Dismissal Under the Guise of Operational Requirements
- Jonathan Goldberg
- 2 hours ago
- 2 min read
In the matter of LEKALAKE V EOH MTHOMBO (PTY) LTD [2025] JS895/19 LC, the Labour Court’s ruling highlighted the importance of fair retrenchment procedures in South Africa. The case involved a consultant who was dismissed in 2019 due to alleged operational requirements. However, the Court found the dismissal to be substantively unfair and ordered the employee’s reinstatement with full back pay.
The employee worked for a company that provided SAP consultancy services. The employer dismissed him under section 189 of the Labour Relations Act 66 of 1995 (LRA), citing poor performance and the need to replace him with a senior consultant at the Department of Water and Sanitation (DWS).
However, during the legal proceedings, it emerged that the real reason for the dismissal was the closure of the employer’s Public Sector Division. This decision came after senior executives faced corruption allegations, leading to the loss of key government contracts.
The employer attempted to justify the dismissal by arguing that restructuring made the employee’s role redundant. However, no documentation or restructuring plan was presented to support this claim. Furthermore, the company failed to provide performance reviews or training records to substantiate its initial argument that the employee was underperforming.
The employee challenged the dismissal, arguing that it was not based on genuine operational needs but rather on the fallout from corruption allegations. Witnesses confirmed that he had not performed poorly, and there was no evidence that the employer had considered alternatives such as redeployment within the company.
The Labour Court scrutinised the employer’s handling of the retrenchment process and found several shortcomings:
There was no proper consultation process as required under section 189 of the LRA.
The company failed to explore alternative solutions like redeployment, voluntary severance, or retraining.
The employer’s financial records showed profitability in other business sectors, contradicting claims that retrenchment was the only option.
The judge stressed that retrenchments must be based on legitimate operational reasons, such as economic, technological, or structural changes—not as a cover-up for reputational damage caused by senior executives’ misconduct.
The Court ruled that the dismissal was unfair and ordered the employee’s retrospective reinstatement. This meant he was entitled to back pay from the date of his dismissal, restoring his financial position as if the retrenchment had never occurred.
The judgment reinforced the principle that retrenchments must be procedurally and substantively fair, requiring transparency, consultation, and genuine operational justification. The employer was also ordered to cover the employee’s legal costs, further emphasising the unfair nature of the dismissal.
This case serves as a warning to employers: retrenchment should not be used to disguise other business decisions unrelated to an employee’s performance. Any retrenchment must be supported by evidence and conducted in good faith, or it risks being overturned by the Labour Court.
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