Restructuring and Variation of Contracts

The COVID 19 Pandemic has affected the working environment and turned companies’ upside down. Those that were stable have become unstable and those that were struggling have really fallen deeper into the financial pit. This has led to companies looking at three options namely:

1.Restructure business models


3.Close completely

Before considering these options as per Section 25 of the Employment Act companies are to notify the Commissioner of Labour of their situation. Upon receiving a positive response to proceed with the process from the Commissioner of Labour the following steps are to be followed:

1. Notify all employees, who will be affected directly or indirectly, of the situation and their proposal to deal with the situation

2.Employees would then be given an opportunity to go and consider the employers’ proposal and even come up with other optional proposals.

3.A consultative meeting would then be held to consider the employees’ proposals.

4.Management would then go consider employees’ proposals.

5.Another consultative meeting will be held with management and employees to finalize the direction the organization is taking.

6.If there will be retrenchments the criteria of selection have to be clearly stated.The usual criteria used is LAST ONE IN FIRST ONE OUT.This is by looking at the effective running of the business, ability, experience, qualifications and skills of the employees.

7.Management then engage the those who fit the above selected criteria on a possible retrenchment package including terminal benefits.

8.Management then would write to each affected employee stipulating calculations of possible retrenchment package including terminal benefits and last date of employment.

9.Upon completion of the process Management would file a Redundancy Form with the Commissioner of Labour stating the profile of retrenched employees.

It is important to note that this is a process and not an event. The Commissioner is notified not to rubber stamp an already perceived decision. Consultations should be done in good faith with intention of both having an effective business and retention of employment. The above steps are applied when the working environment is not Unionized or there no already existing Retrenchment Policy or Collective Agreement.

If at Point 4 Management decides to vary conditions of employment, the general rule is that terms and conditions of a contract of employment may only be varied with the consent of both parties. Under the common law no party has the right to vary or amend such terms and conditions unilaterally and if one party does so act and it is not accepted by the other party it amounts to a repudiation of the said contract. There is however an exception to this rule as regards contracts of employment, because a contract of employment cannot remain static over the years, as some element of change is inevitable, which change, according to the common laws, must be mutually agreed by both parties. If an employee however refuses to accept such a change, the employer may, according to the principles of equity, under given circumstances, unilaterally amend such terms and conditions of employment, because an employee cannot be allowed to exercise a power of veto over any such proposed amendments.

For such unilateral change in the terms and conditions of an employee’s employment contract not to be unfair, the following requirements, according to the principles of equity, have to be complied with;
(a) there must be a valid reason for the change; and
(b) the change must be effected through a fair procedure.

With regards to having a valid reason, there should be a commercial rationale behind the amendment; that is, it must be based on a rationalisation of an economic, technical or structural nature, to render it substantively fair, and it must also not be illegal, as being in conflict with any statutory provision or unlawful, as being in conflict with a collective labour agreement. In so far as a fair procedure is concerned, although it is basically management’s prerogative to amend terms and conditions of employment, the court can never sanction any blatant implementation without allowing the employee to challenge this decision of management. There must be bargaining to deadlock and the employee must be allowed to resist any alteration in accordance with available conciliatory machinery, before it can be said that the unilateral amendment was fair.

Below are Court Judgements to be used as reference:

(1)Mogopudi v. Ed-U-Comp (Pty.) Ltd. [1995] B.L.R. 505

(2)Fitzani and Others v Security Specialists Botswana (IC F93/05), unreported

(3)Green Industrial Enterprises Corporation (Pty) Ltd v Ben and Another [1997] B.L.R. 99, CA

(4)Moatshe and Others v Office Furniture Manufacturers (Pty) Ltd (IC 253/05), unreported

(5)Phale and Others v Dwinchi Woodtech (Pty) Ltd (IC 391/04), unreported

(6)Moyo V. Kgolagano College 1995 BLR 778 (IC)

(7)Ntloyakgosi V Central Automative Aircons And Repairs Pty Ltd 2010 2 BLR 49 IC