EXPLAINER | As more companies go into business rescue, do workers have any recourse?

More and more companies are announcing retrenchments as part of business rescue plan.
More and more companies are announcing retrenchments as part of business rescue plan.
  • An increasing number of companies are filing for business rescue and considering retrenchments as part of the rescue process.
  • Labour lawyers say they are within their rights to do so but they must follow the law and if not, workers have a recourse.
  • There is unfortunately nothing workers can do to speed up the business rescue process or force employers to pay salaries if the business has not been operating under the lockdown.

As more and more companies are going into business rescue or closing permanently closing their doors, the number of unavoidable retrenchments is expected to skyrocket in the coming months. South African Airways, Edcon and Comair are just few examples of companies in which business rescue practitioners have proposed retrenchments as either one of the mechanisms to cut costs and save the company or as a last resort.

Workers who find themselves with Section 189 notices are possibly asking themselves whether they have any say on the matter. When Edcon issued the notices to its staff, their representative union, the South African Commercial Catering and Allied Workers Union (Saccawu) worried that their fate was already a forgone conclusion, arguing that workers always get the short end of the stick in business rescue processes.

What workers can do about retrenchments due to business rescue

Lawyers, however, say that doesn't necessarily have to be the case. Nicolene Schoeman-Louw, managing director at Schoeman Law Inc., says while it can be an understandably frustrating process, a business rescue can save some jobs. However, companies still have to follow due process.

Even if workers are unhappy with a business rescue plan that proposes retrenchments, the only way that they could successfully oppose that process is if the company landed in trouble due to mismanagement. This would not be the case if its misfortunes were brought on by Covid-19.

Bradley Workman-Davies, Director at Werksmans Attorneys, says in most instances, by the time companies go into business rescue, they are already have facing financial hardship, which makes the proposal to retrench an acceptable one. Once there is a business rescue plan in place and it proposes retrenchments, companies are within their rights to issue Section 189 letters, according to Workman-Davies.

BRPs have the final say on retrenchments

"The consultation process, which starts by issuing a Section 189 letter, is normal. It is usual and it does provide employees a platform to have their voice, but ultimately the business rescue practitioner makes the decision about how to he or she wants to restructure the business," explains Workman-Davies.

Andrew Levy, managing partner at Andrew Levy Employment, says because the Labour Relations Act clarifies the consultation process that must take place when companies in business rescue want to retrench, if that process is not followed, workers do have recourse.

"But recourse is not to stop the business rescue, not to stop the liquidation, not to keep the business in operation. What workers can complain of is if the retrenchment was done unfairly. Where unions are involved, they also have a right to go on strike," said Levy.

He adds that while the employer has to consult, it does not mean that unions have to agree with the retrenchments or the business rescue plan.

"They do have a recourse but at the end of the day, they don't have control," he said.

What about employees owed salaries?

In a recent case that was heard by the Johannesburg High Court, employees of two high-profile Johannesburg restaurants, Mezepoli and Plaka, wanted the establishment to be placed into business rescue because they owed salaries to employees during lockdown Level 4 and 5 when they were not allowed to operate.

According to Workman-Davies, Covid-19 has turned many labour laws upside down. For instance, under normal circumstances, businesses would need to pay their staff even if they aren't operating, as long as workers are willing and able to work as per their contract. However, in the current circumstances, where companies are not allowed to operate under the lockdown, they have no obligation to pay salaries.

"It's really not a good idea for employees to place the company into business rescue. It really an option of last resort because the other creditors would have to be taken into account and ordinarily, those creditors will probably receive payment before the employees do," he said.

Workman-Davies adds that once a company is put under business rescue, even if that's what employees wanted, they will not have a claim at the Commission for Conciliation, Mediation and Arbitration (CCMA) if they ended up getting nothing from the business rescue process.

"For instance, when we advised Group Five, they had existing claims for non-payment of salaries up to the time that the company was placed into business rescue and after that. A lot of employees went to the labour court, the high courts, and the CCMA. But they couldn't actually sue Group Five."

He says there is unfortunately nothing workers can do to speed up the business rescue process - they simply have to sit it out.

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