The ticking TERS timebomb: a transient alternative to retrenchment

It is crunch time for many South African employers as retrenchments and other cost-cutting measures become sore realities for numerous businesses navigating the devastating impact of the Coronavirus (COVID-19) and the nationwide lockdown. The C19 Temporary Employer / Employee Relief Scheme (“TERS”) was implemented to minimise this impact. Although the TERS has recently been extended (by the most recent TERS Directive) until the subsistence of the declaration or withdrawal of the national state of disaster (whichever is earlier), it is nearing the end of its lifespan. This is particularly so given that, at the time of writing, the national state of disaster has been extended to 15 October 2020 and a move to Alert Level 1 may be on the horizon.

The urgency of applying for the TERS has been compounded because payments of new and outstanding applications for relief benefits having been suspended in order to mitigate the risks identified by the Auditor-General of South Africa in the application system and to investigate various alleged fraudulent payments.

TERS AS AN ALTERNATIVE TO RETRENCHMENT

But time is ticking. The TERS could not only save employers’ businesses from collapse, it could also assist in avoiding successful challenges to the fairness of retrenchments.

How is this so? If employers in financial difficulty have not applied for the TERS, but qualify and are contemplating retrenchment due to the financial impact of COVID-19 on the business, the question arises whether there is an obligation on employers to apply for the TERS as an alternative to dismissal.

Prior to initiating a retrenchment process, an employer is obliged to explore alternatives to retrenchment. It is only once all alternatives have been considered and rejected that the employer is it entitled to initiate the process. In addition, and during the retrenchment process, the Labour Relations Act, 1995 requires employers to engage in a meaningful joint consensus seeking process with their employees or their representatives in an attempt to reach consensus on appropriate measures to avoid and/or minimise the number of dismissals.

Is the TERS benefit a fair and reasonable way in which the company could mitigate the effects of the retrenchment by, for example, changing the timing of the dismissals or the number of employees affected? The courts, in our view, would likely think so. In fact, in some instances, it may also adequately alleviate the financial pressure on the employer and avoid the need to retrench entirely.

South African courts have held that the failure to explore and consult with employees on possible alternatives may well result in their retrenchments being procedurally unfair. The failure to adopt a feasible alternative could also result in retrenchments being substantively unfair, notwithstanding the existence of a genuine business rationale for the retrenchments. An offending employer may then have to re-employ, reinstate and/or compensate the affected employees, depending on the circumstances.

The question is can employers afford not to apply for TERS? We would suggest not.

WHO QUALIFIES FOR THE TERS BENEFIT?

Immense confusion has arisen as to who qualifies for the TERS benefit. This confusion has been created by various versions of the Memorandum of Agreement (between the Unemployment Insurance Fund (“UIF”) and the relevant applicant employer or trade union for example) and numerous iterations of the Directive which regulates the TERS. There have also been various incorrect benefit calculations formulae circulated and statements on the topic such as by the Retailers Association in April 2020. This has occasioned a reluctance by some employers to seek assistance in terms of TERS particularly in light of the fear created by the potential of the audits to test the lawfulness of their application for benefits.

So, who can apply?

March, April, May and June 2020

For this period, in essence, employers/employees would qualify for the TERS benefits if there was a closure of the employer’s business, either in full or partially, as a result of the pandemic. Once this criterion is satisfied, the employer must apply for affected employees who have:

lost income; and/or
were required or forced to take annual leave, due to the pandemic.

If there is a failure or refusal to apply, then the employees themselves can apply. If this criterion is not satisfied, the enquiry into eligibility ends here.

July until 15 September 2020

From July 2020, there are new, more restrictive criteria for an employer to be considered an eligible employer. Unlike the previous Directive, the closure or partial closure is specifically linked to what the Disaster Management Regulations permit. The national state of disaster has recently been extended until 15 October 2020 and the most recent TERS Directive (which regulates the TERS for the period from July 2020) expressly states that it remains in operation until the earlier of the withdrawal or subsistence of the declaration of the national state of disaster. However, a media statement by the Department of Employment and Labour today, 15 September 2020, refers to applications being permitted for the period July to September 2020 (ie, not until 15 October 2020) and that applications for this period will not be accepted beyond 30 October 2020.

In this regard and for this period, qualifying employers are those who are:

not permitted to commence operations, either partially or in full, in terms of the Disaster Management Regulations;
unable to make alternative arrangements for vulnerable employees to work from home or to take other measures as contemplated in clause 20.3 of the Occupational Health and Safety Directive; or
unable to make use of employees’ services, either fully or partially, because of operational requirements based on the economic, technological, structural or similar needs of the employer which result from compliance with the Disaster Management Regulations; in particular, the need to limit the number of employees at the workplace through rostering, staggering of working hours, short time, or the introduction of shift systems.

Therefore, the first step would be to determine whether the employer falls into one of the above eligibility categories for the months of July and August 2020 and until 15 September 2020 (unless this is expressly extended and to err on the side of caution). If the employer does not fall into any of the above, then the enquiry into eligibility for the TERS benefit will end here. If the employer does fall into any of the above categories, it must apply in respect of affected employees who have:

lost income; or
were required or forced to take annual leave due to the pandemic.

DEADLINES

Applications for March 2020 to May 2020 close on 25 September 2020.
Applications for June 2020 close on 15 October 2020.
Applications for July to 15 September 2020 close 30 October 2020.

No further COVID-19 TERS benefit applications for the respective periods will be accepted beyond the deadline dates listed above.

If employers have not applied for the TERS on behalf of their employees and qualify, they must apply and fast. This is particularly true for qualifying employers claiming that they need to retrench as a result of financial difficulties.

Lauren Salt

Employment | Executive

lsalt@ENSafrica.com

+27 84 509 6494

Jessie Moore

Employment | Candidate Attorney

jmoore@ENSafrica.com

+27 71 125 6135