1. Retrenchments during COVID-19.
Due to Covid-19, an employer cannot simply skip the entire retrenchment process that is set out in terms of the Labour Relations Act which would likely lead to an unfair dismissal. Employers, during this unprecedented time, should try their utmost best to avoid retrenchment proceedings and find alternative measures to put into place in order to retain their staff.
Employers must always consider alternatives to retrenchment such as demotion. Demotion can take place in the following ways: the employee’s pay or responsibilities are reduced, the employee’s subordinates are taken away, reporting roles are changed or an employee returns back to an old position if they have recently taken on a new role. A particularly important principle to remember is that an employer must always obtain the employee’s written consent to the demotion.
Should your business have to shut down completely, an employer can apply for the National Disaster Benefit from the UIF. This will mean that this benefit will pay out the minimum wage of R 3, 500.00 per employee for the period of the shutdown or for maximum period of three months, whichever is shortest.
If a company does not have to completely close down, the company can rather look at reducing working hours for their employees. In this case a benefit can still be applied for. This benefit is the difference between the employee’s current salary or wages and the normal UIF benefits.
If an employee is mandatorily quarantined for two weeks, the employee can apply for the Illness Benefit.
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2) An opinion on whether the Covid-19 pandemic has possibly set a precedent requiring the insertion of new clauses in contracts in the future.
Many written contracts include a “force majeure” clause which excuses the non-performance of contractual obligations where an occurrence, through no fault of either of the parties, has rendered the performance of its obligations impossible.
A force majeure clause may list a narrow, closed-list of events which may occur, such as an act of God, a strike, natural disaster, or terrorism without making provision for any other event outside of the listed events, that a contracting party may rely on to invoke this clause. In addition to a list of force majeure events, the clause may be widely drafted to include “a catch all phrase” such as “any event arising beyond the control of the parties, rendering the performance impossible”.
In the absence of a force majeure clause in a contract, the parties will have to rely on the common law principle of supervening impossibility. The contracting party seeking to rely on this doctrine must prove that their performance and/or obligations are objectively impossible.
The COVID-19 pandemic has reinforced the precedent requiring parties to insert a force majeure clause, and amend any existing force majeure clauses to be widely drafted, to include any and all possible events that may arise during a contractual relationship.
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3. The future of the mining industry after lock-down.
The mining industry has seen a significant downturn as a result of the economic and financial impacts of Covid-19 and is likely to remain a vulnerable industry going forward as employee vulnerability becomes incredibly important due to post-lockdown regulations – miners being particularly susceptible to Covid-19 due to their working environment. Furthermore, the export of platinum and the platinum jewellrey industry will have a steep decline as a direct result of Covid-19, both locally and internationally.
Worryingly, small to medium mining enterprises will be hit the hardest as a result of the Covid-19 implications. During the lockdown only care, maintenance, and production to a certain extent is allowed, which has impacted the mines’ productivity and output levels.
Nevertheless, economists are hopeful that South Africa, which has been faced and overcome with many difficulties in the past, will recover from this pandemic in turn.
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4) What assistance is available from the South African government to help employers cover labour costs resultant from the lockdown?
a) Temporary Employee Relief Scheme (TERS)
The South African government introduced the Temporary Employee Relief Scheme (TERS) to assist those employers unable to pay salaries because they have had to close down their businesses and/or reduce the work hours of their businesses owing to COVID-19.
In terms of this scheme, employees are entitled to a salary benefit, calculated on a capped salary of R 17,712 per month. If an employee earns less than the capped salary, the employee will receive 38% to 60% of their normal salary. Alternatively, if an employee earns more than R17,712 per month, they will receive marginally less. When an employee is eligible to receive less than the minimum wage of R 3,500, based on the calculation, the employee will receive at least the minimum wage from the UIF. However, employees may not receive more than 100% of their salary. The employer must apply for the benefits on behalf of their employees.
b) Unemployment Insurance Fund – reduced working time/short time benefit
If an employer agrees to implement short time or reduced working hours with an employee because of COVID-19, the employee may be eligible to claim relief from the UIF. This benefit will only be available when an employee and employer has made UIF contributions and is subject to the employee having accumulated enough credits to be paid during this time. Credits are accumulated at a rate of one day for every four days worked by the employee up to a maximum of 365 days in a four-year cycle. The employee will be entitled to be paid the difference between what the employee is being paid and the normal UIF benefits payable, should an employee lose employment, subject to a capped limit of R 178,000 per annum.
c) Compensation Fund
The Compensation for Occupational Illnesses and Diseases Act Employees will aid those employees who contract COVID-19 in the workplace. Where the Compensation Fund has accepted liability, the Total Temporary Disablement benefit will be applicable and same will apply from the date of the diagnosis and continues for a maximum of 30 days. The employee will also be entitled to 30 days of medical aid.
6) Legal Tips for businesses to help them recover from COVID-19.
a) Consult your suppliers, creditors and customers
The law of contract allows parties the freedom to agree and bind themselves to any form of arrangement provided that such arrangement is legal and are at liberty to re-negotiate the provisions of their agreement in good faith in light of the effects of the pandemic in an effort to mitigate each parties respective loss. Have an open and honest discussion with your suppliers and creditors and see if you can work out an agreement on the best way forward.
b) Consult your insurer
Interpret your Business Interruption Cover contract and talk to your broker and/or insurer to find out whether you are covered under your insurance policy. If you are not, this gives you an opportunity to address the lack of appropriate cover in order to mitigate the potentially disastrous results a pandemic such as COVID-19 or any other similar event could have on your business in the future.
c) Call in outstanding debts
Often, businesses allow outstanding debts to go unpaid for significant periods of time, and this may result in cash-flow problems. Contact your debtors with a reminder notice. If they still fail to pay their outstanding accounts, consider handing over the debt for formal collection. Our team at Hinrichsen Attorneys is experienced in the debt collection process and would love to consult with you!
d) Do the insolvency and liquidity test to determine if your business is financially distressed
A company satisfies the solvency and liquidity test if, the assets of the company (fairly valued) equal or exceed the liabilities of the company (fairly valued); and it appears that the company will be able to pay its debts as they become due in the ordinary course of business.
If it seems that you will not be able to pay all of your debts as they become due and payable within the immediately proceeding six months, then your business is financially distressed, and you may have to restructure its affairs.
e) Get help from an insolvency specialist
In considering the continuity of your business you may want to get qualified assistance to save you money and your business in the long run.
If you think your business is in financial distress and you need assistance with a plan of action, our team at Hinrichsen Attorneys would love to assist you! We are experienced specialists in business rescue, restructuring and insolvency law.
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5. What measures will be put in place to protect employees' health and
safety going forward.
The Occupational Health and Safety Act 85 of 1993 (“the Act”) requires an employer to bring about and maintain, as far as reasonably practicable, a working environment that is safe and without risk to the health of its employees. Section 8 of the Act states the following:
General duties of employers to their employees
8. (1) Every employer shall provide and maintain, as far as is reasonably practicable, a working environment that is safe and without risk to the health of his employees.
Employers must make sure that they are doing everything they can to ensure the safety of their employees. This would include allowing employees to work from home where possible and having the necessary sanitization facilities available at work to ensure the employee’s safety. Furthermore, employers should provide their employees with masks and gloves and encourage social distancing, as well be aware of social interactions in a company that could be brought to a minimum and attend to same.
Until the world is free of Covid-19, extreme precaution will need to be taken by employers to ensure the safety of their employees.
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