Who Gets Retrenched First?

Retrenchment selection in South Africa is governed by Section 189 of the Labour Relations Act 66 of 1995, which requires employers to apply “fair” and “objective” selection criteria that have been agreed during a meaningful consultation process with the workforce. Last-in-first-out (LIFO) — keeping the most recent hires first — is the most commonly used default because it is the easiest to apply objectively, but no single criterion is mandated by the Act and the Labour Appeal Court has confirmed that employers must consider skills, performance, employment equity, and operational need alongside tenure. Criteria that discriminate on grounds listed in the Employment Equity Act 55 of 1998, or that pre-determine the outcome (such as targeting fixed-term contract workers only), render a dismissal automatically unfair regardless of process.

The Legal Framework: Section 189 of the LRA

Retrenchment is a dismissal for operational requirements, defined under Section 213 of the Labour Relations Act 66 of 1995 (“the LRA”). It is not a dismissal for misconduct or poor performance — the trigger is the employer’s economic or operational need, not the employee’s conduct.

Section 189 of the LRA sets the framework that governs every retrenchment in South Africa, and it has three working parts:

• Section 189(1) requires the employer and the workforce (or a workplace forum or trade union) to consult on ways to avoid dismissal, mitigate its effects, and agree on selection criteria.
• Section 189(2) sets the substantive fairness test: selection criteria must be “fair” and “objective.”
• Section 189(3) sets the procedural fairness test: written consultation notice, disclosure of reasons, opportunity to respond, and good-faith engagement.

Dismissal for operational requirements is unfair if either leg fails — substantive and procedural fairness are independent requirements, and a retrenchment can be set aside on either ground alone.

The Fairness Standard: What “Fair” and “Objective” Mean in Practice

The two operative words in Section 189(2) do real work, and they are not interchangeable.

• Fair means the criteria are rationally connected to the operational reason for the retrenchment. A department in sustained decline cannot justify selecting employees from a department that is expanding. Operational rationale must drive the criteria, not the other way around.
• Objective means the criteria can be applied consistently across the affected group without subjective judgment. Criteria that require a manager to “weigh” or “consider” candidates on an undefined basis will struggle to meet this test.

Criteria must also be agreed during consultation, not announced after the decision has already been made. If the employer walks into a Section 189 meeting with a pre-determined list of names and only consults as a formality, the Labour Court has consistently treated that as a procedural defect. The employer bears the burden of proving that the criteria were fair, objective, and properly consulted on if challenged at the CCMA or Labour Court.

Selection Criteria That Are Commonly Used

No single criterion is mandated. The criteria most commonly applied in practice, and the limits that apply to each, are set out below.

Criterion	How it works	Key limit
Length of service (LIFO)	Last hired, first retrenched; protects tenure	Cannot override operational fit; cannot be the only factor
Skills and qualifications	Keeps the roles the employer actually needs	Must be tied to a documented operational need, not a preference
Performance records	Retains the strongest performers	Performance data must be contemporaneous and disclosed in advance
Disciplinary history	Avoids employees with active warnings	Cannot be used to punish employees for unrelated prior issues
Employment equity considerations	Advances designated groups in line with the EEA	Must be consistent with the employer’s employment-equity plan; not a pretext for discrimination
Operational need / role-specific	Keeps the function viable	Cannot be used to target a single individual absent objective justification

The combination matters more than any single criterion. The test is whether the overall package is objectively fair and rationally connected to the operational need.

Selection Criteria That Cannot Be Used

Some criteria are presumptively unfair or outright unlawful, regardless of how cleanly the consultation process is run.

• Criteria that discriminate on grounds listed in the Employment Equity Act 55 of 1998 — race, gender, pregnancy, disability, religion, sexual orientation, and the other protected grounds — render the dismissal automatically unfair under Section 187(1)(f) of the LRA.
• Criteria that pre-determine the outcome — selecting only fixed-term contract workers, only employees earning above a salary threshold, or only employees in a particular age range — are presumptively unfair because the conclusion is baked in before the process begins.
• Criteria that are not disclosed during consultation, or that are changed mid-process without re-consultation, are procedurally unfair.
• Subjective criteria that cannot be applied consistently — phrases like “poor fit with the team” or “not aligned with the culture” — are substantively unfair where they leave the decision in the eye of the manager.

Bumping and Alternatives to Dismissal

“Bumping” is the practice of displacing a longer-serving employee whose role has become redundant onto a more junior employee’s position, then dismissing the junior employee instead. It is permitted, but only where both roles are genuinely redundant and the displaced employee has the skills for the role they are being moved into.

Before and during consultation, employers must also canvass alternatives to dismissal. The Code of Good Practice on Dismissals and Section 189(2) of the LRA require the parties to consider:

1. Short-time (reduced working hours)
2. Reduced workweeks
3. Redeployment to other roles in the business
4. Retraining
5. Early retirement packages
6. Voluntary severance packages
7. Natural attrition

Failure to genuinely consider alternatives raised by employees during consultation is itself a ground for an unfair-dismissal finding at the CCMA — even where the selection criteria themselves are otherwise fair.

