On 23 March 2020 the President of South Africa announced a nation-wide lockdown for 21 days (“Lockdown“). The Lockdown commenced at midnight on Thursday, 26 March 2020 and will continue until midnight on Thursday, 16 April 2020.
In terms of the Lockdown, all South Africans, aside from certain categories of businesses (and their employees) who will be exempted from this Lockdown, will have to stay at home and will not be entitled to leave their homes, unless under specific circumstances, such as “to seek medical care, buy food, medicine and other supplies, or collect a social grant”.
The Lockdown will have a severe financial impact on businesses that are forced to shut their doors.
This in turn will, undoubtedly, put financial pressure on both Employers and Employees.
What are Employers legally entitled to do in relation to their Employees in times where they are not able to generate income in their businesses?
Both the Labour Relations Act 66 of 1995, as amended (“LRA“) and the Basic Conditions of Employment Act, 75 of 1997, as amended (“BCEA“) apply to this situation.
There are really only two outcomes for businesses as a result of the Lockdown. Either the Employer is able to implement a remote working environment (which may lead to a reduction in productivity), or the Employer will be forced to entirely cease income earning activities.
1. Employers that Continue (or Reduce) Business Operations
In most instances where a reduction in business operations occurs there may very well be systems
put in place by the employer to allow some, if not most, of its employees to work remotely – i.e. not
from a central office location, but rather from the confines of each employee’s home. These are the
following options (amongst others) that Employers and Employees may utilise:
1.1 Remote Working – The Employer may request that Employees continue to work from home, in
which case the Employer will not impose any form of leave. To the extent that working from home
is for shorter hours, or fewer days, the 1.4, 1,5 and 1,6 hereunder may also be of application
1.2 Annual Leave – Where the Employer does not deem it necessary for a particular Employee to
work remotely, by agreement, the Employee may take Annual Leave (which is paid);
1.3 Unpaid Leave – The Employer may, where the Employee refuses to take Annual Leave, or the
Employee’s Annual Leave has been fully exhausted, place the Employee on Unpaid Leave
temporarily, and provided that there exists reasonable justifications for placing the Employee on
Unpaid Leave.
1.4 Short Time – Short-Time cannot be unilaterally imposed by an Employer however an Employer
and an Employee should consider lower pay for the Employee being effectively able to work less
hours. This may be catered for in the Employment Contract (or collective agreement as the case
may be) and if not, it must be agreed to in writing between the Employer and Employee prior to
implementation.
1.5 Demotion (Change of Roles and Responsibilities) – The Employer may, after following a
proper process of engagement with the Employee, “demote” the Employee based on the reduced
role and responsibility of the Employee, and as a result the Employer may similarly reduce the
Employee’s remuneration; and
1.6 Temporary Lay-offs – In the event that the Employer is required to shut down entirely and cannot
afford to continue to pay Employees’ salaries, then the Employer may want to consider the
temporary “lay-off” of Employees, with certain time frames and restrictions being in place.
2 Employers that Entirely Cease Business Operations
The worst effect that the Covid-19 pandemic can have on any business is entirely preventing that
business from being able to continue to generate revenue. Under these circumstances, and where
the Employer has not been able to create other income streams, the Employer may be forced to shut
its doors permanently, alternatively undertake an operational restructure of the business.
Under these difficult circumstances, there is very little that the Employer can do to ensure that all of
its Employees are able to retain their jobs. These are some options that Employers and Employees
may utilise:
2.1 First Considerations – An Employer (and Employee) should always (even if business operations
entirely cease) consider using alternative solutions such Leave, Short-time and Demotion, before
proceeding with Temporary Layoffs and/or Retrenchment.
2.2 Temporary Lay-offs – In the event that the Employer is required to shut down entirely and cannot
afford to continue to pay Employees’ salaries, then the Employer may want to consider the
temporary “lay-off” of Employees, with certain time frames and restrictions being in place; and
2.3 Retrenchment of Employees – The Employer may apply section 189 of the LRA in the event
that an Employer’s business has entirely ceased, or that part of the business is no longer viable,
and the Employer is unable to continue to employ Employees that are involved in the business,
or that aspect of the business. Section 189 applies where the Employer is required to dismiss
any of its Employees for operational reasons. ‘Operational requirements’ is defined as
requirements based on the economic, technological, structural or similar needs of the employer.
The application of the LRA is as a result of no fault on the part of the Employee and is where the
Employer cannot justifiably continue to operate its business.
We must also state that in terms of section 22 of the BCEA, an Employee is entitled to a certain amount of
sick leave. If you have fallen ill then this would replace any Annual Leave allocation – provided that you
have such sick leave available, can produce a note from your doctor and you have complied with any other
internal policies and procedures.
We must point out that the content above is of general application and you should not act upon the above,
without first seeking legal advice as each set of facts and each of the options that may be relied upon by
an Employer may be different. We recommend that you consult with your attorney in order to get specific
advice relating to the effect of Covid-19 on the Employer / Employee relationship.
Possible Assistance from Government & Private Sector
There are currently a number of existing and proposed schemes and platforms on which Employers and
Employees alike may register, with the possibility to obtain partial, if not entire, relief, from the economic
impact of the Covid-19 pandemic. Broadly (and without dealing with each in any detail), the existing and
potential economic relief is as follows:
- Deferral of the Payment of Employees’ Tax Liability (PAYE);
- Deferral of The Payment of Provisional Tax Liability;
- Employment Tax Incentive (ETI) (Early Payments);
- UIF contributions (still to be determined however expected to be a deferral of UIF liability or a
portion thereof); - UIF Temporary Employee Relief Scheme (TERS);
- Debt Relief Fund (via Government), National Disaster Benefit Fund, Bank Debt Relief Initiatives
and Private Sector Funding (such as the South African Future Trust); and - There are other relief structures (i.e. Competition Commission Relief, IDC Support Packages and
Industry Specific Relief etc.) being designed and implemented, which we will learn more about in
due course.
Please feel free to contact us if you have any questions regarding how your business and/or your
employment may be affected by the Covid-19 pandemic.
Jordan Smith and Brian Macgregor
MALHERBE RIGG AND
RANWELL INCORPORATED
