Most South African citizens are severely affected by the recent uncontrolled and unregulated power failures. Employers are especially challenged by these circumstances. Not only are they being frustrated by themselves and staff getting stuck in traffic and arriving late for work, they also have to deal with the several other very costly effects of work stoppages on their bottom line. This article will focus specifically on the effect and potential solutions related to the cost of unutilised labour during these blackouts as well as the costs of catching up with lost production hours. These costs can be astronomical in a manufacturing environment and will sometimes escalate even further when raw materials are lost as a result of an uncontrolled stoppage of a production cycle.
We are currently inundated with calls from clients requesting assistance on the following issues that we will attempt to clarify:
- Must I pay staff during the power-outage if they can’t do any work? Can I apply the “no work no pay” rule?
- If my staff must work later than usual to catch up on production, must I pay them overtime thereby increasing my losses?
- Can I negotiate a dispensation with a trade union or my staff in terms of which the staff will work flexi-hours during periods of power cuts?
- Can I re-arrange working hours to coincide with pre-arranged power failures?
THE FIRST POINT IS THAT AN EMPLOYER MAY NOT REFUSE TO PAY AN EMPLOYEE FOR TIME LOST DURING A POWER FAILURE
Most employers previously heard about or applied the principle of “no-work-no-pay” in the case of work stoppages initiated by employees, and therefore now question whether or not this principle can be applied during a business shutdown as result of power failures.
The employment contract is a reciprocal service contract which is governed by the common law, and supplemented by the Basic Conditions of Employment Act 75 of 1997, in terms of which contract the employee agrees to work for the employer and the employer agrees to pay the employee a specified remuneration for the work. The employer’s obligation to pay is subject to the employee doing the work. Where the employee in fact offers to do the work (tender service) and the employer does not want the employee to work or can not provide the employee with the work (for whatever reason) the employer must still pay the employee. A typical example will be where the employee is suspended pending a disciplinary enquiry. The employee wants to work but the employer does not want him to report for duty for fear that he might interfere with the investigation or some other reason. The employee is tendering service and therefore the employer is obliged to pay the employee and can only suspend him with pay. The opposite situation is where the employee is participating in a strike. The employee is not actually tendering service and therefore the employer is not obliged to pay the employee, which is the classic “no work no pay example”.
When one therefore wishes to determine the legal position during a power failure, it is clear that the common law contractual principles are not working in favour of the employer in the case of power black outs. The employee is tendering service, therefore the obligation to pay the employee will remain in place. In terms of the common-law, the employer will be obliged to pay the employee and therefore cannot apply the “no-work-no-pay” principle. In the end, the question is simple, namely as long as the employee offers service / work, but the employer can not use such service / work for whatever reason not due to the conduct of the employee himself, then the employer must pay the employee..
CAN THE EMPLOYER TREAT THESE STOPPAGES DUE TO POWER FAILURES AS MEAL INTERVALS, THEREBY REDUCING THE COSTS?
A meal interval in the terms of the Basic Conditions of Employment Act or lunch break is normally not considered to be working time and the employee is therefore not remunerated during the period of the interval or lunch break. The question is therefore whether an employer will be allowed to instruct employees to take a “lunch break” during a power failure.
The Basic Conditions of Employment Act and other rules and agreements regulating conditions of employment such as Bargaining Council Main Agreements and Sectoral Determinations, normally protect employees against the practice of granting long breaks during the workday. The reason is obvious. If the employee is told to take a three hour break (unpaid) in the middle of the workday, it would be very difficult for the employee to go home or utilise the time for personal purposes. The employee will therefore have to sit around at the workplace without pay.
Section 14 of the BCEA for example provides that employees must be paid for any lunch break in excess of 75 minutes, unless the employee lives on the premises. These provisions therefore make it impossible to save wages during power failures by instructing staff to take lunch breaks.
In any event, and in the end, it is a question of intention. It simply is not a bona fide and genuine lunch break, and simply an attempt to avoid a payment obligation in terms of an employment contract. A Court will always have the discretion to intervene, and thus the employer will always be at risk of such a measure being found by a Court to be a sham.
MUST THE EMPLOYER PAY THE EMPLOYEE OVERTIME IF HE WANTS TO CATCH UP PRODUCTION AT THE END OF THE WORKDAY?
If any hours lost during the day as a result of power failures are regarded as work hours, which such hours clearly still are, then any work after normal hours will be regarded as overtime and will still be subject to additional pay. This means that where the employer lost 2 hours production time during the day and wishes to catch it up by working 2 hours longer after normal working hours, he will be obliged to pay overtime, thus actually increasing the cost of the power failure.
