Signing Away Retrenchment: Voluntary Retrenchment Agreements
By Kellie-Kirsty Hennessy

“Recession is when a neighbor loses his job. Depression is when you lose yours.” - Ronald Reagan.

Receiving notice of your pending retrenchment can make any employee burst into a cold sweat. Placed in this state of anxiety and stress, most employees are caught like a ‘deer-in-headlights’, not knowing what their rights are, or the implications behind signing these rights away.

A Voluntary Retrenchment Agreement is often presented to an employee facing mandatory retrenchment. The courts have defined such an agreement as a consensual termination of an employment relationship whereby the employer and employee enter into a written agreement in full and final settlement of all claims, and the employee accepts a voluntary retrenchment package1.

Signing a Voluntary Retrenchment Agreement essentially amounts to a waiver of an employee’s rights in terms of the Labour Relations Act No. 66 of 1995 (“LRA”). An employee who validly agrees to the termination of his employment contract cannot be said to have been ‘dismissed’2. The implication of signing such an agreement terminates the employment relationship and the signatory is no longer deemed an ‘employee’ in terms of the LRA. In Kynoch Feeds (Pty) Ltd v CCMA and others3, Judge Revelas held that an agreement between an employer and an employee to terminate a contract of employment is not a "dismissal" as defined by section 186(a) of the LRA or in any other sense. An employee therefore risks being precluded from bringing a case in respect of unfair retrenchments since no dismissal as envisaged by section 186 of the LRA has taken place.

Due to the severe implications of signing such an Agreement, the courts are precluded from creating presumptions that a party has waived his or her rights in such circumstances. A court is entitled to pierce the veil of a so-called waiver and consider whether the employee applied his or her mind and consented to the proposal with full understanding and knowledge of the law, as well as to consider the circumstances surrounding the Retrenchment, and whether such process was indeed in compliance with section 189 of the LRA and both procedurally and substantively fair.4

Despite this risk, a Voluntary Retrenchment Agreement can be beneficial to both an Employee and an Employer. It can act as an amicable clean-break from a Retrenchment for both parties, if an employee carefully applies their mind to the terms and understands the implications behind the waiver of his or her rights.

Furthermore, a Voluntary Retrenchment Agreement may only be enforceable if the employee is given something in addition to the amounts and benefits legally due to them. This will be a quantified amount above and beyond the following: annual leave accrued to the employee but not yet taken; contractual notice pay in the event that the employee is not required to work her notice period; and severance pay, as set out in section 41(2) of the Basic Conditions of Employment Act 75 of 1997 (“BCEA”), namely one week’s remuneration for every completed year of service.

In spite of the protection the court may afford an employee attempting to wriggle free of the implications behind a Voluntary Retrenchment Agreement, litigation will be both time consuming and costly. It is prudent to consider carefully the terms in such an Agreement and understand that you are consenting to a waiver of your rights. Employers should ensure that employees understand their rights, what they are “signing away” and have sufficient time to consult an attorney. Employees should be advised to obtain advise and be granted sufficient time to do so. The agreement must also contain a clause where the employee agrees that he or she understands their rights and had consulted with an expert on the ramifications of the agreement.


1Chiloane & Others v Rema Tip Top Industrial (Pty) Ltd (2002) 11 LC 7.1.5
2United Tobacco Co Ltd v Baudach 1997 [18] ILJ 506 [LAC]
3(1998) 19 ILJ 836 (LC) at 849G–H
4Hodges v Urban Task Force Investments CC and Others (JR840/12) [2013] ZALCHB 295 (7 November 2013); Bekker v Nationwide Airlines (Pty) Ltd [1998] 2 BLLR 139 (LC); Brown v Afgri Producer Service (Division of Afgri Operation Limited) (JS 436/06) [2008] ZALC 138 (31 October 2008); Roberts & others v WC Water Comfort (Pty) Ltd (1999) 8 LC 5.5.2.

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