"The employer has shut down the business in order to avoid the spread of the coronavirus. What measures can an employer implement to ensure that it minimises its financial obligations and to ensure that its employees remain employed?"
Following the declaration of coronavirus (Covid-19) as a national disaster, employers have been left in a huge predicament, tasked with attempting to balance the health and interests of their employees, and the economic interests of their businesses. The situation has been worsened by the announcement of a national lockdown for 21 days - and it is inevitable that employers not
exempted from the shutdown start to think about the consequences for employees and their business during and possibly after the period of the national lockdown.
Should the business of the employer not produce enough income to the extent that the employer can no longer afford to remunerate its employees, the employer must consider alternatives short of dismissals. Employment contracts, fortunately, are products of mutual consent and parties may therefore relax the terms of these agreements in an attempt to reduce the economic effects of Covid-19.
Employers who fall under the scope of a bargaining council and who are affected by the national lockdown, may consider approaching the Regional Secretaries of their relevant bargaining councils with an application for exemption from paying minimum wage increases during the lockdown. The employer must have first consulted with the relevant trade unions and/or employees who are likely to be affected by this application.
An employer may not unilaterally change the employee’s conditions of employment as the employee may still refer an unfair labour practice dispute. The employer may therefore not demote an employee, reduce his/her salary or withhold a benefit which is a condition of the employee’s employment. The employer may only do so by way of consent. This is solely due to the fact that collective agreements and employment contracts remain legally binding on the parties unless they have been amended by way of another agreement. If the company cannot afford the cost of the employees’ benefits and employees are opposed to any amendments, the next option may be to consider temporary layoffs until the company attains financial relief.
A layoff is a temporary suspension of employees from work due to a number of reasons which may include the operational circumstances of the employer. The employees are not dismissed in the real sense, but remain under the employment of the employer with a temporary halt on their wages. During this time, the employee may claim unemployment insurance fund (UIF) benefits.
A layoff has a chance of not constituting a dismissal if it has been provided for in the employment contract or a collective agreement. If there is no such inclusion, the layoffs must strictly be agreed to by the affected parties. The employer may further consider shift rotations or even working shorter hours as viable measures.
Should the employer and its employees not be able to reach consensus on measures aimed at avoiding retrenchments, the only option the employer may be left with be retrenchment due to financial hardship. The employer may not however, during this process, single out employees who have refused to consent to the measures discussed above as this may be automatically unfair.
Employers are therefore advised to communicate with and seek consent from their employees when seeking to adopt measures aimed at alleviating the effects of the national lockdown.
It's also highly advisable to consult a labour law specialist for further guidance throughout this very sensitive process.