Demystifying ‘no work, no pay’ and other COVID-19 options
03 June 2020 | Web Article Number: ME202019259
EMPLOYERS must understand that the COVID-19 and the national lockdown has not suspended employment rights, warns Grant Nirenstein, director at law firm Knowles Hussain Lindsay Inc.
“The disregarding of employees’ rights will prove to be a costly mistake, especially now the Commission for Conciliation, Mediation and Arbitration (CCMA) has opened and labour courts are set to resume operations,” said Nirenstein. “These agencies will inevitably be inundated with referrals by employees, and transgressions will not be sympathetically viewed.”
He noted that recent weeks have seen much confusion among both employers and employees, fuelled by misinformation about employment obligations. A key principle for employers to remember is that employment is a binding contract, and they are not permitted to unilaterally change material employment conditions – especially where this will prejudice an employee.
“Unsurprisingly, one of the material terms of an employment contract is remuneration. To amend the terms of remuneration therefore needs the agreement of the employee.”
To understand how the principle of ‘no work, no pay’ may be applied, a distinction must be drawn between two common scenarios. One is where the employer is taking steps to salvage the viability of their businesses in the face of reduced income and the other is where employees are lawfully prohibited from working during the lockdown period.
“The restaurant industry, for example, has been lawfully precluded from operating during the lockdown period to date, so restaurant employees have been precluded from working,” he said. “This is a direct consequence of the lockdown regulations and not the product of operational considerations on the part of any employer.”
This situation – referred to as the supervening impossibility of performance – allows ‘no work, no pay’ to be unilaterally implemented by the employer. This means an effective suspension of the employment relationship, often referred to as ‘temporary layoff’.
“A difficulty employers face is how to deal with employees who refuse to agree to a reduction of earnings or short time.”
Nirenstein said there are effectively four options for employers. The first is not to change the terms of employment, which under the circumstances may not be feasible. The second option is to implement a ‘no work, no pay’ policy, which is more prejudicial than reduced earnings or moving to short-time.
“Employees who refuse to agree to a payment reduction or imposition of short-time should judiciously consider their options, as an unreasonable refusal may, in itself, constitute a career-limiting decision,” he said. This is because cost-saving measures such as these are generally not contemplated by employers who need not implement such measures.
Failing to agree to an employer’s request in these circumstances may lead to retrenchment proceedings in terms of section 189 of the Labour Relations Act – which is the third option for employers.
“Commencing retrenchment proceedings is exceptionally prejudicial, particularly in the context of a COVID-19 ravaged economy,” he said.
“It is important to note that intrinsic in legitimate Section 189 proceedings, options short of dismissal must be considered and explored. In this context, payment reduction and short-time can be implemented as an alternative to dismissal, failing which retrenchment would be the fallback position.”
The fourth option is to consider liquidation or business rescue proceedings.