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Employee claims against an Employer in business rescue in the Labour Court

Employee claims against an Employer in business rescue in the Labour Court

The Labour Court, in the case of Marais and Others v Shiva Uranium (Pty) Ltd (In Business Rescue) and Others (J3049/18) [2018] ZALCJHB 346; (2019) 40 ILJ 177 (LC); [2019] 5 BLLR 472 (LC) (5 October 2018), recently ruled on whether employees are entitled to approach the Labour Court to enforce a claim against their employer placed under business rescue.

The employer, Shiva Uranium (Pty) Ltd., is part of a larger group of companies.  Following a scandal involving the main shareholder, four of the major banks pulled out from any dealings with the businesses.  The only bank that was still willing to deal with the businesses was the Bank of Baroda.  In February of 2018, the Bank of Baroda gave notice to the Registrar of Banks that they will be leaving South Africa.  The effect of this was that the employer could not continue operating their business and the board of directors resolved to place the business in business rescue.

The employees of Shiva Uranium (Pty) Ltd. approached the Labour Court as a matter of urgency, looking to institute their claims against the employer.  The employees requested the Labour Court to order the employer to pay all outstanding remuneration and employment benefit contributions due and payable to the employees, for the months of July and August 2018.  The Business Rescue Practitioners (hereinafter referred to as “the practitioners”) conceded to the outstanding remuneration.  It was explained to the employees, via text messages, that the practitioners are attempting to secure financial assistance that would enable them to pay the outstanding remuneration.

The practitioners opposed the employees’ claims, arguing that in terms of the Companies Act 71 of 2008 as amended (hereinafter referred to as “the Act”), no legal proceedings and/or claims may be commenced or proceeded with against a company in business rescue, in any forum.  They further argued that the only way for any claimant to institute legal claims against a company in business rescue is if the practitioners give written consent thereto or if the High Court grants the employees leave to do so. Subsequently, the practitioners argued that the Labour Court does not have jurisdiction to entertain these employees’ claims as the Act specifically states that only the High Court has the jurisdiction to grant the employees leave to institute their claims against their employer in business rescue.  The employees, in turn, argued that the Labour Court does, in fact, have the jurisdiction to entertain their claims against the employer.

The Labour Court in this matter referred to the recent decision of the Supreme Court of Appeal (hereinafter referred to as “the SCA”) in Chetty t/a Nationwide Electrical v Hart and Another NNO [2015 (6) SA 424 (SCA) paras 26-29] where the SCA ruled that not even arbitration proceedings may be instituted against a company in business rescue. The Labour Court in this matter accepted this ruling as the essence of business rescue proceedings is to afford a financially distressed company the opportunity to rehabilitate itself in terms of a business rescue plan that will keep the business afloat while also balancing the rights of all relevant stakeholders, among others the employees.

The Labour Court also found that in terms of the Act, when it comes to matters relating to business rescue proceedings, only the High Court has jurisdiction to entertain claims against companies in business rescue. Subsequently, the Labour Court, in this matter rejected the employees’ argument that the Labour Court has the jurisdiction to entertain their claims.

The significance of this Case to employers who finds themselves in business rescue proceedings is that no employee may institute any legal proceedings against the Employer unless the High Court grants the employee leave to do so.

Article by: Carine van Blerk – Dispute Resolution Official – Cape Town



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Originally appeared on ceosa.org.za on 30-08-2019. The views expressed herein are those of the author and do not necessarily reflect those of estome. estome accepts no responsibility for the accuracy, completeness or fairness of the article, nor does the information contained herein constitute advice, legal or otherwise.

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