Employers and COVID-19 

March 30th, 2020
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By Roy Bregman, Sharusha Moodley and Jaco Lessing 

As South Africa enters the 21-day national lockdown, business owners are understandably confused and concerned about its economic consequences. Will their businesses go bankrupt and what happens to employees, if they cannot afford to keep them on or pay them?

Although a business owner would never want to dismiss, retrench or short time its employees, what happens if there is no business – or one that is just surviving – at the end of the lockdown.

What follows is a summary of options open to employers. This is not meant to be legal advice and employers are encouraged to seek legal help during this evolving time.

Employment contract

An employer can change terms and conditions of employment through consultation and negotiation. A contract can be varied relating to salary reduction, bonus waiver or reduction, compulsory use of annual leave during the lockdown period and so forth. The point to remember is that there must be consultation with employees and not a unilateral implementation of a change to terms and conditions imposed by the employer. In the event the employer and employee do not reach consensus on the variation of contract, the employer may initiate retrenchment procedures if needed.

During the lockdown, and where practical, the consultative processes can be conducted by e-meetings, e-mails or over the telephone. It is important that agreements reached must be reduced to writing (even confirmation via WhatsApp would suffice if the normal conditions of a binding variation of a contract are met).

Retrenchment

Section 189 of the Labour Relations Act 66 of 1995 provides, inter alia, that an employer can dismiss one or more employees based on operational requirements. Employers could safely argue that the impact of COVID-19 on their business negatively impacted its operations on some level. Bear in mind that a s 189 process has guidelines that must be adhered to and attracts statutory payments like severance pay, notice pay, outstanding leave pay-out and so forth. To minimise job loss, alternatives to retrenchment may be offered during consultation. Alternatives include, but are not limited to, short-time implementation and/or temporary dismissal. Furthermore, and in accordance with s 41(4) of the Basic Conditions of Employment Act 75 of 1997 (BCEA): ‘An employee who unreasonably refuses to accept the employer’s offer of alternative employment with that employer or any other employer, is not entitled to severance pay in terms of subsection (2)’ (our italics).

Annual leave

Can an employer ‘force’ an employee to take annual leave during the lockdown?

Annual leave is regulated under s 20 of the BCEA. Section 20(10) provides, inter alia, that annual leave must be taken in accordance with a written employment contract between an employer and employee. If there is no agreement, annual leave must be taken at a time determined by the employer in accordance with s 20.

It is, therefore, our view that employers could – during this unprecedented time – engage with employees, where written employment contracts are in place, to vary terms and conditions of employment to have employees take their annual leave during the lockdown period. If there are no contracts in place, an employer can determine when annual leave must be taken and call on employees to take their annual leave during the lockdown period.

This enforced leave will not apply for periods of self-isolation or quarantine and only applies to the statutory portion of annual leave (ie, 15 business days).

Bear in mind, should the employee fall ill during the annual leave period, sick leave is applicable.

Relief schemes

President Cyril Ramaphosa mentioned certain relief schemes, which an employer would be able to access.

The Department of Labour has taken measures to accommodate alternatives to retrenching staff over this period by allowing employees to claim from the Unemployment Insurance Fund (UIF).

Director at Contact Labour, Jaco Lessing, discusses the following measures –

  • National Disaster Benefit;
  • reduced working time and/or forced shutdown; and
  • death benefit.

National Disaster Benefit

If the company needs to close as a direct result of COVID-19 and the employer cannot pay his employees for this period, the employer can apply for the ‘National Disaster Benefit’ from the UIF. This benefit is paid at a flat rate of R 3 500 per employee irrespective of income for the duration of the lockdown or three month period (whichever may be shorter). This benefit cannot be used in conjunction with any other UIF benefit.

Documents that have to be completed:

  • UI19 and UI2.7 (completed by employer);
  • 1 (the application);
  • 8 (completed by the bank);
  • copy of employee’s identity document (ID); and
  • a letter from the employer confirming company shutdown is due to COVID-19.

Reduced working time and/or forced shutdown

Where a company shuts down for a certain period or implements short time, for every four days worked the employee accumulates one credit day, and maximum credit days payable are 365 for every four completed years of service.

Documents that have to be completed:

  • UI19 and UI2.7 (completed by employer – choose option 17 on the UI19 document);
  • 1 (the application);
  • 8 (completed by the bank);
  • copy of employee’s ID; and
  • a letter from the employer confirming company shutdown is due to COVID-19.

Death benefit

Benefits are paid to the beneficiaries of the deceased. Spouses, life partners, children and nominated persons, in that order, are eligible to apply.

Documents that have to be completed:

  • UI19 and UI53 (completed by the employer);
  • 5 or UI2.6 (deceased application);
  • death certificate;
  • ID document of the deceased and the applicant;
  • 8 (bank form completed by the bank); and
  • copy of ID’s.

How to apply for these benefits?

Employers must complete the UI19 form stating the last date of termination and the reason thereof. The forms can be submitted by e-mailing the application to the nearest UIF processing centre.

Roy Bregman and Sharusha Moodley are legal practitioners at Bregman Moodley Attorneys Inc in Johannesburg and Jaco Lessing is a director at Contract Labour in Pretoria.

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