Section 189 Retrenchment
Also known as: Retrenchment, Operational-Requirements Dismissal, Section 189 Process.
What is Section 189 Retrenchment?
Section 189 of the Labour Relations Act 66 of 1995 governs retrenchment — dismissal for operational requirements. It requires the employer to consult with affected parties in a meaningful, joint consensus-seeking process, consider alternatives, apply fair selection criteria, and pay a minimum severance of one week per completed year of service under Section 41 of the BCEA.
Drafted and reviewed by
Attorney & Founder, My-Contracts.co.za · Legal Practice Council of South Africa (LPC F17333)
Definition and context
Section 189 of the Labour Relations Act 66 of 1995 (LRA) governs dismissal for "operational requirements" — the statutory term for retrenchment, including economic, technological, structural, or similar reasons. It imposes a detailed consultation and procedural framework designed to ensure that retrenchment is genuinely a last resort and that affected employees have a meaningful opportunity to influence the outcome. Section 189A applies additional procedural protections to employers of 50 or more employees retrenching 10 or more (with thresholds scaled to workforce size).
Section 189(2) requires the employer to consult "when the employer contemplates dismissing" — not after the decision has been made. Consultation must engage (a) any party identified in a collective agreement as the consulting party; (b) a registered trade union representing affected employees; (c) any workplace forum; or (d) the employees themselves if none of the above exists. Section 189(3) requires the employer to issue a written notice containing specified information: the reasons for proposed dismissals, the alternatives considered and rejected, the number and categories of employees likely to be affected, the proposed selection criteria, the proposed timing, severance pay, any proposed assistance, and the possibility of future re-employment. Section 189(2)(a) requires the parties to attempt to reach consensus on appropriate measures to avoid dismissals, minimise their number, change the timing, mitigate adverse effects, the selection criteria, and severance pay.
Selection criteria must be "fair and objective" — the Code of Good Practice on Dismissal Based on Operational Requirements identifies LIFO (last-in-first-out), skills, attendance, and disciplinary record as typically fair; criteria based on union membership, race, gender, or other protected grounds are automatically unfair under Section 187. Severance pay under Section 41 of the Basic Conditions of Employment Act 75 of 1997 is a minimum of one week's remuneration per completed year of continuous service — consultation may negotiate enhanced severance. Section 189A applies to large-scale retrenchments and requires mandatory facilitation by the CCMA, a 60-day minimum consultation period, and specific strike/lock-out rights. Breach of Section 189 exposes the employer to unfair-dismissal compensation under Section 194 (up to 12 months' remuneration for procedural unfairness, and up to 24 months for substantive unfairness) and in large-scale cases to an application to stay the retrenchment under Section 189A(13).
Where this term lives in law
Labour Relations Act 66 of 1995
Sections: 187, 188, 189, 189A, 194
Regulates the relationship between employers, employees, and trade unions, including dismissals and CCMA jurisdiction.
Basic Conditions of Employment Act 75 of 1997
Sections: 41
Sets minimum employment standards including working hours, leave, and termination requirements.
Frequently asked questions
When must an employer consult under Section 189?
Section 189(2) of the LRA requires consultation "when the employer contemplates dismissing" — meaning before the decision is final, while alternatives are still open. Consulting after the decision is made is procedurally unfair and a common basis for successful Labour Court challenges. Consultation must be a genuine, joint consensus-seeking process, not a rubber-stamp exercise.
What severance pay is payable on retrenchment?
Section 41 of the Basic Conditions of Employment Act 75 of 1997 sets a minimum of one week's remuneration per completed year of continuous service. Section 41(4) provides that an employee who unreasonably refuses alternative employment on similar terms forfeits severance. The Section 189 consultation may negotiate higher severance — in many bargaining-council contexts, severance of 1.5 or 2 weeks per year is agreed.
What selection criteria are fair under Section 189?
Section 189(7) requires selection criteria to be "fair and objective" — either agreed with the consulting party or, if none can be agreed, criteria that are fair and objective. The Code of Good Practice on Operational Requirements identifies LIFO, skills, attendance, and disciplinary record as typically fair. Criteria based on union membership, age, race, gender, disability, or other protected grounds are automatically unfair under Section 187.
What is the difference between Section 189 and Section 189A?
Section 189 is the default retrenchment process. Section 189A applies to "large-scale" retrenchments — broadly, employers with 50+ employees retrenching 10+, scaled by workforce size. Section 189A imposes additional protections: mandatory CCMA facilitation (Section 189A(3)), a minimum 60-day consultation period, a right to strike or lockout after the period, and the ability of employees to apply to the Labour Court to stay the retrenchment under Section 189A(13).