No severance pay is payable if employee declines reasonable alternative employment

No severance pay is payable if employee declines reasonable alternative employment

It may sound unfair, or unreasonable, but employers are not obliged to pay employees who are retrenched, severance pay, if they refuse to accept an offer of alternative employment with their current employer or another employer, when being retrenched.  This is specifically provided for in sections 41(2), and 41(4) of the Basic Conditions of Employment Act.

Employees are, in law, entitled to a minimum of one week’s severance pay for each completed year of continuous service with the same employer, when retrenched.   However, the employer is not obliged to pay severance pay if an employee unreasonably refuses to accept an offer of alternative employment.

In 2014, the Cape Town Labour Court, in Argent Steel (Pty) Ltd t/a Gamid George v Tracey Ann Lancaster & 3 others (case number C541/2014) made reference to the landmark judgment in “Astrapak Manufacturing Holdings (Pty) Ltd t/a East Rand Plastics (2014) 35 ILJ 140 (LAC), with particular reference to Irvin and Johnson Ltd v CCMA (2006) 27 ILJ 935 (LAC), reasonableness of a refusal to accept an offer of alternative employment should be assessed within the context of the following factors and principles where (a) an employer arranged alternative employment for an employee and the employee rejected the alternative employment for no sound reason, but simply in order to take the severance pay, that payment should not be paid to such employee; (b)the purpose of these provisions was to discourage employees from unreasonably rejecting offers of alternative employment arranged by their employers simply because they might prefer cash in their pockets in the form of severance pay; (c) if an employer offers an increased amount or, at the very least, the same amount, viewed within the context of the specific conditions of employment that cannot on any reasonable basis be taken as more onerous than that which existed prior to the retrenchment exercise, and if an employee refuses to accept such an offer, that refusal is then unreasonable;

(d) the purpose of the BCEA, would be subverted, where a Court finds that, notwithstanding an equivalent offer, at the very least, an employer would be compelled to pay severance packages; (e) if there is a reasonable and similar position offered at a similar salary, then the refusal to accept same will negate the necessity to pay a severance payment to that employee; (f) thus, the refusal must be justifiable and reasonable in order to lay claim to the severance payment, and there would no necessity to pay any severance payment if in fact the offer of alternative employment was fair and reasonable in all the circumstances, inclusive of a transfer from one region to another; (g) similarly, a refusal to accept an offer of alternative employment in circumstances where the employer still need the skills and expertise of the affected employees, and the latter insists that they be offered the same positions or positions at the same or higher level, is unreasonable”, so held in Pretorius v Rustenburg Local Municipality and Others (2008) 29 ILJ 1113 (LAC).

It makes sense that an employer should not be compelled to pay an employee severance pay in circumstances in which the employee is offer alternative employment which would not materially prejudice them.   For example, if an employee whose position has been made redundant, is offered alternative employment which does not actually, or materially, impact on his or her remuneration, working hours and status, which they decline to accept, the employer is not obligated to pay the employee being retrenched, severance pay.

When all is said, and done, every case needs to be assessed on its merits; no two cases are the same.  It also follows that if an employee reasonably refuses an offer of alternative employment with the employer, or another employer, because the working hours are longer, their remuneration is less, or the position would require them to relocate, the employer would be obligated in law to pay the employee severance pay no less than one week’s remuneration for each year of continuous employment.