Page 80 - Q&A 2019/2020

The Labour Court or business rescue
– who gets priority?

June 2019

“Myself and other co-workers have not received any salary for the last three
months. Our employer has informed us salaries will not be paid as a moratorium
has been placed on the company because it is under business rescue. Surely
our employment rights are being infringed. Can we not take the employer to
the CCMA to force the employer to have to pay our salaries?”
Our Companies Act provides for business rescue proceedings as a procedure
to facilitate the rehabilitation of a financially distressed company. During
business rescue proceedings section 133 of the Companies Act provides for a
moratorium during which no legal proceeding, including enforcement action,
against a company, or in relation to any property belonging to a company, may
be commenced or proceeded with in any forum except with the consent of the
business rescue practitioner or in accordance with the terms prescribed by a
court as suitable.

To determine which court had the jurisdiction to uplift the moratorium imposed
on a company by section 133, our Labour Court recently had to decide whether
it had the authority to order a company under business rescue proceedings to
pay all unpaid salaries and employment benefits to its aggrieved employees
whilst the company was under the moratorium imposed by section 133.

In addressing the jurisdictional question the Labour Court concluded that
the Legislature has made express provision for a forum to deal with litigation Labour
emanating from the business rescue proceedings and that this court was
expressly designated to be the High Court and that no other court had
exclusive jurisdiction in respect of matters relating to the moratorium in respect
of business rescue proceedings. Accordingly, it was held that the Labour Court,
and by implication other labour forums such as the CCMA, would 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.

This does not mean that you are left without a form of redress. Section 135
of the Companies Act provides that any unpaid amount of remuneration,
reimbursement for expenses or any other amount relating to employment
that becomes due and payable by a company to an employee during that
company’s business rescue proceedings, would be paid in priority to other
claims.
Our advice is to engage with the relevant business practitioner for your company
and to try and agree to some form or interim remuneration during the stay of
business rescue proceedings, bearing in mind that all outstanding amounts
will be deemed priority claims against the company. It may also be prudent to
consult an attorney or business rescue specialist for advice or assistance in this
process.

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