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Retrenchment remains a “no‑fault” dismissal that demands exacting fairness. The Labour Relations Act (LRA) requires a meaningful, joint, consensus‑seeking consultation before any final decision is taken, with specific duties around both how employees are selected for dismissal and how alternatives to dismissal are explored.

Since 4 September 2025, the new Code of Good Practice: Dismissal has consolidated and updated guidance on operational‑requirements dismissals, replacing the prior Schedule 8 Code and the separate Code on Dismissals Based on Operational Requirements. It is now the single benchmark that the Commission for Conciliation, Mediation and Arbitration (CCMA), bargaining councils and courts will look to when they test the substantive and procedural fairness of a Section 189 process.

Section 189 of the LRA prescribes the architecture of a fair retrenchment. It requires a written invitation to consult that discloses all relevant information; a genuine engagement aimed at reaching consensus on ways to avoid dismissals, reduce numbers, mitigate adverse effects, and determine fair selection criteria; and, ultimately, proof of both a fair reason and a fair procedure if dismissal cannot be avoided. The Code now lays out the operational‑requirements guidance in one place and even includes a standardised template for a Section 189(3) notice, with emphasis on disclosure, open‑minded consultation, and the centrality of alternatives.

Although the Code is not legislation, it is persuasively authoritative and will be a starting point for commissioners and judges assessing whether an employer’s Section 189 decisions met the standards of fairness. The 2025 update also recognises small‑business realities while keeping the core test intact: Dismissal for operational requirements must be a measure of last resort, reached only after the employer has demonstrated that it genuinely considered viable alternatives and applied fair, objective selection criteria.

What Makes a Selection Criterion Fair

The statute makes selection a joint topic for consultation. If the consulting parties reach agreement on criteria, those agreed rules govern. If not, the employer must unilaterally apply criteria that are both fair and objective, and be able to prove their fair application in practice. The Code reinforces that transparency in design and consistency in application are non‑negotiable.

Courts have long accepted “last‑in, first‑out” (LIFO) as inherently objective, but LIFO is not mandatory and it often co‑exists with a skills‑retention overlay where business continuity would be jeopardised by a strict length‑of‑service rule. The risk is not with skills per se, but with how “skills” are tested and scored. In Umicore Catalyst South Africa (Pty) Ltd v NUMSA obo five members, the Labour Appeal Court (LAC) scrutinised a mixed “laboratory” and “behavioural” assessment used to implement LIFO‑with‑skills and found the behavioural component too subjective to meet the “fair and objective” standard, upholding reinstatement. The message is that criteria must be demonstrably job‑related, measurable, and free of manager opinion or personality traits; where questionnaires are used, expect a court to examine the content, weighting and calibration.

When the criterion selected is LIFO, employers must also grapple with “bumping”, which allows an at‑risk employee with longer service to displace a shorter‑serving colleague in the same or a lower post, either horizontally (same level) or vertically (lower level). In Fischer Tube Technik SA v Bayene and another, the LAC held that there is no general obligation to reach agreement on how bumping is applied, but fairness requires that bumping be considered during consultation and – where adopted – implemented even if it requires offers into lower‑paid roles. Dismissal will not be unfair merely because an employee rejects a reasonable vertical bumping offer that entails reduced pay, provided that the employer’s consultation and offers were fair.

A related theme is the treatment of LIFO across organisational “pools”. In Mtshali v Bell Equipment, the LAC accepted the employer’s criteria as fair and objective but flagged that fair application includes grappling with whether LIFO should operate only within a unit or more broadly, and whether bumping across units is feasible. Employers must be ready to justify the scope of any selection pool with evidence, not assumption.

Transformation or employment equity considerations sometimes surface as proposed criteria. Selection criteria that amount to unfair discrimination will not pass muster. While a 2022 Constitutional Court decision in the Barloworld litigation dealt primarily with the limits of urgent relief under Section 189A(13), it is still a useful reminder that selection criteria are a matter of substance in consultation, that meaningful disclosure and open‑minded engagement are required, and that any criterion – particularly one touching on equity – must be capable of objective, non‑discriminatory application. If agreement cannot be reached, the unilateral criterion must still be fair and objective to withstand scrutiny.

Alternatives to Dismissal: An Obligation, not a Courtesy

South African law requires employers to treat dismissal as the last resort. Long‑standing LAC authority in CWIU v Algorax emphasises that operational‑requirements dismissals must be a measure of last resort, which in practice means exhausting viable, reasonable alternatives raised by either party during consultation. Oosthuizen v Telkom sharpened the point: Where an employee could be retained in a suitable alternative role with minimal retraining, a failure genuinely to pursue that option renders the dismissal substantively unfair. These are not “soft” dicta – courts will interrogate whether alternatives were seriously considered or simply listed and rejected.

What counts as a “viable alternative” depends on the business and the roles at issue. Typical options include redeployment to vacancies or reasonable substitutes, temporary lay‑offs, short‑time, salary freezes or moderated reductions by agreement, job‑sharing, natural attrition and early retirement, or a staggered restructuring to reduce immediate job loss. The 2025 Code consolidates this, expecting the Section 189(3) letter to disclose alternatives considered and reasons for rejection, and the consultation minutes to reflect genuine engagement with counter‑proposals. The CCMA’s guidance notes echo this, underscoring that alternatives are the first agenda in a facilitation.

