Article by P Assenmacher from Paradigm Corporate Services
At the time of the publication of this article, the World Health Organisation has on 11 March 2020 declared the COVID-19 outbreak a pandemic, and has declared Europe to be the epicentre of the pandemic on 14 March 2020. The United States has declared a national emergency on 13 March 2020, and has prohibited air travel from Europe to the United States for 30 days. Italy has declared a national lockdown from 12 to 25 March 2020 and Spain has declared a national lockdown for 14 days, effective 16 March 2020.
On Friday, 13 March 2020, 17 confirmed cases of COVID-19 had been reported in South Africa, with continuous escalation over the weekend, and by Sunday, 15 March 2020, the number had risen to 61 cases.
President Ramaphosa had called an urgent cabinet meeting on Sunday. Consequent hereto President Ramaphosa declared a national state of disaster in terms of the Disaster Management Act, No. 57 of 2002. The State Address can be accessed through the link
A ‘Super Flu’ can wreak economic havoc and cause millions of deaths. In modern times, the Spanish Flu of 1918 was the most devastating pandemic the world has experienced. In a space of six weeks 300,000 South Africans died (Black October), and in little more than a year 50 million people died across the world (Ref: Article by Emeritus Professor Howard Phillips at UCT published in the Mail & Guardian of March 13 to 19 2020, Vol 36, No. 11). At the time, and in the wake of WWI, the world was not equipped to meet this threat, and certainly did not possess the technology and advancement of medical science as we have at present.
The COVID-19 outbreak has a material impact in the workplace on employers and employees. Factories and business activity shut down following the outbreak and spread of Covid 19 in China. News reports are in abundance of businesses shutting down or reducing business activity in Europe and in the United States. On 14 March 2020, the United States announced a number of measures to be implemented, making available billions of dollars for paid family and medical leave, sick pay for workers, tax credits/breaks for small to medium sized employers, tax cuts for hourly wage earners, loans for small businesses and considerations of financial assistance to the airline and cruise industries.
In a number of other countries, assistance to the business sector has been pledged by banks. In Australia, the Australian Banking Association urged small businesses impacted by COVID-19 to contact banks for access to financial assistance on offer, such as deferred loan payments, waiving fees and the restructuring of loans. The Bank of England introduced a cut of 50 basis points, thereby reducing interest rates to stimulate the country’s economy in the wake of COVID-19. In Italy, financial institutions have been considering various forms of financial assistance to workers, such as mortgage holidays. Financial assistance as contemplated in Italy is complicated by the state of the Italian economy, likely for South Africa to face similar challenges.
Across the world schools and universities are shut down and sport, cultural, trade and other events are cancelled or postponed, also in South Africa.
In the workplace employers are specifically faced with difficult questions, whether to close business operations or reduce staff attendance, and where possible, to have staff work from home. From these considerations arises the question of legal obligations on employers to continue to remunerate employees if they are not at work. A vast number of employees cannot work from home, typically factory employees, manufacturing and construction industry, etc.
In terms of the Common Law, employers in South Africa have a duty to take reasonable care of the safety of their employees. In addition, Statute Law, such as the Occupational Health and Safety Act, No. 85 of 1993 (“OHS Act”) provides for general and specific duties of employers concerning safety issues at work. Section 8(1) of the OHS Act stipulates that “Every employer shall provide and maintain, as far as is reasonably practicable, a working environment that is safe and without risk to the health of his employees.” Section 9 of the OHS Act deals with general duties of employers and self-employed persons to persons other than their employees. Section 9(1) stipulates that “Every employer shall conduct his undertaking in such a manner, as far as is reasonably practicable, that persons other than those in his employment who may be directly affected by his activities are not thereby exposed to hazards to their health or safety.” Section 9(2) stipulates that “Every self-employed person shall conduct his undertaking in such a manner as to ensure, as far as is reasonably practicable, that he and other persons who may be directly affected by his activities are not thereby exposed to hazards to their health or safety.”
