By: Senyo M. Adjabeng
There are certain principles of life that we cannot run away from. For example, the principle of gravity can be paraphrased as “whatever goes up must definitely come down”. And then we have the principle of seasons paraphrased as “everything has a beginning and a definite end”. There are many more such wonderful philosophical annotations that we can identify. This week however, I want to discuss the employment relationship in a broader perspective of the principle of seasons – the Beginning and the End!!
Truly, whatever has a beginning has an end. Unfortunately, when people are employing or being employed, they least think about the fact that the relationship is going to end one day. They neither take any precautions to protect themselves in the eventuality of an end to the employment relationship nor even think about such possibilities in the first place. The truth is that once you walk into an organization, you need to start thinking about the day you will walk out because surely, you will. Whether it is in a year, two, or thirty, you will definitely walk out of there sometime in the future. If you do not walk out yourself, you will be urged out or both. And that is why we all need to understand the phenomenon of redundancy.
Redundancy is the process of selectively reducing a workforce or removing the entire workforce from employment in the event of any structural changes, amalgamation or close down. Redundancy would normally be undertaken as a requirement of meeting organizational efficiency targets or as part of the processes for introducing significant changes in the operations and structures of an organization or as part of processes for shutting down business operations. For the purposes of this write up, we want to focus on the legal requirements for ensuring a decent and smooth redundancy process. How should redundancies be undertaken? How and why should consultations form the basis of all redundancies? What should be the scope of consultations and who should be consulted? Do Consultations constitute notice periods? Finally, how and what form should such redundancy consultations take? Redundancies are tricky and very sensitive. You don’t see them coming most often until they are imminent. And redundancies are very expensive processes. If you start thinking redundancy as an employer, make sure you have the money to fund it. You will need a whole lot of money for the entire exercise because of the unique nature of the employment relationship at law.
The Employment Relationship…
A relationship between the employer and worker is supposed to be a true and interactive relationship. Hitherto, employment relationships were master-servant relationships in which the master was the sole owner of the worker as asset. Today and in most jurisdictions, the employment relationship comprises a partnership of labour services exchanges – a trade of time for money. In essence, the employment relationship is not only a legal relationship but is also a contractual one with specific rights, responsibilities and mandatory obligations for each party.
In a true relationship, there must be trust, good faith, common purpose, values and a deep concern for each other. Interestingly, this important ingredient is so missing in current employment relationships. So during a normal redundancy process in Ghana today, there is a lot of misunderstanding, conflict and bad faith during and long after the process. Further, the entire process takes time in excess of the duration planned for. If a redundancy is well planned, it must not take more than a fortnight (two weeks) to roll out. However, when you have a redundancy programme taking more than three months or even six months, there must surely be a problem. And where the fallouts from the redundancy programme is so much as to attract media attention and other legal and quasi legal jurisdictional processes, then there must be even more problems.
The problems most often occur because the organization failed to adequately prepare for the redundancy process. As mentioned above, redundancies may occur when an organization undergoes some structural changes, amalgamation (also known as a merger) or shut down. Common among these is the case of structural changes as a way of aligning organizational objectives with industry trends and market conditions. A redundancy process is essentially a change management process. It is easy to manage a redundancy effectively through change management theories.
Ancillary Processes to Redundancy
In the changing world of business, companies need to keep altering their business operations so they can keep up with competition. And these changes most often affect some jobs every now and then. Sometimes, entire production lines need to be changed or reengineered to pave way for newer and more competitive products. And this reengineering may affect hundreds of jobs. So at the end of the day, some employees may have to be exited from the organization. Redundancy however, in accordance with good practice must be the last option for restructuring jobs. A number of processes can be employed to exit employees comfortably from employment before contemplating redundancy.
These processes include redeployment of employees into different areas of operations in cases where their services may not be needed in their immediate lines of work. Employees whose services may no longer be required may be given added training to build their skills for other available jobs. Through up-skilling, relevant positions and vacancies are filled or created for the redundant employees.
Sometimes, employees may be eased out of an organization through structured attrition. This is a process of allowing older employees to slowly phase out of the organization through retirement. This is normally done in cases where manpower assessment results show that a substantial number of employees are due to retire within the particular year of interest. Again, voluntary retirement programmes are also used to further entice the early retirement of a substantial number of employees who may be affected by an impending redundancy.
When these processes fail to fully answer the issue of redundant employees who need to be exited from an organization, a voluntary redundancy programme may be initially introduced with an attractive package for volunteer employees. And when there are still more employees to be exited, compulsory redundancy may be employed.
