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Can an employer withhold an employee’s severance pay if the employee refuses an alternative position?

Can an employer withhold an employee's severance pay

The Labour Relations Act deals specifically with the requirements and criteria when an employer wants to start the retrenchment process with an employee. One aspect hereof that an employee may not be aware of, is that an employer may not have to pay the severance pay if the employee unreasonably refuses an alternative position that was offered to the employee. This is dealt with in the Basic Conditions of Employment Act. (“BCEA”).

In terms of Section 41 of the BCEA

It is clear that the employer must pay to the employee severance pay equal to at least one week’s remuneration for each completed year of continuous service. This does not prohibit the employer from providing the employee with a more favorable severance package, as this is a decision made by the employer.

During a retrenchment process, the employer may offer the employee an alternative position in an attempt to assist the employee in not losing their employment. The parties should bear in mind that there is no obligation placed on the employer to offer an alternative position, specifically if the company can no longer afford to retain the employees.

The BCEA further stipulates that if an employee refuses a reasonable alternative position with the employer, the employee may be deprived from their severance pay. This needs to be considered specifically by an employee, when the employee refuses the alternative position.

If the position offered to the employee is similar or more favorable than the current position that the employee holds, it can be interpreted that the employee is unreasonably refusing the alternative position.

This was confirmed in the matter of Astrapak Manufacturing Holdings (Pty) Ltd t/a East Rand Plastics v Chemical Energy, Paper, Printing and Allied Workers Union 2014. The court held that, where the employees refused an offer on similar conditions, they would forfeit their right to severance pay.

It should be noted that whether refusal of an alternative offer of employment is reasonable, will depend on the nature of the alternative position offered, the location, status and other relevant factors.

In the event that the employee accepts the alternative position, the employment contract might be varied to adjust the terms and conditions of employment agreed upon between the parties.

Employees should be mindful when making these decisions and should always rather seek legal advice, before accepting or refusing the alternative position.

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