The Consultation Process: How Criteria Become Binding

Section 189(3) of the LRA requires the employer to issue written notice inviting consultation, with sufficient information to enable employees to engage meaningfully. The notice must cover the matters set out in Section 189(2): the reasons for the proposed dismissal, alternatives to dismissal, the timing, the number of employees affected, the selection criteria, severance pay, and ways to mitigate the effects.

Once consultation begins, the criteria discussed with the workforce become the criteria the employer must apply. If consultation deadlocks, either party may ask the CCMA to appoint a facilitator under Section 189(4). For larger dismissals, the employer may be required to issue a Section 189(7) notice where the issue is not resolved through facilitation. Once the criteria are agreed, the employer must apply them uniformly and document any deviation — a criterion that is applied differently to two employees in the same affected group is a defect.

The Local Filing Layer: CCMA and Labour Court in Gauteng

Retrenchment disputes in South Africa do not file in any High Court. They are referred to the Commission for Conciliation, Mediation and Arbitration (CCMA) within 30 days of dismissal under Section 191 of the LRA. For Gauteng-based employees and employers, the CCMA’s Johannesburg, Pretoria, and Ekurhuleni regional offices handle the conciliation step, and unresolved disputes may be referred to arbitration at the same office or, for complex matters, to the Labour Court in Johannesburg or Pretoria. The substantive law is the same nationally; the local layer is the regional CCMA office and (where the matter escalates) the relevant Labour Court seat.

What to Do If You Think You’ve Been Unfairly Selected

Time limit. An employee disputing the fairness of selection has 30 days from the date of dismissal to refer an unfair-dismissal dispute to the CCMA under Section 191 of the LRA. Late referrals can be condoned, but the 30-day window is the starting position.

Remedy. For a substantively and/or procedurally unfair dismissal, the CCMA may order reinstatement, re-employment, or compensation of up to 12 months’ remuneration. For automatically unfair dismissals — including those based on prohibited grounds — the 12-month cap does not apply and the cap is raised to 24 months’ remuneration, with reinstatement as the primary remedy unless re-employment is no longer reasonably practicable.

Documents to retain. The Section 189 notice, the written selection criteria, consultation minutes, the termination letter, and any correspondence about the criteria or process. These are the documents the CCMA will want to see, and they are the documents a complainant will need to prove the dismissal was unfair.

Frequently Asked Questions

Is last-in-first-out (LIFO) the only legal way to select for retrenchment in South Africa?

No. The Labour Relations Act 66 of 1995 does not mandate any single criterion. Last-in-first-out is the most commonly used default because it is the easiest to apply objectively, but employers must consider all relevant factors — including skills, performance, employment equity, and operational need — and the criteria must be agreed during consultation. LIFO can be departed from where the operational case requires it, but the departure must be documented and rational.

Can an employer force me to re-apply for my own job as part of retrenchment selection?

Generally, no — not unless re-application is genuinely being used as an alternative to retrenchment (that is, the role itself is genuinely at risk and the process is designed to test who is best placed to fill it). Forcing existing employees to compete for their own positions without that justification tends to be treated as a covert selection mechanism rather than a fair alternative, and a CCMA commissioner is likely to find the dismissal unfair.

Can employment equity be used as a selection criterion in retrenchment?

Yes, but only in a way that is consistent with the Employment Equity Act 55 of 1998 and the employer’s employment-equity plan. An employer cannot use employment equity as a pretext for dismissing employees on prohibited grounds. Where employment equity is genuinely applied, it must be rational, transparent, and disclosed during the consultation process.

What is the difference between substantive and procedural unfairness in retrenchment?

Substantive unfairness is about whether the decision to retrench and the choice of who to retrench was fair and based on objective criteria. Procedural unfairness is about whether the consultation process was conducted in good faith, with proper notice, disclosure, and opportunity to respond. A retrenchment can be set aside on either ground alone.

How long do I have to challenge an unfair retrenchment?

An unfair-dismissal dispute must be referred to the CCMA within 30 days of the date of dismissal, under Section 191 of the Labour Relations Act 66 of 1995. Late referrals can be condoned in limited circumstances, but the starting position is the 30-day window.

Whether you are an employer designing a Section 189 process and want to make sure your selection criteria will hold up at the CCMA, or an employee who has been retrenched and is unsure whether the criteria applied to you were fair, Burger Huyser Attorneys’ Labour Law practice can help. The firm’s Labour Law specialist, Marius Ferreira, handles retrenchment consultations, CCMA referrals, and Labour Court proceedings from the head office at 49 First Avenue, Linden, Randburg (011 888 0246), with files run across the firm’s Gauteng branches. The firm carries a 4.8/5 average across 250+ Google reviews (Trustindex verified “Top Rated Law Firm in South Africa”). Contact the head office to book a consultation.