This document is intended to communicate information on the impact of the Covid-19 virus on employers and employees in the workplace in South Africa.
As a result of the Republic of South Africa being declared a National State of Disaster on 15 March 2020 (precautionary measures) and a National State of Disaster on 23 March 2020 (lock down), non-essential employers have since had to require all of its employees stay at home. Some of these employees will still continue to render services and work remotely however most employees will not be able to do so.
For those employees not working remotely, employers are faced with a conundrum of what then are its legal obligation to pay these employees their remuneration under these circumstances.
An employee is entitled to sick leave and annual leave days in terms of the BCEA and their employment contracts. The employer is obliged to pay the employee leave pay at the employee’s rate of remuneration.
In the ordinary course, when an employee exceeds his/her sick leave and/or annual leave, the Employee’s salary is deducted. This is in line with the “no work, no pay” principle.
Another group of employees are those who have been infected with the virus and are obligated to stay at home and self-quarantine.
The reason for the employees “staying at home” must be considered in order to determine how to deal with leave days and the remuneration that the employer must pay to the employee.
In the case of the employee who can carry out his/her duties at home, there can be no question of unpaid salary as the employee is able to carry out his/her duties and continue working from home. The employer would have to determine how many days / hours of the lock down the employees would be required to continue working in order to determine whether salaries will be paid partially or in full.
In the case of those employees who cannot or are unable perform their duties away from the office, but have been instructed to stay at home by the employer, there is a good legal argument that the contract of employment is suspended due to impossibility of performance. The causa of the impossibility of performance is the lock down of the country ordered by the President. The consequence of a suspension of the contract usually means that all rights and obligations under the contract are held in abeyance and cannot be enforced by either party – this includes any right by the employees to receive pay. Whether an employer can in terms of the its contracts of employment embark on this process will ultimately depend on its particular circumstances. Employers are not advised to initiate any suspension of contracts of employment until it has taken legal advice.
Another option to explore is that the employer may at its discretion award to these employees paid special leave depending on the employer’s financial ability to do so and in consideration of the negative economic effect the Covid-19 virus is having on South Africa and will continue to have for the foreseeable future. Alternative to this, the employer may also, depending on the terms of the employee’s employment contract and the leave policy of the organisation, require the employee to take the “stay at home” period as paid annual leave.
In this way, the employee’s salary is not deducted, and the employer can recover the unexpected number of leave days, during the latter part of the year. In this instance however, the employee may not have the accumulated number of leave days available to him/her and the employer may have to grant leave in advance to the employee.
This means that an employer will not be legally obliged to pay the employees for any days once the employee has exceeded his sick leave days and annual days. The excess leave days are regarded as unpaid leave.
As a result of the sudden change in our country’s economy, certain measures have been put in place by government to assist the employer and employee.
The following assistance has been communicated by government however the situation remains fluid and the assistance below may change or be supplemented at short notice.
GOVERNMENT’S ASSISTANCE TO EMPLOYERS AND EMPLOYEES
Compensation for Occupational and injuries Diseases Act 130 of 1993
The Department of labour has issued a Notice on Compensation for Occupationally Acquired Novo Corona Virus. The scope is limited to employees who occupationally – acquired the virus under the Compensation for Occupational and injuries Diseases Act 130 of 1993.
The purpose of the Notice is to compensate those employees who have been infected by the virus during the course of their employment. In our view, it may realistically difficult to prove that the source of the infection arose during the course of employment.
In terms of the Notice, the employee will have to produce, amongst other things, a medical report and exposure history to the virus.
The benefit which the Unemployment Fund will cover is for either temporary or permanent disability and for as long as the disablement continues, but not for a period exceeding 30 days.
However, unlike verified cases of infection, and as per the government notice, an employee who is suspected of being infected by the Covid-19 virus as well as for unconfirmed cases i.e. where an employee has been booked off by a medical doctor for self-quarantine, the employer will be liable for remuneration for the days of absence.
Temporary Employer/Employee Relief Scheme (TERS)
For companies that has found itself in distress due to the economic downfall under the Covid-19 epidemic, government with their social partners have proposed that employees be paid their wages through a Temporary Employee Relief Scheme to enable companies to pay their employees and avoid retrenchments during this period.
Employees will be paid directly through the Unemployment Insurance Fund.
The employer will be required to make application to the Central Adjudication Committee and ensure that the key requirements of UIF are met in order to successfully be assisted through this funding scheme.