It is clear, that both the Common Law and Statutory Law duties referred to, place a legal obligation on an employer to take preventative measures to safeguard himself, his employees and third parties, as far as is reasonably practicable, against exposure to COVID-19. The complexity of the consideration and implementation of such contemplated measures are self evident. Further, the nature of the business operations of employers differ from one to the next, which calls for different and suitable adapted measures to be considered and implemented. Naturally, the evident solution to maximise the avoidance of risk would be to shut down the business operations. However, the matter is not as simple, as with such a decision come a number of other considerations such as:
- Financial survival of the business;
- What remuneration, if any, is to be paid to employees sent home;
- How to deal with some employees who can work from home and will expect remuneration and others who cannot perform their job functions from home;
- Employees’ concerns about not meeting their financial obligations if they are not paid, or receive reduced remuneration;
- How does the employer meet its financial obligations if it is not conducting business or has to scale down its business activities, e.g. lease agreements, instalment sale agreements, etc.
The legal principle in South Africa to consider whether an employer will be obliged to remunerate employees if a decision is made to shut down the business operations of the employer and employees are sent home would be that of force majeure (French) or also referred to as vis maior and casus fortuitus (Latin).
Force majeure is a common clause appearing in commercial contracts, which frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described as an act of God (earthquake, volcanic eruption, hurricanes, floods, or other inclement weather) prevents one or both parties from fulfilling their respective obligations in terms of the contract. Force majeure clauses do not necessarily excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure.
Generally, force majeure is intended in general application to include occurrences beyond the reasonable control of a party. In each particular case it will be necessary to scrutinise the particular provisions of the force majeure clause to determine its stated or intended nature and extent, and whether it explicitly provides for plagues, pandemics, etc., or if it provides for a general description or category of events beyond the reasonable control of a party.
Force majeure clauses do not typically appear in employment contracts, but does not mean that force majeure will not apply. In cases where agreements do not contain a force majeure clause, the principle of ‘supervening impossibility’ may apply, either in terms of Common Law or Statute Law. Supervening impossibility provides for a situation where performance has become objectively impossible due to no fault of the non-performing party consequent to an unavoidable and unforeseen event, in which case a party will be released from the obligation to perform his obligations in terms of the contract.
The question whether Covid 19 may constitute a force majeure event or invoke the principles of supervening impossibility in a commercial or employment contract will require an analysis of the contractual provisions, applicable laws and the facts and circumstances of each particular case. Evidently, this matter is of a legal technical complex nature, and parties are urged to seek specialised legal advice.
Employment law in South Africa has an added consideration to be taken into account, that being the principle of equity/fairness, other than just strict contractual law application. The concept of fairness must be applied to both parties.
Any decision considered to be taken potentially impacting remuneration of staff must be preceded by a due consultation process.
Given that the pandemic will be of a temporary nature which may result in the suspension of employment, any disputes arising in such regard between employers and employees may bring into play the unfair labour practice jurisdiction of employment law.
Employers are advised to be creative in finding solutions to the complexities at hand. Some airlines have, following consultation with their employees, adopted a rotational schedule of unpaid leave for employees, thereby reducing the number of employees at work and the remuneration of the employees being reduced commensurate to time worked. Employers can also consider to have employees take their paid accrued annual leave, before implementing unpaid leave, thereby reducing the contingent annual leave liability of employers.
In his State Address President Ramaphosa mentioned that Cabinet is in the process of finalising a comprehensive package of interventions to mitigate the expected impact of COVID-19 on the South African economy, which package will consist of various fiscal and other measures, to be concluded following consultation with business, labour and other relevant institutions. Hopefully, from these deliberations will come forth schemes/plans to assist employers in dealing with challenges in the workplace, striking a balance between the interests of employers and employees, with the aim to promote the continuation of business and gainful employment during and beyond COVID-19.
Employers and employees are urged to follow hygiene protocols, both privately, at home and in the workplace. An abundance of material is available, and employers are urged to provide information to employees and to implement particular hygiene measures in the workplace. Information and hygiene protocols can be obtained from information sheets of the World Health Organisation.
In South Africa, Government has provided a useful WhatsApp tool utilising the number 0600 123456 consisting of a number of topics, including a news item, which provides helpful guidelines by the World Health Organisation, such as but not limited to, guidance on the reduction of transmission from animals to humans, infection protection and control, guidance for schools, workplaces and institutions, etc.
In closing, all South Africans should take to heart the concluding paragraphs of President Ramaphosa’s address, stating that it is true that we are facing a grave emergency, but if we act together, if we act now and if we act decisively, we will overcome it.