A note on measures to be implemented by employers and relief available during lockdown:

Many employers are concerned in this time of lockdown with whether they will be able to continue operating after lockdown and whether they will have sufficient funds to pay themselves and their employees either during or after lockdown.

The knee-jerk reaction by most employers are to retrench employees. What follows is a short note on measures employers must take before taking the ultimate decision to retrench.

The obvious first port of call is to see whether employees are able to contribute remotely as in any circumstances retrenchment and/or temporary lay-off or any variance in the employment agreement is meant to be a last resort. Should remote working not be an option, then two obvious alternatives to retrenchment is for employees to work short time or to be laid off temporarily without pay. We deal with each in turn:

Lay – off:

Unfortunately, there are no legislated short time or lay-off scheme currently available, although some Bargaining Councils, such as the Building Industry Bargaining Council and the National Bargaining Council for the Electrical Industry to name two, make provision in their main collective agreements for short time and/or temporary lay-offs and have built-in provisions in their standard contracts in this regard. In the absence of such provisions, employers may, generally, not impose these measures unilaterally – it will have to be agreed upon. If no agreement is reached, employers may have to follow the retrenchment process as a last resort.

This is however not without some controversy. An employer could, as part of the s 189 process, advise employees that in order for it to remain viable and operative, employees would have to agree to a reduction in their remuneration or other terms and conditions of employment. Those employees who refuse to agree to the reduction could be lawfully dismissed in order to allow the employer to employ employees who are prepared to accept the reduced terms and conditions of employment. This is, in essence, the reasoning that was adopted by the Supreme Court of Appeal in NUMSA and Others v Fry’s Metals (Pty) Ltd [2005] 3 All SA 318 (SCA).

In Entertainment Catering Commercial & Allied Workers Union of SA and Others v Shoprite Checkers t/a OK Krugersdorp (2000) 21 ILJ 1347 (LC) the Labour Court found that employers are entitled to unilaterally change employees’ conditions of service in order to save jobs. This was confirmed in Media Workers Association of SA and Others v Independent Newspapers (Pty) Ltd (2002) 23 ILJ 918 (LC) where the court held that changes (in conditions of employment) are justified if they are made in the course of a bona fide retrenchment exercise and as an alternative to retrenchment.

In both the ECCAWUSA and Independent Newspapers judgments, the courts found that the changes proposed by the employers were bona fide and genuine attempts to avoid retrenchment. In Chemical Workers Industrial Union and Others v Algorax (Pty) Ltd (2003) 24 ILJ 1917 (LAC) the LAC pointed out that the employer could have implemented the changes to the shift system without having to resort to retrenching the employees who refused to accept the changes. This confirms the position in the ECCAWUSA and Independent Newspapers judgments.

In Oosthuizen v Telkom SA Ltd (2007) 28 ILJ 2531 (LAC) the LAC found as follows at para 8: ‘In my view an employer has an obligation not to dismiss an employee for operational requirements if that employer has work which such employee can perform either without any additional training or with minimal training. This is because that is a measure that can be employed to avoid the dismissal and the employer has an obligation to take appropriate measures to avoid an employee’s dismissal for operational requirements. … In such a case the dismissal is a dismissal that could have been avoided. A dismissal that could have been avoided but was not avoided is a dismissal that is without a fair reason’.

There is therefore sufficient support for the view that alternatives can be implemented unilaterally by employers. In fact, the judgments above seem to evince a duty on an employer to implement alternatives which are likely to save jobs. Conversely, an employer that neglects or refuses to implement alternatives could be said to have acted unfairly.

A temporary lay-off is therefore an adequate solution in the short term for the employer’s needs and can be coupled with the following UIF relief. On 18 January 2018 the President assented to several amendments to the Unemployment Insurance Act of 2001, including the insertion of the following provision to section 12 of the Act:

“(1B) A contributor employed in any sector who loses his or her income due to reduced working time, despite being employed, is entitled to benefits if the contributor’s total income falls below the benefit level that the contributor would have received if he or she had become wholly unemployed, subject to that contributor having enough credits.”

It would seem that this caters for precisely the type of situation faced by employees who work short time or are temporarily laid off. The relevant forms are available from the Department of Labour. The Department of Labour have, in the meantime, published an Easy Guide to assist with the claiming of Unemployment benefits for employees who are laid off or placed on short time, have to be placed under quarantine or who have died from the disease.

Click here for more information: Easy- Aid Guide For Employers

TERS:

According to the Directive on COVID-19 TERS, employers can claim relief from the UIF for employees’ salaries they are either partially or completely unable to pay during the lockdown period and as a result thereof.

The salary benefit will be capped at a maximum amount of R 17 712 per employee per month paid according to the income replacement sliding scale (38% to 60%) as stipulated in the Act. The benefit will be calculated in terms of the income replacement rate sliding scale of 38 % (for high earners) up to 60 % (for low earners) as provided in the Unemployment Insurance Act, subject to the maximum threshold which is currently R17712. Despite conflicting reports, it is understood that the maximum benefit for a high earner would be 38 % of R17 712 a month, which amounts to about R6 730 a month.

The maximum amount, to high earners, is therefore R6 731, calculated on a salary of R17 712. Should an Employee’s income determined in terms of the income replacement sliding scale fall below the minimum wage, the Employee will be paid a replacement income equal to minimum wage of the sector concerned. This means an employee earning R10 000.00 per month, depending on how long they have been employed, will receive a minimum of R 3 800.00 and a maximum of R 6 000.00.

It is important to note that a benefit will not be paid to employees who are being paid by the employer, but it may be possible to apply for a shortfall in salary, should the employer be paying only part of the employee’s salary.

The following is required in order to apply for the benefit:

1. A letter of authority on the letterhead of the employer that authorises the person to apply on behalf of the employer.
2. The Department has a standard Memorandum of Agreement that it sends out and that needs to be signed by the UIF and the employer and attached to the application.
3. All information about the employer as requested in the application form;
4. Three-months’ worth of payroll information;
5. Confirmation of bank details (supported by bank statements);
6. Applications need to be sent to covid19claims@labour.gov.za.

Click here for more information: COVID-19 TERS Benefits Easy Aid

Process:

The first duty is to call the affected employees in, notify them in writing that their positions have been selected for possible retrenchment, as is required in terms of Section 189 of the Labour Relations Act, consult with them and allow them an opportunity to make representations in relation to the options provided to them. Ideally consensus should then be reached on which measures are to be taken in both the employer and employees’ interests and thereafter implemented.

Should this prove to be fruitless, then the employer must consider either temporary lay-off and/or applying for TERS before the process of retrenchment can commence.

For any specific enquiries, you are welcome to contact our Labour and Employment Law Department on 021 941 7777 / 7745 or our Labour and Employment Law expert, Charl May on labourlaw@bdplaw.co.za.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)