top of page

Forfeiting severance pay

It is trite law that an employee may forfeit his/her claim to severance pay if he/she unreasonably refuses an offer of alternative employment in an attempt by the employer to avoid his /her retrenchment (section 41 of the BCEA). This provision incentivises an employer to provide alternative employment, but it also aims to limit job losses as a result of retrenchment processes.

But who decides when it is a reasonable alternative offer, or an unreasonable refusal of the offer by the employee?

The Labour Appeal Court considered this in Lemley v Commission for Conciliation, Mediation and Arbitration and Others [2020] 7 BLLR 676 (LAC) where the affected employee (57) who worked in the employer's Port Elizabeth office where retrenchments were contemplated, had been offered an alternative position in the East London office. The employee refused the offer without providing any reasons.

The employer than revised the offer by increasing the period of payment of a rental subsidy offered to the employee in the event of his relocation to East London; and when this was also rejected by the employee, further offered to subsidise the shortfall in the employee’s pension fund up until the date of his retirement to allow him to take early retirement. The employee once again declined the offer and was then dismissed (retrenched) without payment of a severance package. He referred the dispute to the CCMA, where it was found that he was not entitled to severance pay because he had refused a reasonable offer of alternative employment. On review, the Labour Court agreed with this ruling.

The employee appealed to the Labour Appeal Court against the finding, saying that the CCMA ruling disregarded his age and personal circumstances which had rendered it impossible for him to relocate. However, the employer indicated that the employee had not at the time informed the company of the reasons as to why he could not accept the offer, and had been the only individual to reject the offer of alternative employment.

The Court found that in this case, the employer had taken steps to avoid retrenching the employee, who in turn had made no effort to engage with the employer regarding the difficulties he had faced in accepting the alternative position. Instead, he refused all offers of alternative employment without giving reasons. When the issue of his age and personal circumstances was later raised, no further steps were taken by him to detail these circumstances or discuss the matter further with the employer. As such, the employee's refusal had been unreasonable in the circumstances and he was not entitled to severance pay.

In the current Covid-19 working environment where many employers have to resort to restructuring, changes in terms and conditions of employment and/or retrenchments, both employers and employees should take note of this judgement. If an employer can demonstrate a true operational need to effect such changes and embark on a consultation process with employees in an attempt to find solutions to avoid retrenchments, but the affected employees (and/or their representatives) are simply uncooperative and unwilling to consider these on a point of principle, it can backfire badly.

We have seen a trend lately where employees who are part of restructuring consultations simply refuse to accept or even consider the reality of the employer's situation, and who try with any means at their (or their representatives') disposal, to delay or obstruct the process as much as possible.

Whilst such an approach might be understandable on an emotional level, it is not wise or prudent. The reality of the employer's situation is not going to change as a result of posturing or other obstructive tactics and such employees may just end up getting the short end of the stick.

© Judith Griessel


bottom of page