While employers do not have to accept proposals that would sink the business or undermine the rationale, they must be able to show that they weighed them with an open mind, furnished the information necessary to evaluate them, and gave reasoned feedback. Labour Court decisions regularly uphold dismissals where the record shows a real search for alternatives and a rational rejection of proposals that were not viable on the facts of that enterprise. A recent example is Lesedi Kelatwang v Sygnia Securities (Pty) Ltd, where the Court accepted that no suitable alternatives existed for the senior employee concerned, and upheld both the rationale and the process.

The boundary between “alternatives” and “changes to terms” can be fraught. The Constitutional Court’s NUMSA v Aveng Trident Steel line confirms that where the true reason for dismissal is the employer’s operational need – evidenced by consultation, redesign, offers of alternative roles and a refusal by employees to accept operationally necessary changes – dismissal is not automatically unfair under Section 187(1)(c). The true‑reason enquiry remains central, but Aveng affirms that employers may lawfully dismiss for operational requirements when properly grounded alternatives are rejected and viable redeployment has been tried. Consultation records matter.

Selection Pitfalls that Most Often undo a Process

The first pitfall  is subjectivity masquerading as “skills”. Where skills matrices lean on supervisor opinions, personality descriptors, or unverified behavioural traits, they will likely be set aside. The Umicore appeal shows that courts are comfortable interrogating the legitimacy of test instruments. Designing job‑specific, evidence‑based assessments, pre‑testing for bias, and weighting criteria transparently can make the difference between a lawful and an unlawful selection.

The second is failing to define the pool rationally. Employers sometimes confine selection to a convenient department without showing why a wider pool was not feasible. Mtshali and later commentary emphasise the need to analyse whether a broader pool or inter‑unit bumping is reasonably practicable and to record the analysis.

The third is treating bumping as optional window‑dressing. The LAC’s Fischer Tube decision firmly places bumping on the consultation table when LIFO is in play. Even if a vertical bump is the only feasible option, the employer should make a concrete offer, set out the remuneration implications candidly, and allow the employee time to consider. Where an employee unreasonably refuses a fair vertical bump, dismissal may still be fair – but only if the underlying engagement and offer were robust.

A fourth pitfall is “alternatives” in name only. Courts compare what the Section 189(3) notice disclosed, what minutes show was discussed, and whether supporting data was shared. The 2025 Code expects employers to put their reasons in writing and to demonstrate open‑mindedness, particularly where employees propose redeployment or limited retraining. Oosthuizen remains a cautionary tale: If minimal retraining could save a job, failure to do it is likely to be fatal to substantive fairness.

Finally, transformation as a “criterion” can be hazardous territory. While workforce equity is a legitimate business imperative, courts will ask whether the criterion was agreed, whether it was framed and applied in an objective, non‑discriminatory manner, and whether it supplanted core fairness safeguards such as LIFO‑with‑skills without adequate justification. While the Barloworld litigation also reminds employers that selection criteria disputes belong in the substantive fairness arena, that does not dilute the duty to disclose, consult and justify.

Practical Guardrails for Employers

Start with a problem statement that is evidenced. Your consultation credibility depends on it. The CCMA’s facilitation guide and the Code envisage that reasons for the restructure, the organisational impact, and the alternatives explored are disclosed from the outset. Make sure that your Section 189(3) letter mirrors the Code’s expectations and annexures.

Co‑design selection criteria where possible. Agreement with consulting parties is the safest harbour. If agreement proves impossible, ensure that any unilateral criteria are demonstrably job‑related and objectively measurable. Pilot any testing instrument, document the calibration process, and keep an audit trail showing how raw scores translated into final selections. The Umicore outcome is a reminder that a court will drill into your methodology.

Treat LIFO and bumping as part of the same conversation. Explain your proposed selection pools and why a broader or narrower pool is rational. If LIFO is adopted, record how horizontal bumping was examined, why it was feasible or not, and table any vertical bump offers in writing with clear terms. Fischer Tube shows that a well‑documented vertical bumping offer can withstand challenge even if employees decline to accept it.

Make alternatives the first and last agenda item. Log every alternative raised on either side, the information used to assess it, and the reasoned outcome. If redeployment is viable with short, affordable retraining, lean into it and record the plan; Oosthuizen demonstrates how failure to do so can sink a case on substantive fairness. Where alternatives are not viable, your paper trail should make that conclusion uncontroversial.

Keep consultation genuinely iterative. The Constitutional Court in Barloworld reaffirmed that “meaningful” consultation requires willingness to respond to information requests, to consider counter‑proposals, and to give reasons for rejecting them. This is not a duty to agree, but it is a duty to be persuadable on the evidence.

Where Good Faith Is Won or Lost

Selection criteria and alternatives to dismissal are the two levers that most starkly reveal whether a Section 189 process was about saving jobs or merely about concluding a headcount exercise.

The LRA and the 2025 Code do not insist on perfection but rather on good faith, transparency, rationality and evidence. If your selection tools can be defended as fair and objective, if your bumping analysis is principled and properly recorded, and if your consultation file shows a real attempt to avoid dismissals, you will be well placed to justify the outcome – even where hard choices had to be made.

Conversely, if subjectivity creeps into your matrices, if bumping is ignored, or if alternatives are waved away, the authorities make it equally clear that the process will not endure.