The Retrenchment and Severance Benefits Act Chap 88:13 prescribes the procedure to be followed in the event of redundancy and provides for the payments of severance benefits to retrenched workers.
What is the meaning of retrenchment and redundancy?
Retrenchment is the termination of employment of a worker at the initiative of an employer for the reason of redundancy. Redundancy means the existence of surplus labour in a business for whatever cause.
Who does the act protect?
The act applies to workers in general but excludes:
public officers, domestic workers and estate constables;
people who are responsible for the formulation of policy with the employer eg a CEO or director;
workers with less than a year service;
workers serving a probationary period;
casual workers;
seasonal workers unless that worker worked for at least three consecutive seasons with the same employer and for at least 100 days each season;
workers employed under a fixed term contract or employed for a specific purpose and for a period. This does not include people transferred from project to project even with small breaks in service; and
independent contractors.
Procedure and reasons for retrenchment
Section 4 of the Act states that where an employer proposes to terminate the services of five or more workers for redundancy, he shall give formal notice of termination in writing to each involved worker, to the recognised majority union and to the Minister of Labour. The notice must state:
the names and classifications of the involved workers;
their length of service and current salaries;
the reasons for the redundancy;
the proposed date of termination;
the criteria used in the selection of the workers to be retrenched; and any other relevant information.
The minimum notice period is 45 days. However, where due to unforeseen circumstances it is not practicable for an employer to give 45 days notice, he must give the maximum notice that he can reasonably be expected to give. If an employer is retrenching less than five workers, he is required by the principles and practices of good industrial relations to give reasonable notice, normally the minimum period of 45 days or shorter period if there are unforeseen circumstances.
The employer is also required by the principles and practices of good industrial relations to notify the worker of the reasons for the redundancy, the criteria the company used in selecting the worker for retrenchment and the proposed date of termination. Principles and practices of good industrial relations also dictate that employers must adopt a fair and objective method of selecting the excess workers to be retrenched such as the "Last in First out" principle or some other fair system.
Obligations during notice period
During the period of notice, the employer could terminate the worker for good reason not having to do with the retrenchment and that worker would not be entitled to receive the severance benefits.
During the notice period, the worker is obligated to report to work unless the employer specifically indicates otherwise and during that period, the worker is entitled to full terms and conditions of his employment. The employee is also entitled to reasonable time off to look for a job once that request is reasonable and made in advance.
Severance payments
Section 18 provides the minimum severance payments a retrenched worker is entitled to. It provides:
two weeks' pay at the basic rate for each year of service for workers having completed more than one year but less than five years of continuous service; and
three weeks' pay at the basic rate for the fifth year and for each succeeding year of service where workers have served the employer for five years and more.
Each period of service amounting to less than a completed year of service, payment shall be calculated on a pro rata basis.
Alternative employment
Where an employee unreasonably refuses an offer by his employer or his employer's successor i.e. a new company taking over the business of the employer, an associate company or a subsidiary company, of a comparable and suitable job without any break in service his severance benefits may be withheld.
Disputes arising out of retrenchment
A dispute arising out of a retrenchment situation such as an allegation of unfair dismissal, or a claim for unpaid severance benefits is to be reported to the Minister of Labour as a trade dispute and if unresolved may be dealt with by the Industrial Court.
Penalty for non compliance
An employer who contravenes the Act is guilty of an industrial relations offence and liable to a fine of $10,000.
Objection to retrenchment
Where there is a recognised majority trade union, the union can object to the proposed retrenchment. The union and the company must then search for a solution and if no agreement has been met the parties can request or the Minister of Labour on his own volition can intervene to help find a solution. Where there is no recognised majority union, the worker who has been given a formal notice may request the minister to intervene.
This article sets out general guidelines. All legal rules have exceptions and variations. How the law applies to you depends on the facts of your case.
