum entitlements.
This provides certainty and reduces costs of retrenchment, especially in this environment where businesses are facing a myriad of challenges. In South Africa, the statutory formula for the payment of severance pay is provided for in Section 41 of their Basic Conditions of Employment Act of 1998 and an employee is entitled to a minimum of one week’s remuneration of every completed and continuous year of service with that employer and the amount is not crested.
Tapiwa Kasuso is a registered legal practitioner, independent arbitrator and lecturer in Midlands State University’s Faculty of Law.
To be continued next week…
