With the repeal of the Labour Code Order, 1992, employers in Lesotho must now rely on the Labour Act, 2024 for guidance on all labour matters. As businesses face increasing economic and operational pressures, including the impact of recent US tariff hikes, retrenchments have unfortunately become a necessary consideration in some restructuring efforts. While the Labour Act, 2024 governs dismissals based on operational requirements, the Codes of Good Practice (2003) continue to offer valuable guidance on the recommended steps during the retrenchment process.
The Labour Act, 2024 allows for termination of employment where dismissal is based on operational requirements such as redundancy, restructuring, economic hardship, or technological change. Section 139(1)(c) specifically recognises these dismissals as potentially fair, provided they are substantively and procedurally justified. However, unlike some jurisdictions, the Act does not prescribe a detailed process for retrenchments. There are no statutory requirements for formal consultation, specific selection criteria, or severance pay beyond ordinary notice periods. This absence of formal procedure does not remove the obligation to act fairly, and dismissals may still be challenged before the Directorate of Dispute Prevention and Resolution (DDPR) if found to be substantively or procedurally unfair.
The Codes of Good Practice on Termination of Employment, issued under the former Labour Code Order, have historically influenced the way courts and tribunals assess retrenchment disputes. In terms of section 220(1) of the Labour Act, any provisions of the repealed Labour Code and its regulations that are not inconsistent with the Labour Act remain in force until they expire, are revoked, or are cancelled. Accordingly, the retrenchment procedures in the Codes of Good Practice (2003) continue to have legal effect. These require meaningful consultation with employees or their trade unions as soon as retrenchments are contemplated, application of objective and non-discriminatory selection criteria, and genuine consideration of alternatives to dismissal. Acceptable selection criteria include length of service, skills and qualifications, operational needs, and affirmative action objectives. Selection based on union affiliation, pregnancy, or personal bias is not only discouraged but is deemed automatically unfair and unlawful under the Codes.
Employers are further encouraged to explore alternatives such as transfers to other departments, reduced working hours, voluntary retrenchments, early retirement, temporary layoffs, or unpaid leave before proceeding with dismissals. In addition, preferential rehire should be offered to retrenched employees should suitable positions become available in the future.
While the Labour Act, 2024 establishes the statutory basis for dismissals on operational grounds, following the Codes of Good Practice is a prudent way to reduce the risk of legal disputes and preserve constructive labour relations. At Mayet & Associates, we advise on retrenchment planning and consultation, prepare compliant notices and letters, ensure adherence to both the Labour Act and the Codes of Good Practice, and represent clients before the DDPR in dismissal disputes. Businesses considering restructuring or workforce reductions are encouraged to seek tailored legal advice to ensure compliance and minimise risk.