With Covid-19 restrictions in place, times are difficult financially. This is true for companies that are grappling with ever-changing conditions within which they can operate as well as for individuals who have limited job security and are often faced with salary cuts and decreased working hours.
With every Regulation which is published in terms of the Disaster Management Act, the restrictions change and we are all forced to adapt to survive. Companies adapt by changing their operating hours and business models. Individuals are needing to change their spending habits. One of the things that companies consider doing is decreasing their employees’ salaries. Another mode of cost-saving that companies consider is to reduce the employees working hours or change their employment from a full-time employee to one that is working part-time.
The recent case of Mhlonipheni v Mezepoli Melrose Arch and Others 2020 should make employers think twice before they implement any changes to the employees’ salaries or working hours. This case has far-reaching consequences. In this matter, the court found that the employer was obliged to pay its employees and its failure to do so made the employees of the company creditors of the company allowing them to place the company under business rescue.
In this case, the employer argued that it was not obligated to make payment of the employees’ salaries as the lockdown restrictions prevented the company from operating under its normal circumstances and as such force majeure made it impossible for the employees to tender their services. If the employees do not tender their services, the employer is not required to pay them.
In order to determine if it was impossible for the employees to return to work, the court held that the impossibility of performance must be absolute or objective as opposed to relative or subjective. The court highlighted that the obligation of an employer to remunerate employees does not arise from the actual performance of the work but rather from the tendering of the services. What this means is that the employer is required to pay its employees even if the employees do not do the work and merely indicate that they wish to do their work. If the employer decides not to make use of the employees’ services, this does not excuse them from remunerating the employees.
The court held that the employers were able to trade in some form throughout the national lockdown and as such, the decision of the employer not to trade does not pass the strict objective test required for a successful defence on the grounds of force majeure. The employees had clearly tendered their services and were willing to work but the employer refused to accept these services. As a result of this finding, the court ruled that the employees’ salaries were due and payable by the employer.
At the time of writing, the Republic of South Africa has implemented lockdown restrictions in one form or another for over 10 months. Many companies have been forced to adapt, alter their business models and take other necessary and difficult decisions to keep their doors open. Many companies will look to their employees to find immediate relief by changing the terms of their contracts, shortening their hours and decreasing their salaries. It is at this point that we warn companies not to make these decisions lightly. One needs to remember, an employer’s obligation to its employees is a contractual one and as such, it cannot simply be altered by one of the parties to the agreement.
If you are an employer who has been affected by the lockdown restrictions and you are considering taking steps which might affect your employees, we recommend that you consult with us first. Failure to do so can have significant adverse consequences. If you are an employee and your employer has taken steps which adversely affect you, contact us and allow us to fight for your rights.
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