In a recent judgment that underscores the importance of aligning retrenchment processes with statutory requirements, the Labour Court in Mqikela v Pristo Response Trading (JS562/22) (18 June 2025) (LC) found that the dismissal of the employee amounted to an automatically unfair dismissal under section 187(1)(d) of the Labour Relations Act 66 of 1995 (“the LRA”). The Labour Court held that the retrenchment, though framed as a dismissal for operational requirements, was in fact linked to the employee’s exercise of her rights under the LRA, particularly the referral of a dispute to the CCMA.
Ms Nomvula Mqikela (“Mqikela”), a Human Resources Manager, lodged a formal grievance in November 2020 regarding various concerns, including unfair treatment, victimisation, abusive behaviour and favouritism against the sole and managing director of Pristo Response Trading (“the Company”).
Although internal efforts to resolve the matter were allegedly initiated, including referral to an external labour consultant, the issues remained unresolved. On 31 January 2022 Mqikela referred an unfair labour practice dispute to the CCMA. The following day, she was advised that her role was being considered for possible retrenchment as part of a ‘broader review of the employer’s operational structure’. Mqikela was subsequently retrenched. After conciliation failed, Mqikela referred an automatically unfair dismissal dispute to the Labour
Court.
During the Labour Court proceedings, the employer attempted to argue that Mqikela’s dismissal was necessitated by financial constraints and the outsourcing of HR services. The Labour Court, however, was not persuaded. Testimony from the director was riddled with
contradictions, from when retrenchment was first contemplated to whether the proposed outsourcing was legitimate. Notably, the employer’s notice in terms of section 189(3) of the LRA was described by its own director as being “wrong”.
The Court meticulously applied the Afrox causation test, endorsed by the Constitutional Court in NUMSA & others v Aveng Trident Steel, to determine whether the CCMA referral was the proximate and dominant reason for the dismissal. The answer was a resounding ‘yes’.
The Labour Court held that “[37] Dismissing an employee for exercising her legal right using a disguised reason amounts to a misrepresentation of the true reason for the dismissal. The employer knows that the true reason is against the law and/or unsustainable and unfair and deliberately manufactures another reason to dismiss the employee…”.
In view of the aforementioned, the Court found the dismissal automatically unfair and awarded 20 months’ compensation (R300,000) to Mqikela. The Court also ordered the Company to pay Mqikela’s costs.
Employers are reminded of the critical importance of ensuring that retrenchments are genuinely based on operational requirements and not a guise for dealing with unrelated disputes or grievances. This judgment highlights the risks of initiating a retrenchment exercise where an employee has recently exercised their rights under the LRA, such as referring a matter to the CCMA.
To safeguard against adverse findings employers must:
- Ensure transparency throughout the retrenchment process, with clear documentation supporting the operational rationale.
- Avoid any timing or conduct that may give rise to a perception that the retrenchment is retaliatory or linked to the employee’s exercise of legal rights. If such a perception may arise, the employer must be able to prove that the retrenchment is not retaliatory
in nature, and is justified by legitimate operational requirements.
Employers should seek specialist legal advice when dealing with issues of this nature. The consequences of an adverse finding may be severe, as they were in this matter.
