Dismissal for operational requirements
An employer may find itself facing financial ruin (due to unsound strategy, large clients or contracts having been lost, or factors in the economy at large). Under pressure, the employer may be forced into considering reducing its wage bill by restructuring the organisation, which may mean dismissing some employees. In this scenario, the word “retrenchment” is often used.
Section 188 of the LRA recognizes that an employer also has operational requirements and needs, and that, in certain cases, these may also be a fair and valid reason for dismissal.
According to section 213 of the LRA, “operational requirements” are requirements based on the economic, technological, structural or similar needs of an employer.
There are four categories of operational requirements. From these categories it is clear that the reason for the dismissal does not relate to the employee; it is due to the needs of the employer, and therefore reason for the dismissal is the employer’s.
An employer’s economic needs, for example, include those needs and requirements relating to the economic well-being of the enterprise. One of the most common economic reasons for dismissal is financial difficulties (due to, for example, a downturn in the economy or a decrease in the demand for certain products).
“Technological needs” refers to the introduction of new technology, such as more advanced machinery, mechanization or computerization, leading to the redundancy of employees.
Structural needs as a reason for dismissal describe posts becoming redundant following a restructuring of the enterprise. This often follows a merger or amalgamation.
Employer’s similar needs
This is a very broad category and must be determined with reference to the circumstances of the case. There is no clear and absolute dividing line between an employer’s “economic” needs and “similar” needs, as there are often considerable overlaps.