Retrenchment and the Law

Retrenchments belong to the class of termination of employment commonly described as "economic dismissals". This class is distinct in that on the one hand workers lose their jobs without any fault (such as misconduct) or other reason (such as through the operation of the contract of employment) attributable to them, while on the other, the employer may be compelled by unavoidable economic considerations to terminate the services of some workers. Rycroft and Jordan have expressed this distinctiveness in the following words: Workforce reduction or retrenchment, because of recession, technological change, unionisation, disinvestment, transfer of the business or decentralisation has become a major issue of law and social policy. For the retrenched worker at a time of rising unemployment, the loss of a job frequently means "disappearance into the large mass of the unemployed". For the employer at a time of recession, to retrench is often the only way to ensure economic survival.1 It is also important to emphasize that while a retrenchment is merely one of the forms of termination of employment, its social, economic and political ramifications tend to be of a greater scale than other forms of termination of employment. Accordingly, it is not surprising that many countries have specific and sometimes elaborate legal provisions on retrenchment.

A legal treatise on how the law explains retrenchment of workers.