May 14,2012 / News / Legal Brief

As employee costs spiral and the economy labours, more and more employers are facing difficult business decisions. One option that might be preferable to downsizing is to consider asking staff to work short-time or take a pay cut.
“Proposals to reduce remuneration packages are usually not favourably received by employees, who are generally unwilling to consent to any alterations to their conditions of service,” says Grant Marinus, employment law director at Werksmans Attorneys. “However, if employees refuse to consent to a proposed change or to participate in negotiations about this, it does not mean the employer simply has to drop the subject.”
In fact, there are two legal avenues that employers can pursue in order to persuade their employees to accept a change in pay or working conditions, Marinus says.
Of the two, the best-known route is to propose terminating the employment contract for operational reasons, using the procedure in section 189 of the Labour Relations Act.
This route is usually fraught with pitfalls, particularly if the employer’s motive is to pressure employees into agreeing to employment contract changes without genuine or compelling operational requirements.

SECTION 189 CAN’T BE USED AS A BATTERING RAM

“Employers who seek to use the 189 process as a battering ram to coerce or compel acceptance of an employment demand run the risk of having any consequent dismissals automatically declared unfair,” says Jacques van Wyk, director at Werksmans Attorneys. “In the event of employees refusing to accept new working conditions or work for lower wages, only exceptional circumstances would justify an operational requirements dismissal.”
The second, less-known option is to impose a lockout.
“Lockouts are very rarely used – strangely so since the lockout was such a hard-fought concession when the Labour Relations Act was considered at NEDLAC,” says van Wyk. “A lockout is not unconstitutional. Just as workers have the right to strike, employers have the right to lock workers out.”
The downside of an offensive lockout – as opposed to a defensive lockout in reaction to a strike – is that the employer may not use replacement labour while the lockout is in place.
“And, of course, an employer must follow the correct procedure before instituting a lockout,” he says.
This is to declare a dispute and refer it to the bargaining council or CCMA. If attempts to resolve the dispute fail, the CCMA must issue a certificate of outcome and the employer must then give the employees or their union 48 hours’ notice of the lockout.
“Then it’s a case of who has the patience and the muscle to wait it out,” says van Wyk.

MUTUAL CONSENT IS STILL ESSENTIAL

At the end of the day, employees must still give consent to any changes to their conditions of employment, Marinus adds. “Unilateral changes are unlawful.”
Employers should also be extremely careful how they position any proposal for a change in pay or working conditions.
“You cannot tell employees they will be dismissed if they do not give their consent. The law makes it clear you cannot threaten someone with dismissal to achieve a change.”