The point in the end is once again simple. If an employee is tendering to work, and an employer is unable to provide the work or allow the work, then in law the employee is deemed to have worked. In the eyes of the law, whether or not the employee actually worked the hours is irrelevant. Extra hours worked will be overtime.
CAN I RESTRUCTURE WORKING HOURS TO MINIMISE THE EFFECT OF POWER FAILURES?
Employers and employees can agree to almost anything as long as it is not prohibited by law. Many employers, especially in a production environment, will have to consider changes to their work hours or shift structures to minimize the financial losses caused by power failures. It is however obvious that pro-active steps to reduce losses would only be possible as far as structured load shedding is concerned and that it would be impossible to provide for unforeseen power failures.
In addition, the employer may be able to rearrange working hours if scheduled load shedding takes place at the beginning or end of the normal shift. For example, if the production line normally commences work at 08:00 and load shedding is scheduled for 06:00 to 08:30, it will be possible to change the commencement of the shift to 08:30, thus avoiding downtime of 30 minutes. The same will apply where the shift was scheduled to end at 17:00 and load shedding is scheduled from 14:00 to 16:30. The employer should then be able to change the operation for that day to end at 14:00.
Where load shedding is scheduled to take place in the middle of a normal shift, for example between 12:00 and 14:30, it would be difficult to change operation for that day unless one shift can end at 12:00 and another shift can commence at 14:30. If the employer only employs one shift between 08:00 to 17:00, it would be almost impossible to agree with staff to stop work and remuneration at 12:00 and to re-commence at 14:30. See our comments regarding meal intervals in this regard.
One can also propose to employees that payment in terms of the employment contract as a result of power failures due to load shedding be suspended during such period of power failure, and thus employees are not paid for such period, which would be permissible in law for employees to agree to.
The crisp issue however is that all the measures designed to reduce costs and cater for prejudice to the employer in the event of load shedding power failures requires consensus with, and agreement by, the employees. If employees agree, a change is effected, put in writing, signed, and that will be the end of the problem. What is however the case where employees refuse to agree?
How do I implement changes if employees do not want to agree?
Any of the above changes, as stated, can in the first instance only come about by agreement. The changes referred to above cannot be implemented unilaterally. The following process can be adopted in the case where there is no such agreement or the employees refuse to agree.
Where the employees belong to a trade union, the employer would have to consult with the union regarding the changes to working hours or shift times or payment terms before implementing any changes, Where no trade union exists, staff should be consulted directly in this regard.
If the trade union or staff refuses to accept these proposed changes, the employer may utilise the provisions of Section 189 or 189A (whatever is applicable) to effect a change. This means that the employer will argue that due to its operational requirements, it needs to restructure its business in the form of a change to conditions of employment, by either changing shifts, or working hours, or suspending payment during power failures. These are clearly both economical and structural reasons as contemplated by Section 213 of the Labour Relations Act. In fact, the judgement in Fry's Metals (Pty) Ltd v National Union of Metalworkers of SA & Others (2003) 24 ILJ 133 (LAC) specifically contemplates this scenario, and the Labour Appeal Court held that “The purpose of a dismissal for operational requirements in such a case, which is the same as in the present matter, is to get rid of employees who do not meet the business requirements of the employer so that new employees who will meet the business requirements of the employer can be employed.” In the end, things change, and employees have to adapt to such change, or face replacement.
The end result is that employees that refuse to accept the change in working hours may be retrenched after proper consultation, and replaced with employees who are willing to work under such terms proposed.
Due to the time needed to consult (especially in terms of Section 189A), these steps will only be viable once it is certain that load shedding schedules will be implemented consistently and that it will apply for long periods of time. If not, the effort and effect of restructuring on the business may be even more costly than the loss of production during these power failures.
Current indications are however that load shedding is here to stay. It will therefore be prudent to immediate start a process, in terms of which a consultation process is initiated with employees in order to effect changes to employment conditions as a result of this operational necessity that has arisen. Provided that a proper process is followed, the employer would be able to have working conditions changed by either having working hours amended to correspond with load shedding, or to have payment suspended if employees can not work due to load shedding.
There is therefore a solution. It will however just require some work.
Gerhardt van Heerden : CEO: LabourNet Holdings (Pty) Ltd
Sean Snyman: Director: LabourNet Holdings (Pty) Ltd
Disclaimer
The information published in this article or newsletter is of general nature and should not be used without obtaining specific advise as to its application in your business or under your specific circumstances. LabourNet™ will accept no liability if the information is used without first obtaining specific advise from one of our consultants.