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The Labour Court or business rescue – who gets priority?
14 July 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 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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