Aside from the adverse economic, health and social impact of the Corona crisis on people generally, employers are also confronted by complex legal issues and facing several employment challenges after lockdown.
As restrictions are gradually relaxed, matters in the workplace are likely to become more complicated.
The legal issues arise as a consequence of the restrictions on economic activity imposed in terms of the Disaster Management Act of 2002, not only during the period of ‘hard’ lockdown, but also thereafter.
The challenges employers face are numerous. For example, must an employer who is unable to provide work as a result of the restrictions continue to pay its employees? Can an employee who is prevented from tendering her or his services because of the restrictions demand payment from an employer? And what if the restrictions are lifted and employees tender their services but their employer is unable to use it because the business is still not fully operational?
In short, to what extent are the respective rights and obligations of the employer and employee suspended, partially, fully or at all?
IMPOSSIBILITY OF PERFORMANCE
In terms of ordinary principles of the law of contract, a contract automatically terminates when it becomes permanently and objectively impossible for the parties to perform their obligations due to no fault of either party. Should this happen, all parties are immediately released from their obligations.
If the impossibility is merely temporary, as is the case with the lockdown or other restrictions that are beyond the control of the parties, their mutual obligations are only suspended for the period of impossibility.
How does this apply to the employment relationship? The employee’s primary obligation to the employer is to tender her or his services. If the employee becomes permanently incapable of tendering services, this obligation is extinguished as is the employer’s obligation to pay, aside from outstanding sick leave or holiday pay.
However, unless the relationship is terminated by agreement, the Labour Relations Act (LRA) still requires that the employer follow the normal rules applicable to dismissal for incapacity or operational requirements.
If the employee’s inability is merely temporary, e.g., because of legislative restrictions imposed in terms of the Disaster Management Act of 2002, the ‘no work, no pay’ principle applies. The employee will, however, have recourse to UIF support.
TENDERING OF SERVICES
Except in very exceptional circumstances, the employer’s obligation is not to provide work for its employees (we don’t have a right to work), but to pay them if they properly tendered their services. The employee must be able tender his or her services ‘legally’, which is not possible if the employee is prohibited by lockdown or other restrictions from doing so.
So, if the employer is unable to utilise an employee’s legally tendered services because of the restrictions, the employer still has to pay employees for as long as their services are available to be utilised. If the employer wants to avoid its obligation to pay, it will need to either reach an agreement on reduced working time (short time), temporary lay-off without pay, or activate retrenchment/redundancy procedures and propose short time or a temporary lay-off as an alternative to dismissal.
However, the employer will need to justify this not merely because it is unable to use employees’ services. It will need to demonstrate ‘operational requirements’ as defined in the LRA.
The application of these principles can be demonstrated with the following scenarios in the post-lockdown context where the restrictions have been relaxed slightly:
Scenario 1: The employer is in the performing arts industry and the current level of restrictions prohibits public gatherings. The business thus cannot operate at all. [It wants to retrench all its staff.]
Scenario 2: The employer repairs tents and trailers. It may not operate at all under the current restrictions, but is confident that business will return to normal, or close to normal, when summer arrives. [It intends to make use of the opportunity to reduce employee numbers by retrenching some of its staff and temporarily laying off others without pay.]
Scenario 3: The employer manufactures labels that are used in a variety of industries. In terms of the current restrictions it may scale its operations up to 20%. It is not practicable and profitable to open at all. [It intends to retrench all staff for now with the view of possibly re-employing some of them several months from now if and when it is viable to reopen the business, or to have employees work short time on a rotational basis.]
Scenario 4: The employer has a restaurant, which means that it may not open its doors to sit-down customers. It may, however, prepare and deliver meals to the homes of customers. The kitchen will function for 75% of the normal opening hours, but there is no work for waiters. [It intends to retain kitchen and administrative staff, but to retrench all waiters. It is also considering the possibility of laying the waiters off temporarily.]
Scenario 5: A retail store may sell a limited number of goods. [It intends to retrench a proportionate number of its tellers, or to have them work short time on a rotational basis.]
Scenario 6: The employer provides a business services, but may only provide such services to businesses that are allowed to operate while the current level of restrictions apply. It can provide work for all its employees, but the business only functions at 30% capacity. [It is considering offering short time or retrenching up to 70% of the staff.]
Scenario 7: The employer’s fruit stall experienced a temporary drop in business during the lockdown due to interruptions in the supply chain. Business is booming, but the employer has realised that it is able to manage with less staff. [It intends to retrench some of its staff.]
APPLICATION OF PRINCIPLES
In all the scenarios sketched above, what looms in the background is the possibility of retrenchment. This should not be the main aim of the employer, though. While the possibility of redundancies and retrenchment may be very real, dismissal due to operational requirements (retrenchment) should remain a measure of last resort. The employer should consider alternatives.
Much will depend on the extent to which the business is able to resume activities, if at all. The contractual obligations and financial implications for the parties are also of relevance.
Employees unable to tender services
Where employees may not tender their services (e.g. the performing arts employees in Scenario 1, the tent/trailer repairers in Scenario 2, and the waiters in Scenario 4), the employer is not obliged to pay them. This is so because of the continuation of the temporary impossibility of performance.
While there is no need to seek agreement for a temporary lay-off, it would be advisable for the employer to take a longer-term view and reach an understanding with employees in this regard.
Employees able to tender services
Where employees are able to legally tender their services, fully or partially, the employer remains responsible for paying them their normal remuneration until such time as they have come to a different agreement (e.g., as may apply in Scenarios 3, 4, 5 and 6).
If the employer wants to extend the temporary lay-off or reduce working hours, it amounts to a change to terms and conditions of employment. Such changes may not be unilaterally implemented. The employer would have to negotiate and reach an agreement with employees.
Negotiated Short time/Lay-off
Employers should, where appropriate, offer alternatives such as short time (e.g. the kitchen staff in Scenario 4 and the service employees in Scenario 6). In other situations, a temporary lay-off would be more appropriate (e.g. the label makers in Scenario 3).
Redundancies are very likely to arise as a result of the imposition of restrictions. However, in most cases it would be sensible for employers not to rush into retrenching staff. It may be a better option, if possible, to hold out and re-evaluate the situation at a later stage. Short time or temporary lay-off arrangements would provide employees with some hope and the employer may avoid having to pay severance packages. In the meantime, employees would have access to UIF benefits.
If an employer does decide to retrench, the court or CCMA will, in any event, inquire into an employer’s reasons for not considering such alternatives. Given the hardship that the current crisis causes to employees as well, the court or CCMA may be less inclined to condone retrenchments if other reasonable options were available.
Where employees unreasonably refuse to agree to the alternatives offered, the employer may invoke the retrenchment process.
In cases where the employer’s main concern is the survival of the business or optimal efficiency, and where short time or temporary lay-off are not considered to be viable alternatives (e.g. the label makers in Scenario 3, tellers in Scenario 5, and fruit sellers in Scenario 7), the employer is still bound to show why the retrenchments are operationally justifiable.
While the retrenchment process may be truncated if a business is in severe financial distress, the obligation to follow the normal retrenchment procedures in terms of the LRA cannot be avoided.
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Jan Truter and Barney Jordaan for www.labourwise.co.za