Retrenchment is the process of downsizing a number of employees. Apart from operational requirements such as economic constraints, technological changes or else, structural or similar requirements, an employer in Tanzania mainland may not legally conduct retrenchment. 

Here an employer does not willingly choose to reduce/terminate employees but is forced by the circumstances legally referred to as operational requirements.

The Employment and Labour Relations Act, Cap 366 R.E. 2019 (the “Act”) under section 38, provides for what needs to be done when an employer/company, under operational requirement, intends to execute retrenchment.

The employer must implement the following before retrenchment: –

A. NOTICE OF INTENTION TO RETRENCH

The notice of any intention to retrench MUST BE GIVEN AS soon as retrenchment is contemplated.

B. DISCLOSE ALL RELEVANT INFORMATION

The employer must disclose all relevant information forcing the company to propose the intended retrenchment for the purpose of proper consultation.

C. CONSULTATION

• The employer must consult WITH the recognized trade union, registered trade union with members in the workplace, and every employee un-represented by the above trade unions.

• Consultation is focused on, and must answer, the followings: –

1. The reasons for the intended retrenchment: – Employer must prove that there is substantive valid and fair reason.
2. Are there any measures to avoid or minimize the effect of an intended retrenchment? – Both parties must engage in reflecting whether there can be any alternative measure
3. What will be the method of selection of the employees to be retrenched? – The method to be agreed must be fair and non-discriminatory while considering the necessity on the part of an employer to keep special skills, experience, job and qualification according to Rule 24 (c) of the Employment and Labour Relations (Code of Good Practice) Rules.
4. The timing of the retrenchments; and,
5. Benefits of retrenched employees say, repatriation, certificate of service, severance pay, unpaid salaries, and annual leave as may be agreed. Any agreement reached as a result of these consultations must be documented and is binding to parties.

What if agreement is not reached during consultations?

If after consultations, the parties fail to reach agreement, employer may take matter to the Commission for Mediation and Arbitration, and if mediation fails, the matter will be referred to arbitration and must be arbitrated for 30 days. In event, arbitrator allows retrenchment and employees are not satisfied with arbitrator’s award, employees may apply for revision to the High Court, meanwhile, the employer may proceed with retrenchment.

Note that, if the employer’s affairs stabilizes and wish to recruit in similar positions within two years of retrenchment, then, the retrenched employees who signified their interests to be re- engaged should be given priority.

Conclusion: if employer fails or neglects to adhere and perform in accordance to the law i.e. to give notice, disclose factor behind retrenchment and consult with employees and/or their trade unions or representatives, then such failure may subject the company/the employer to serious labour dispute for unfair termination.

Disclaimer:

This publication is prepared for general information purposes only and should not be treated or relied upon as advice unless agreed to in writing by Litcot Attorneys (“the Firm”). The Firm neither assumes nor accept any liability or responsibility whatsoever to any person for any usage other than that specified for herein. For legal advice, please contact the Firm, or your legal attorneys.