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Non-payment of salaries by employer under business rescue

February 7, 2020

In this week’s article, we will deal with the procedure as well as the appropriate forum (Labour Court or High Court) to approach when employees seek an order compelling their employer, who’s under business rescue, to pay all the unpaid remuneration during business rescue proceedings.

The jurisdictional dilemma referred to above was dealt with in the matter between Marais and Others v Shiva Uranium (Pty) Ltd (In Business Rescue) and Others [2019]. In this case, employees of Shiva Uranium approached the Labour Court seeking an order to uplift the moratorium to institute legal proceedings against their employer for the order referred to above.

The employees’ claims were opposed by the business rescue practitioner (BRP) on the ground that; 1) no legal proceedings may be instituted against a company in business rescue unless the BRP consents therein or the High Court grants leave; 2) the Labour Court does not have jurisdiction to hear the matter.

The Labour Court agreed with the BRP and ruled that no legal proceedings, not even arbitration proceedings may be instituted against a company in business rescue and that the High Court, as defined in the Companies Act has exclusive jurisdiction to deal with litigation emanating from business rescue proceedings. Therefore, the Labour Court and other labour forums such as the CCMA, do not have the jurisdiction to deal with matters relating to the upliftment of the moratorium in order to force a company under business rescue to pay salaries and benefits.

However, this does not mean that employees’ protection is undermined. Section 135 of the Companies Act provides that any remuneration and/or reimbursement relating to employment which becomes due and payable by the company to employees, during the company’s business rescue proceedings, but remains unpaid, such monies will be regarded as post-commencement finance and would be paid in priority to other claims.

The abovementioned section aims to ensure that employees are in a better position under business rescue than they would have been in, in a liquidation scenario.

Disclaimer: The contents and information provided above are generalised and must not be acted upon as legal advice