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Title:

Do’s and Don’ts of Retrenchment Due to Financial Difficulties in Tanzania

Author: Nicole Mbowe
Dated: May 19, 2020
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Introduction

The novel Coronavirus disease (COVID-19) has not only had a negative impact on people’s health across the world. It has equally affected the global economy leading to significant adversity on businesses, which in turn has affected their ability to retain and create jobs.  The financial difficulties occasioned by COVID-19 are likely to force certain employers to restructure their businesses and/or workforce, to enable easier navigation through the rough seas during these times. The restructuring may inevitably lead to retrenchment. Against that backdrop, we deem it fit to share the do’s and don’ts of retrenchment in Tanzania, in accordance with the Labour laws.

Retrenchment or redundancy, in the context of Employment Law, can generally be defined as the act of an employer discharging their employees, often due to operational requirements. Section 4 of the Employment and Labour Relations Act 2004 (hereinafter ‘ELRA’), as reiterated by Rule 23(1) of the Employment and Labour Relations (Code of Good Practice) Rules, 2007 (hereinafter ‘Code of Good Practice’), defines operational requirements as requirements based on the economic, technological, structural, or similar needs of an employer; forming the legal basis under which retrenchment may take place. The reason for retrenchment, due to COVID-19 and for the purposes of this read, in light of the aforesaid provision, shall be ‘economic needs’. To that effect therefore, the following table demonstrates the Do’s and Don’ts when implementing a retrenchment.

Do’sDon’ts
Give notice of any intention to retrench as soon as it is contemplated (Section 38(1)(a) ELRA)Carry out retrenchment and fail to prove a valid reason for termination; a fair reason related to the employee’s conduct, capacity or compatibility, or based on the operational requirements of the employer; and that employment was terminated in accordance with a fair procedure. Failing this, it will be deemed an unfair termination, rather than a retrenchment. (Section 37(2) ELRA)
Disclose all relevant information on the intended retrenchment for the purpose of proper consultation. (Section 38(1)(b) ELRA)Terminate employment on grounds related to pregnancy, disability or discrimination, as stipulated by the ELRA. (Section 38(3)(b) ELRA and Rule 24(2) Code of Good Practice)
Prior to retrenchment, consult on reasons for retrenchment, any measures taken to avoid or minimize retrenchment, selection method, and timing for retrenching and severance pay in respect of retrenchments. (Section 38(1)(c) ELRA)Where the dispute reaches the Commission for Mediation and Arbitration (CMA), the employer shall not implement retrenchment until the referral is conclusively determined, whether at the CMA or at the High Court (Labour Division) (Section 38(2) ELRA and Rule 23(8) Code of Good Practice)
Give notice, disclose, and consult with any recognized trade union, any registered trade union, and employees not represented by a recognized or registered trade union. (Section 38(1)(d) ELRA)Coerce or unduly influence employees to enter voluntary retrenchment in an effort to save on retrenchment costs, as this may constitute an unfair termination in the future.
Consider selection criteria for retrenchment- have regard to their length of service, business’ need to retain key jobs, experience and skills, and qualifications. (Rule 24(3) Code of Good Practice)
Preference in rehiring retrenched employees – ought to be considered first when rehiring potential employees with comparable qualifications (Rule 25(1) Code of Good Practice)
Pay the retrenched employees all dues: pending pay for work done before the termination, pending annual leave pay not taken, annual leave pay accrued during any incomplete leave cycle, payment in lieu of notice, any severance pay due, and any transport allowance that may be due. (Section 44(1) ELRA)
Issue a prescribed Certificate of Service to retrenched employees. (Section 44(2) ELRA)

CONCLUSION

In conclusion, although businesses are struggling to stay afloat amid these uncertain times and would find it difficult to incur the stipulated retrenchment costs, it is advisable that businesses should strive to comply with the above

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Important Notice

This publication has been prepared for information purposes only, and it does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Afrilex Associates, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.