The Redundancy Process
So how are redundancies supposed to be undertaken? The entire redundancy procedure is outlined in Section 65 of the Labour Act, 2003 (Act 651). The law firstly require that where an employer contemplates the introduction of major changes in production, programme, organization, structure or technology in a company that is likely to entail the termination of the employment of workers, the employer shall provide in writing to the Chief Labour Officer and the representative of the employees concerned, three months before the contemplated exercise, relevant information including the reasons for any termination, the number and categories of workers to be affected and the period within which any termination is to be carried out.
It has been widely agued whether the provision of this relevant information to the Chief Labour Officer and the representative of the employees constitute notice to the relevant stakeholders. Unions have vehemently agued that it constitutes notice where as employers maintain it is just information that must be shared. I will not try to interpret the law as no one except the Courts are qualified to do so. However, it is obviously implied that some form of open interaction and discussions must be held long before and at least three months before any contemplated redundancy exercise. There must be thorough and prior consultation long before the exercise.
The Labour Law further states that the employer must consult the trade union concerned on measures to be taken to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment. More consultations are expected between the stakeholders or parties beyond just sharing information on the exercise. Consultations must also involve seeking solutions to and measures to protect the interest of the affected workers. This indeed is a very huge and expensive responsibility for employers seeking to undertake redundancy. Yet it is mandatory at law that employers satisfy such responsibilities.
Further, the law states that where such redundancy or close down results in the severance (termination) of the employment relationship between the worker and employer, or where a merger or amalgamation of companies result in employees suffering diminution in their remuneration (reduced pay and benefits), all affected workers shall be entitled to redundancy pay as compensation. Such compensation is expected to be negotiated between the employer and affected workers. And where they are unable to reach an amicable negotiated agreement, they may refer the matter to the National Labour Commission to have it resolved.
Some organizations negotiate the terms and conditions of redundancies into their agreements long before the occurrence and the need for redundancy where as others negotiate the terms as and when there is the need for redundancy. Whether done before or after the process, the most important thing is that all parties and stakeholders must be fully consulted and involved in the process from beginning to end. What then is the extent and scope of this consultation?
The Redundancy ‘Notice’
The Labour Act states in section 65 (1a) thus:
“When an employer contemplates the introduction of major changes in production, programme, organization, structure or technology of an undertaking that are likely to entail terminations of employment of workers in the undertaking, the employer shall
1a. Provide in writing to the Chief Labour Officer and the trade union concerned, not later tan three months before the contemplated changes, all relevant information including the reasons for any termination, the number of employees and categories of workers likely to be affected and the period within which any termination is carried out…”
The above provision for redundancy raises a number of issues especially ‘notice’ of redundancy issues. For example, does the phrase “provide in writing” constitute notice of redundancy? Many unions and their employers have easily construed the phrase to mean notice and hence continue to demand three months payment in lieu of notice where an employer fails to provide such notice three months before the contemplated redundancy exercise.
But objectively speaking, it may seem that if the drafters of the law had intended the provision to constitute notice to the Chief Labour Officer and the trade union concerned, it would have stated so. Albeit, notice for the termination of employment is clearly spelt out in section 17 of the labour law, which exit or termination processes includes the redundancy process.
Hence, we may need to look a bit deeper into the understanding of the provision before considering the phrase as a notice of redundancy clause. Indeed, it may be necessary to test this provision in the Courts to ascertain its true meaning once and for all. But until that is done, we as stakeholders of labour will have to work it out amicably. I sincerely believe the purpose must be different from a mere notice period for redundancy because it paves way for redundancy consultations to begin long before the exercise actually takes place. This way, parties are able to adequately plan the processes together, discuss the issues involved and arrive at an amicable implementation plan that serves the purposes of both parties – the union or employees and the employer.
But the phrase is mandatory. The provision in writing to the Chief Labour Officer and the trade union concerned is a must because the employer per the legal provision “shall provide in writing”. Therefore, there must surely be some rectification for the failure to or a breach of this obligation to provide in writing all relevant information on the redundancy exercise three months before the contemplated exercise. The form in which this rectification should take can be discussed between the parties to be settled amicably – perhaps through compensation of some sort. But for one party to conclude that such breach constitutes a beach of ‘mandatory notice’ and hence must be sanctioned through the payment of three months salary in lieu of notice may be over exaggerated.