Employees – Go Home! “No Work No Pay”? The Unintended Consequences of COVID-19

Although in jest, they reflect the truth that COVID-19 has served as a disruptor in the labour context by presenting employers with entirely novel legal challenges and forcing them to adapt their labour practices to remain commercially viable. Our labour legislation has developed to cater for labour disputes and industrial action in a world free from pandemics. However, COVID-19 has created entirely new and unforeseen legal issues which our labour statutes are arguably ill-equipped to address. The consequences of the spread of COVID-19 cannot be ignored and the onus falls on employers and legal practitioners alike to consider what legal issues will arise and how our labour law can adapt to address these. 

The President in his address on 15 March 2020, noted the significant and lasting impact that COVID-19 will have on our economy – referring to the dramatic decline in economic activity in our major trading partners, a sudden drop in international tourism and severe instability across all global markets as proof thereof. President Ramaphosa provided that the anticipated effects of the decline in exports and tourist arrivals will be exacerbated by both an increase in infections and the measures we are required to take to contain the spread of the disease. President Ramaphosa further noted the severe impact COVID-19 will have on production, the viability of businesses, job retention and job creation. In light of these impending and devastating consequences, the President announced that Cabinet was in the process of finalizing a comprehensive package of interventions to mitigate the expected impact of COVID-19 on our economy. This package, which will consist of various fiscal and other measures, will be concluded following consultation with business, labour and other relevant institutions. 

Employers’ responses have been diverse and dependent on their particular context. Some employers have sent employees to work from home as a precautionary measure. Some employers have adopted a rotation system whereby employees take turns to attend work according to a shift schedule. Some employers have further been forced to send their employees home as a result of operational and supply chain disruptions caused by COVID-19. All of these responses have short term and long-term legal consequences. 

The legal questions which have arisen in response to the President’s address and the current state of affairs include: what are employer’s obligations under the Occupational Health and Safety (OHS) Act and how must they comply with them in the circumstances? What qualifies as a gathering and what effect does the prohibition have on the workplace? What are the consequences of the prohibition of gatherings of more than 100 people on protests and pickets? Does COVID-19 and qualify as a force majeure and what are the consequences of this on employer’s contractual obligations? Following from this, will employers be required to continue paying their employees even where doing so would jeopardize the commercial viability of their business? What impact will COVID-19 have in catalysing the fourth industrial revolution? 

Due to the novelty of these legal issues, the considerations which employers are to make in addressing them are similarly novel and countless. The issue which has bedevilled many-a-citizen is the extent of employers’ remuneration obligations in circumstances where a pandemic has caused employees to be sent home for reasons beyond the employers control and employers aren’t able to utilize their productive capacities. 

The question becomes how does the law expect employers to balance their remuneration obligations to employees with their obligations to maintain a commercially viable business? 

Employers are to consider the following obligations, arising from contract and statute, in responding to this scenario: 

Short-time or Temporary Layoffs:

Employers may want to consider short-time or temporary layoffs as a means of balancing their obligations to their employees with the need to maintain a commercially viable business.

Short-time entails the reduction of the working hours of an employee, with a corresponding decrease in the employee’s remuneration.

Temporary layoffs entail the temporary suspension of employees’ employment where the employer is unable to afford its employees due to a lack of revenue coming into the business. 

An Act of God and Contractual Obligations:

The employer should also consider what the impact of the common law doctrine and principles relating to an act of God and supervening impossibility of performance may have on their contractual performance obligations. 

There are circumstances where employer’s contractual remuneration obligations may arguably be temporarily suspended as a result of performance thereof becoming impossible due to an act of God or an unexpected and unforeseeable occurrence. 

There is little South African case law applying these principles in the employment context. However, in cases dealing with an outbreak of foot and mouth disease in Botswana, the court held that employers were discharged from their remuneration obligations where the employment contracts were rendered impossible to perform as a result. 

Directors Fiduciary Duties:

Company employers must consider their duty to act in the best interests of the company when sending employees home with a promise of payment where there is a risk of jeopardizing the continued operation of the company and rendering it insolvent. Accordingly directors should be cautious in complying with their fiduciary duties. 

Retrenchment/4^th Industrial Revolution:

Employers are having to adapt to the operational disruptions created by COVID-19 by increasingly using technology. The unexpected consequence of this may be that the fourth industrial revolution is catalysed as employers realize that their businesses can operate with technology instead of employees. In view of this unintended consequence, employers may want to effect retrenchments for operational reasons. The consequences of the fourth industrial revolution may unintentionally be brought forward. 

Period of Reprieve and Paid Quarantine Period:

The Minister of Employment and Labour, Minister Thulas Nxesi, provided that in order to assist distressed companies a period of reprieve will be considered whereby employers will not be required to contribute to the Unemployment Insurance Fund (UIF). The Minister further provided that the Fund’s temporary Employer/Employee Relief Scheme will be used to ensure that workers are not laid off. Accordingly, where employers decide to temporarily close as a precautionary measure, the short term UIF benefit will be triggered upon the company informing the Fund of their intention to close. 

The Minister further provided that where an employee is required to be quarantined for 14 days, such a leave will be recognized as a special leave which will be fully paid on condition that the reason for the quarantine meets the requirements. Where an employee is required to be quarantined for a period of longer than 14 days, due to having travelled or having been in contact with an infected person, then such leave will be recognized as special leave and that employee will be eligible to apply for unemployment insurance benefits. Notably these benefits will not come from employers pockets. 

Regulations issued in terms of the Disaster Management Act:

The Department of Cooperative Governance and Traditional Affairs issued Regulations in terms of the Disaster Management Act setting out steps necessary to prevent the escalation of COVID-19. In terms of these Regulations, the Department of Defense and organs of State must make resources available to ensure the delivery of essential and emergency services. Employers who qualify as an essential and emergency services should bear the provision of these resources in mind.

Notably, the Regulations further provide for penalties for non-compliance with its provisions, including a fine or imprisonment. 

Definition of Gatherings in terms of the Regulations:

The definition and regulation of gatherings in the abovementioned Regulations bears further consideration. The Regulations define a gathering as any assembly, concourse or procession of more than 100 persons, wholly or partially in open air or in a building or premises. The Regulations provide that where a gathering takes place, enforcement officers must order the people to disperse. If they refuse to disperse the enforcement officer must take appropriate action, which may include arrest and detention. 

Conclusion

Employers must also bear in mind that even after the virus has been addressed effectively, there will be legal consequences resulting from the effects thereof on the workplace for many years to come. Where dismissals and retrenchments eventuate as a result of the operational disruptions caused by the virus, courts will want to see what employers did at the time of the spread of the virus to mitigate against the risk of retrenchments. The disruption caused by COVID-19 must also been seen as a catalyst for employers to adapt their operations so as to successfully move into the 4th industrial revolution. This entails that employees’ ability to work be decentralized from the physical workplace into employees homes where possible. Ultimately, in view of the unforeseen threats posed by COVID-19 to business, employer’s would be wise to tread carefully and undertake a thorough consideration of the above factors in determining their obligation to pay employees so as to avoid the negative long-term legal consequences which may visit upon them should they not.