Challenges of retrenchment jurisprudence

From time to time, I write on special cases, particularly those that expand the Industrial Relations (IR) jurisprudence and possibly create new law. The case of TD 407 of 2016 in Transport and Industrial Workers’ Union and Ansa Polymer delivered on November 12, 2020 is one such example. Also, I read and noted with some scepticism, the earlier judgement contained in Trade Dispute 74/2014 between OWTU and NESC delivered in July 2017. Both cases dealt with the issue of retrenchment.

The Polymer case sought to remedy a dispute regarding the retrenchment of three workers from the company in 2011. I was at that time providing consultancy services to Polymer, so, I was aware of the issues regarding these terminations.

Retrenchment is classified as a “no fault termination,” which simply means that the employees committed no fault to justify their termination.

In her judgement, Her Honour Ms Mahabir highlighted the critical issues that would support good industrial relations practices in a retrenchment exercise. She opined that that the reason for retrenchment is an essential ingredient for a retrenchment exercise to be legally compliant. In so doing, she concluded that a fair reason is therefore a valid reason and cautioned that “no amount of procedural fairness can mitigate or cure the absence of a valid reason to terminate”.

This reasoning is an enlightening insight from Her Honour. It clearly establishes that the foundation of any defendable retrenchment must be that the company had a valid reason to terminate. Conversely, the judgement affirmed that a retrenchment exercise could be deemed unfair despite the existence of a valid reason. In such cases, the company’s defence would have fallen short based on the principle of procedural fairness.

On the other hand, notwithstanding that there may be a valid reason, once the process lacked procedural fairness, the company’s defence is also doomed to fail. The clarity in this reasoning is welcomed.

There are however parts of this judgement with which I have some difficulty. Firstly, it seems to be at odds with the jurisprudence in the NESC case. Secondly, it attempts to establish new law which in my view restricts the employer’s use of past disciplinary action as objective criteria to determine who should be selected for retrenchment.

Let me deal firstly with what appears to be a material and significant difference in the jurisprudence emanating from these two judgements. In the NESC judgement Her Honour Mrs George Marcelle seemed to have established by her reference to Mudford vs Middleland Bank PLC (1997) ICR399, that consultation with a recognised majority trade union (RMU) does not itself release the employer from an obligation to consult with the individuals concerned.

Her judgement expressed the view that even though the Retrenchment, Severance and Benefit Act (RSBA) is silent on the issue of consultation with the worker, good IR practice dictates that the worker to be retrenched should be consulted. Our law however expressly provides for consultation with the RMU.

I believe Her Honour’s view is alien to our existing norms and breaks with a long standing practice that where there is a RMU, good-faith consultation with the union alone is sufficient. As a matter of fact, Her Honour went on to state clearly that whether it was one or a million workers, the company is obligated to engage in good-faith consultations with the individual employees. Where there is an established RMU, this can be seen as putting an unnecessary burden on the employer as well as it clearly grates against the very fabric of collective bargaining and its attendant principles.

However, when one examines the Ansa Polymer judgement, Mahabir accepted that consultation with the RMU alone was sufficient to meet the required standards. I think that Mahabir is right on this issue which is consistent with both existing practices, as well as the expressed provisions with the RSBA where there is a sitting RMU. In my view this indeed is the better law.

My second difficulty with the Polymer case is that the judgement expressly stated that the company’s case failed on the issue of procedural fairness. In summary, it was Her Honour’s view that to use only the past disciplinary record of persons earmarked for retrenchment was a flaw in the process as it converted the terminations from “no fault” to one “for cause”. I understand that reasoning, but find it difficult to accept.

The established method for the selection of workers for retrenchment lie in the principle “last in first out, all things being equal” or LIFO. This simply means that an employer is entitled to first use any fair and objective criteria to select employees. Should this process result in employees being ranked equally, then length of service would be the determining factor.

In the Polymer case the management considered past disciplinary warning letters for the specific issues of punctuality and attendance. The rational for the use of this criteria was that the company needed to be satisfied that those retained were dependable and reliable.

These warning letters should have been regarded as compelling and objective evidence of the unreliability of the workers who were selected for termination, and inferred as evidence of their unsatisfactory performance. The question arising is whether the court is now saying that a company cannot consider an employee’s performance in the selection process for retrenchment? I for one surely hope not as I will continue to advise my clients accordingly. I trust my colleagues in the practice will do likewise.