Employment: Regrouping after Lockdown

employment Apr 26, 2020
There is a lot going around to be negative about at the moment - including the many difficult decisions to be made by organisations everywhere as we are planning for the post-lockdown environment. The difficulties of this situation are very real and the sheer survival of people and organisations may be at stake. It however also presents the opportunity for employers to take a step back, to regroup and to reset.

Where do we go from here?

This question was debated during a recent panel discussion of the South Africa Board for People Practices (SABPP) and summarised in an article written by Sherisa Rajah (Partner at Fasken). The conclusion was that "employers are urgently required to bring into being business operating procedures that address capabilities to manage change. An employer's structures and terms need to consider change, risk and emergency management. This will, in turn, inform how to deal with people, planning and profit."

Organisations now have a rare opportunity to rethink the reasons for their existence and to investigate alternative products or services. Businesses that purely continue as in the past, will encounter difficulties, because their consumers are battling and their needs have probably changed. 

An organisation will have to first resolve its vision for the post-Covid19 world and then put together contingency plans of how to get there. A re-evaluation of strategic objectives could lead to very different operating models in the future and agile business models with a flatter management structure will be much more functional than sticking to a conventional command-and-control approach. This will require organisations to create a culture of shorter feedback loops to employees, learning from this and then to pivot in response, as the case may be.

One aspect that will no doubt get a lot of traction from employees, is that of remote- or flexible work. Having experienced it, albeit in abnormal cicrumstances, is likely to be a game-changer for management and employees alike. However - managers will have to be given the skills to manage such workers, platforms for remote and freelance work will have to be adopted or adapted as need be, and the help of experts should be sought to assist with this. 
Even for employees who of necessity do 'hands-on' work, there will be a period of transition, uncertainty, new ways of working and new policies around safety, distancing and customer care to learn and apply. It makes perfect sense to use experienced consultants to help with this transition - be it training, coaching, drafting policies, change management, review of remuneration structures, managing employee wellness, or the like. 

Whatever options are considered or strategies are to be implemented, it must be accepted that some Covid-19 restrictions will remain for some time to come, and the immediate and critical issues for organisations will be to:
(1) Manage cash flow and overheads in the face of reduced productivity and income - which will inevitably include re-assessing staffing needs in order to mitigate the economic impact of the post-lockdown era; and
(2) Compliance with legislative requirements and disaster management directives as pre-conditions of resuming operations (partly or fully) - and remaining open. 

For now, let's focus on the first aspect.


Employees, the wage bill and stages of work

We know that many employers are panicking at this stage about their (in)ability to pay their employees. Despite UIF benefit options and financial assistance from Government and financial institutions, the sad reality is that some form of restructuring and/or retrenchments will in all likelihood be necessary. So, what are the legal rights and obligations of employers and employees in this situation?

The principle - If an employee is not practically able (or legally permitted) to tender his/her services to the employer, the employer is not obligated to remunerate the employee ('no work, no pay') in terms of the common law and based on contractual principles.

The situation could however, in terms of labour law, potentially be regarded as a form of ‘legal/operational incapacity’. Where it is not the employee’s decision not to report for work, but there is a legal prohibition on doing so (e.g. where someone may not work because a required permit/licence or an accreditation has lapsed), it has been regarded by our labour courts as a form of incapacity. Fairness principles then require the employer to explore alternatives to accommodate the situation – especially in view of the fact that this is likely a temporary situation. These could include looking at leave options (paid or unpaid), UIF, remote working, etc.

Remote work - This can (and should) continue as far as possible for employees who are able to do so, and for those who are at risk due to age or individual health issues. Such employees are then entitled to be paid for the work done. An employee who is capable to work from home but refuses the employer's instruction to do so, will not be entitled to payment and may also potentially be subject to disciplinary action.

Not working or working reduced hours due to (partial) closure of business 

Employers of employees who cannot work or who work reduced hours (during lockdown or beyond) due to government restrictions, have been urged to nevertheless try and pay these employees, in conjunction with possible UIF benefits and/or annual leave options.

The Covid19-TERS benefit is at this stage applicable to eligible employees for a maximum period of 3 months from its publication, and the employer can also set off the benefit amount against paid annual leave granted to those employees. We do not know what will happen after the 3-month period, but employees should at least be able to claim the normal reduced-work UIF benefit if they have sufficient credits. (Refer to our Online Booklet for the options in this regard.)

Employees who may work

Employees who are allowed to work / return to work and who tender their services, are entitled to be remunerated in terms of their contracts of employment.

🔻 The Covid-19 situation has not changed the contents or existence of employment contracts and policies; nor has it changed the BCEA or other labour legislation. All applicable contractual- or labour law provisions still apply to the employment relationship, just as it has before the lockdown.

🔻 There is therefore no automatic 'relaxation' of the employer's obligations or of the normal requirements for procedurally and substantively fair decisions and actions. This means that changes to terms and conditions of employment cannot be effected unilaterally by the employer - including short-time measures, temporary lay-offs, demotion, reduction in pay, job changes, changes to bonus structures, or similar. 

