What Is A Section 189 Retrenchment?

A Section 189 retrenchment is the statutory process under Chapter 6, Section 189 of the Labour Relations Act 66 of 1995 (LRA) by which an employer may terminate employment for operational requirements — economic, technological, structural, or similar needs of the business — and it is not a unilateral dismissal. The employer must issue a written notice under Section 189(3), follow a procedurally rigorous consultation process intended to reach consensus on alternatives to dismissal, the selection criteria for affected employees, severance pay, and timing, and only proceed with dismissal once that consultation has been completed in good faith. A failure to follow the process renders any subsequent dismissal automatically unfair, and the dismissed employee can refer the dispute to the CCMA within 30 days, or directly to the Labour Court in limited circumstances.

What Section 189 Retrenchment Is and Where It Sits in the LRA

Section 189 is the chapter-6 procedure of the LRA that governs termination of employment for reasons other than misconduct or incapacity. The trigger is the employer’s operational requirements — defined in Section 213 of the LRA as requirements based on the economic, technological, structural, or similar needs of the employer. Section 189 applies to small, medium, and large retrenchments alike; Section 189A is a separate, additional mechanism in the same chapter that applies where the employer contemplates dismissing 10 or more employees at one or more workplaces within a 12-month period, and it introduces a statutory right to facilitation by a CCMA-appointed facilitator. Together, these two sections substitute structured consultation for the common-law termination-by-notice route, and give employees a meaningful voice in whether the dismissal is necessary and how it is carried out.

When Section 189 Applies (the “Operational Requirements” Trigger)

The trigger is operational requirements — economic downturn, restructuring, merger, technological change, business closure, relocation, or a change in the business model — not employee performance. If the trigger is performance, misconduct, or ill health, Section 189 does not apply; the relevant procedures are in Schedule 8 of the LRA (the Code of Good Practice: Dismissals) and the employer’s own disciplinary or incapacity processes. The CCMA and Labour Court interpret “operational requirements” generously — a single consultant role can be retrenched under Section 189 if the underlying reason is genuine operational change rather than the individual’s performance — but the operative test is always the reason the employer gives for the dismissal.

The Section 189 Process, Step by Step

The procedural timeline for a Section 189 retrenchment typically runs as follows:

1. Decision to consider retrenchment. The employer is internally deciding whether operational requirements justify dismissal. The legal process only starts once that decision is made.
2. Section 189(3) written notice. The employer issues a written notice inviting the affected employees, or their representatives, to consult. The notice must disclose the reasons, the proposed timing, the number of employees affected, and the proposed severance pay.
3. Disclosure of information. The employer must disclose relevant information so employees can engage meaningfully during consultation, including the reasons for the dismissal, alternatives the employer has considered, and the selection criteria.
4. Consultation in good faith. The employer consults on alternatives to dismissal, the number of employees to be dismissed, the selection criteria, severance pay, and timing. Consultation must be meaningful, not performative.
5. Selection of affected employees. Selection must be based on fair, objective, and consistently applied criteria. LIFO (last in, first out) is the default presumption unless the employer can justify a different basis.
6. Issuing notices of dismissal. Once consultation has run its course, the employer issues formal notices of dismissal. The notice period may run concurrently with the consultation period only if the LRA’s minimum notice requirements are met.
7. Payment of severance pay. At least one week’s remuneration for each completed year of continuous service, calculated under Sections 196 and 41(2) of the LRA. The package can be higher if the employment contract or a collective agreement provides for it.

Section 189A Facilitation (Large-Scale Retrenchments)

Section 189A is a separate procedure activated when the employer contemplates dismissing 10 or more employees at one or more workplaces within a 12-month period. The affected employees may demand that a CCMA-appointed facilitator be appointed to assist the consultation process, and the employer must pay the facilitator’s fees. The facilitator’s role is to ensure consultation is meaningful and to assist the parties in reaching consensus — the facilitator does not decide the outcome. A settlement reached through facilitated consultation is binding and can be made an order of the Labour Court, which gives it teeth beyond ordinary agreement. Large-scale retrenchments must comply with both Section 189 and Section 189A.

Employee Rights During a Section 189 Retrenchment

Right	Source	What it means in practice
Right to be consulted	Section 189(2)–(6) of the LRA	Representation, disclosure of information, and a meaningful opportunity to propose alternatives to dismissal.
Right to representation	Section 189(3) and (4) of the LRA	Trade union, workplace forum, or fellow employee. An attorney does not have an automatic right to attend the consultation itself, though counsel can represent the employee in any subsequent CCMA or Labour Court proceedings.
Right to severance pay	Section 196 of the LRA	At least one week’s remuneration per completed year of continuous service.
Right to challenge the dismissal	Section 191 of the LRA	Refer the dispute to the CCMA within 30 days of the dismissal (90 days with condonation).
Right to written notice of dismissal	BCEA and the employment contract	Even where the dismissal is procedurally valid, the employee must receive written notice as required by the BCEA and the contract.