There has been regulations published on this scheme a few days ago. We will provide an overview in the next circular.
Unemployment Insurance Fund (UIF)
The Minister of Employment and Labour announced measures that the Department of Labour will implement in order to assist employers who have become distressed due to the virus. These measures include (but not yet regulated):
- A period of pardon will be given to employers not to contribute to the Unemployment Insurance Fund;
- Where an employer, as a precautionary measure, takes the decision to close for a short period, the Unemployment Insurance Fund will assist;
- In cases where employees have to self-quarantine for 14 days, such leave will be recognised as “special leave” and will be “fully paid” provided that all requirements are met i.e. the reason for quarantine meets the requirements and the employee can apply for UIF;
- An employee who has been travelling or has been in contact with an infected person, will also be covered under UIF.
Whilst the Minister commented that the fund will fully pay the claim, this is highly doubtful as the claim be well be limited by the UIF due to funding constraints.
In the media conference noted of the Department of Labour dated 24 March 2020, the question was asked “Can the UIF afford to pay for its expanded commitments?” The response to this question was that “all undertakings by the UIF are based on actuarial calculations. These will, of course, be updated as the situation unfolds”.
From the current downfall in the economy, it appears that there will be a mass demand for employer/employee assistance and whether the UIF can assist all is but one of the issues that will still have to be dealt with in the administrative task of assisting the country’s economy.
Assistance to SMME’s
Small, Medium and Micro sized enterprises are recognised for their potential to drive economic growth and employment in South Africa. It is these SMME’s which are struggling to meet their businesses financial needs under the Covid-19 outbreak.
As a result, and on Tuesday, 24 March 2020, the Minister of Small Business Development, emphasised that all SMMEs (currently organisations with turnover of less than R50 million) are eligible to receive emergency financial aid.
The requirements as stated by Minister are that the SMME must:
- Establish a direct link to the impact/potential impact of the Covid-19 virus on business operations;
- be 100% owned by South African citizens;
- should employ at least 70% SA nationals; and
- be registered with the South African Revenue Service (Sars) and be tax compliant.
The funding will assist in acquiring raw material, paying for labour and other operational costs in a structural manner.
Priority will be given to businesses owned by females, the youth and persons with disabilities.
Of particular importance, is that the funding is not free to the SMME’s but rather a loan at a low percentage of interest. The rate is stated as prime minus five percent – 3.75% per annum at present.
Employers must take note of the fake news that has been circulating in regards to the requirements above. The requirements above have been come directly from the Ministry.
It should be note that there is a penalty against those SMME’s who do not meet the requirements and still apply for the funding. It seems that this penalty may be preventative to stop businesses for do not meet the requirements from applying and taking up valuable resources in this time of crisis.
The requirements to apply for funding through TERS can be more fully discussed.
HOW TO MANAGE BUSINESS DUE TO THE NATION-WIDE LOCK DOWN FROM MIDNIGHT, THURSDAY, 26 MARCH 2020 UNTIL 16 APRIL 2020
After the President declared a National State of Disaster and the nationwide lockdown for 21 days with effect from midnight on Thursday 23 March 2020, only essential services will be operative during this period.
This means that, subject to some exceptions, law firms, Courts, the CCMA and Bargaining Councils will also cease to operate during this time. Only the following businesses regarded as essential services will be functional:
- health workers in the public and private sectors;
- emergency personnel;
- personnel in security services – such as the police, traffic officers, military medical personnel, soldiers – and other persons necessary for our response to the pandemic;
- personnel involved in the production, distribution and supply of food and basic goods;
- essential banking services;
- the maintenance of power, water and telecommunications services;
- laboratory services, and the provision of medical and hygiene products.
Companies that are able to continue their services and operations remotely should do so.
Whilst the lockdown is implemented, there may be certain pending disciplinary action, unfortunate retrenchment processes on which the employer may require advice, which could possibly affect the business.
Should you as the employer be desirous of dealing with disciplinary issues during the lockdown period, please contact us for advice.
Retrenchment of staff under the current conditions may also have to be considered as a result of the economic shift, whilst the employer may attempt to save jobs, this may ultimately not be possible.
Our firm has dedicated essential employees to work from home to provide the necessary legal advice and opinions to assist our valued clients in keeping the normality of their business in as far as possible during this time.
These are challenging times for our country, its people and businesses. Our firm being an SMME would like to assist its clients in as far as possible.
Should legal advice and assistance be required, we will be remotely available to you at any given time.
We shall keep you abreast of any further developments.