🔻 The panic attached to COVID-19 further has a high potential to result in hasty and legally non-compliant retrenchments. Employers cannot just rush into retrenchments as a fait accompli, thinking that the Covid19 situation automatically justifies this. Global companies often struggle to understand the restrictions of our labour law in respect of their South African divisions. Specifically, that there is a requirement to enter into consultations with employees about proposed changes in terms and conditions of employment; or about measures to minimise or avoid retrenchments, before a decision to do so can be finally taken. 

🔻 Employers should also be mindful that a retrenchment exercise could result in significant retrenchment costs being incurred (including severance pay, accrued leave pay and notice pay) and that they may not have the cash flow to fund these costs.


Restructuring and making changes

There are a number of ways to approach staffing and its associated costs and still keep within the bounds of the law. It is also important to think about employee morale while trying to manage all the different interests impacted by this unusual situation.

An employer can seek the agreement of employees to introduce changes to their terms and conditions of employment, subject of course to statutory minimum terms. This process may be different for dealing with salaried employees as opposed to wage earners, and depending on the existence and contents of Collective Agreements. Consultations with employee representatives will be required in the normal way, subject to logistical and technical impediments. 

Whilst most employees should certainly be aware that these are desperate times and that there is a huge economic crunch, employers can nevertheless still expect resistance from employees - and especially so from unions. It is an inevitable fight for survival - as much for them as it is for the business.

Approaching employees with a (preliminary) strategic plan for moving the organisation forward in some form or another even in the face of financial adversity, can go a long way in assuring them of the employer's good faith in its attempts to do the best it can under the circumstances. "Affordability" is an abstract concept, whilst explaining the bigger picture and the need for specific practical and financial changes to get there, could be a better way to secure their buy-in, or at least their understanding of the need for compromise as an alternative to possibly being without a job. It will also set a solid basis for the substantive fairness of any consultation process involving changes in conditions of employment or unavoidable retrenchments.

The measures that an employer may consider to keep its business (in some form) afloat in these tough economic times and/or to avoid retrenchments, will differ. There is great scope for innovation and creativity, if you are so inclined! Some measures may be necessary for immediate short-term liquidity, whilst longer-term changes in line with revised operational- or business models, may also require consideration.

This may include engaging employees on:

  • Reducing or eliminating the use of fixed-term contracts or other a-typcial employment options
  • Reducing salaries (perhaps in combination with remote work and reduced work expenses)
  • Re-thinking executive remuneration models
  • Delaying promotions 
  • Delaying salary increases 
  • Repurposing bonuses or incentive schemes (see this article by PWC for more guidance)
  • Short-time / temporary layoffs / rotational lay-offs (the terms of applicable Bargaining Council Agreements or policies must be observed)
  • Short-time / temporary layoffs in conjunction with the 'Training-Layoff' TERS-scheme available via CCMA facilitation 
  • Flexibility and rostering of working hours
  • Changing job descriptions and KPI's (or 'demotions')
  • Re-skilling and upskilling employees

It should be noted that the employer will likely also have to show that, as a possible measure to avoid retrenchments, it had attempted to secure or utilise financial assistance made available by the various Covid-19 disaster management initiatives, including applying for UIF benefits for its employees or other commercial/government-funded options. (A comprehensive list of available relief options can be found here.)

If retrenchments are unavoidable

Once such measures have been explored and employees have either refused to agree to them, or it has become apparent that such measures will not be sufficient to avoid retrenchments of (some) employees, then consultations will evolve into a formal retrenchment process in terms of section 189/189A of the LRA. 

📌 The alternatives explored above could be revisited as part of this process or form part of the substantive grounds for retrenchment. An employer is required to explain which alternatives were considered and the reasons why they were rejected or not possible.

📌  An employee is of course under no obligation to agree to changes to terms and conditions of his/her employment. However, it is worth noting that an employee who is offered a reasonable alternative by the employer to avoid retrenchment but refuses it, could forfeit his/her claim to severance pay.

📌 If therefore a change or alternative is proposed by the employer during a bona fide consultation process to avoid or minimise retrenchments, and the employee unreasonably refuses this, this might lead to the employee's retrenchment and even a forfeiture of severance pay.

📌  Whether the specific proposal (or refusal) was reasonable, will have to be determined on a case by case basis - and this is subject to scrutiny by the CCMA or Bargaining Council if the employee challenges the dismissal or refers a severance pay dispute.

📌 Employers should however be careful not to land itself in a situation where proposed changes to terms and conditions of employment that are refused by employees (particularly on a collective basis) and consequently result in their dismissals, can be couched as automatically unfair dismissals in terms of section 187(1)(c) - i.e. dismissal due to the employees' refusal to accept the employer's demand in respect of a change to their terms and conditions of employment. It is a very thin line between this scenario and a bona fide operational requirements process - the former is prohibited, the latter is permitted. 

We strongly advise employers to obtain proper advice before embarking on any restructuring- or retrenchment process. There is a huge strategic component to this that must inform the process from the start. A holistic approach that gives due consideration to all of the relevant interests and legal risks, is imperative. 


© Judith Griessel 



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