What Makes a Section 189 Retrenchment Procedurally Fair

A Section 189 retrenchment is procedurally fair where:

• Consultation was meaningful — information was disclosed, alternatives were genuinely explored, and selection criteria were objectively applied.
• Selection criteria were fair and transparent — typically LIFO, but can be tailored to operational needs provided it is consistently applied and justifiable.
• Notice was proper — the Section 189(3) written notice was issued, and statutory notice periods were met.
• Severance pay was paid — at the LRA minimum or higher per the employment contract or collective agreement.
• The decision was substantively fair — there was a genuine operational requirement, not a pretext for getting rid of an undesirable employee.

What Happens If the Process Is Not Followed

The dismissal is automatically unfair if the purpose was to compel an employee to accept a demand, defeat a union’s organisational rights, or where the reason is any of the protected grounds listed in Section 187 of the LRA. Procedural failure — no consultation, no disclosure, no proper notice — does not automatically render the dismissal substantively unfair, but it does affect the remedy. The remedies available at the CCMA and Labour Court are set out below.

Remedy	Detail
Reinstatement	Re-employment in the same or comparable position, with no loss of service.
Re-employment	Re-employment in a different but suitable position.
Compensation	Up to 12 months’ remuneration in ordinary unfair-dismissal cases; up to 24 months’ remuneration in automatically unfair dismissals.

Where to Take a Retrenchment Dispute

Section 189 is a national-law process under the LRA — there is no provincial or municipal variation, and the procedural requirements apply identically across South Africa. Despite the national scope, the forums that hear retrenchment disputes are often confused. The Commission for Conciliation, Mediation and Arbitration (CCMA) conciliation and arbitrates dismissal disputes under Section 191 of the LRA, and it is the first port of call for an unfair-retrenchment challenge. The Labour Court, sitting in Johannesburg, Cape Town, and on circuit, hears only the narrow set of matters that can be referred directly to it — including automatically unfair dismissals, disputes about the meaning of the LRA, and reviews of CCMA arbitration awards — and most retrenchment disputes only reach the Labour Court after the CCMA has issued an arbitration award. The Department of Employment and Labour is the regulatory authority; it does not adjudicate disputes, but its publications and the Departmental Code of Good Practice on dismissals are persuasive in any CCMA or Labour Court hearing.

For Gauteng-based employees and employers working through an actual Section 189 process, Burger Huyser Attorneys’ Labour Law practice handles CCMA referrals, disciplinary hearings, and labour court matters across the firm’s Gauteng branches, with intake routed through the head office in Linden, Randburg (011 888 0246). Labour Law specialist consultant Marius Ferreira is the named practitioner on the team.

Frequently Asked Questions

What is the difference between retrenchment and dismissal for misconduct?

Retrenchment under Section 189 is a dismissal based on the employer’s operational requirements — economic, technological, structural, or similar needs of the business. Dismissal for misconduct is a separate process, governed by the employer’s disciplinary code and Schedule 8 of the LRA, and the trigger is the employee’s conduct rather than the employer’s needs. The two are often confused; the operative test is the reason for the dismissal.

How much notice must an employer give before retrenching?

The employer must issue a Section 189(3) written notice before starting consultation, and the period of consultation must be meaningful (in practice, several weeks depending on the scale). The notice required under the Basic Conditions of Employment Act (BCEA) — typically one week’s notice for every year of service up to four weeks — is separate and may run concurrently with the consultation period if it is sufficient.

How much severance pay is an employee entitled to?

At least one week’s remuneration for each completed year of continuous service with the employer, under Section 196 of the LRA. The employment contract or a collective agreement may provide for a higher rate, and most retrenchment packages offer between two and four weeks’ remuneration per year or a settlement-style lump sum.

Can an employee refuse to be retrenched?

An employee cannot unilaterally refuse a substantively and procedurally fair retrenchment, but can challenge the fairness of the dismissal through the CCMA or Labour Court. The remedy is not to prevent the retrenchment itself but to obtain compensation, reinstatement, or re-employment if the process was flawed.

What is the difference between Section 189 and Section 189A?

Section 189 is the standard consultation process for any operational-requirements dismissal. Section 189A is an additional, separate procedure that applies to large-scale retrenchments (10 or more employees at one or more workplaces within a 12-month period) and introduces a CCMA-appointed facilitator to assist the consultation. A large-scale retrenchment must comply with both.

How long does an employee have to challenge a retrenchment?

The employee must refer the dispute to the CCMA within 30 days of the dismissal under Section 191 of the LRA. The CCMA may condone a late referral if the employee shows good cause — typically up to 90 days is condoned, but later referrals are harder to justify.

Can an employer retrench a single employee?

Yes — Section 189 applies to any number of employees, including one. The Section 189A large-scale mechanism only kicks in at 10 or more employees, but the substantive procedural requirements (consultation, disclosure, severance pay, fair selection) apply no matter the headcount.

If you are an employee facing a Section 189 retrenchment and want to know whether the process your employer is following is procedurally fair, or if you are an employer running a consultation and want a second opinion on your Section 189 obligations, Burger Huyser Attorneys’ Labour Law practice can help. The firm handles CCMA referrals, disciplinary hearings, and labour court matters across its Gauteng branches, with intake routed through the head office in Linden, Randburg (011 888 0246) or the branch nearest you. The firm carries a 4.8/5 average across 250+ Google reviews (Trustindex verified “Top Rated Law Firm in South Africa”), and Labour Law specialist consultant Marius Ferreira is the named practitioner on the team.