Newsroom

Corporate & Commercial Law Update, The Future of Fixed Term Agreements reported in the Witness



ACCORDING to the draft regulations for the Consumer Protection Act, 2008, from March 31, 2011, suppliers of goods and services will not be permitted to conclude a fixed-term agreement to supply goods and/or services to a consumer for a period exceeding 24 months from the date on which the consumer signs the agreement.

The act also says that a consumer may cancel a fixed-term agreement at any time on 20 business days notice to the supplier. This spells the end of the common practice of locking consumers into one-sided agreements from which they are unable to escape.

However, if the consumer cancels a fixed-term agreement and the supplier has supplied any goods or services or granted the consumer any discounts in contemplation of the agreement enduring for its full term, the draft regulations provide that the supplier may charge the consumer a cancellation penalty of up to 10% of the amount which the consumer would have had to pay for the remainder of the period of the agreement.

Suppliers will have to monitor constantly the expiry dates of their fixed-term agreements as the act provides that, at least 40 business days before the expiry of a fixed-term agreement, the supplier must notify the consumer of the expiry date and the option either to renew or terminate the agreement with effect from such date. The supplier must simultaneously notify the consumer of any material changes to the fixed-term agreement which it proposes should apply on renewal.

If the consumer does not elect to terminate or renew the fixed-term agreement, after the expiry date, the agreement will continue on a month-to-month basis on the terms which the supplier proposed would apply if the consumer had renewed the agreement.

The supplier, on the other hand, may only cancel a fixed-term agreement if the consumer commits a material breach of the agreement and does not remedy the breach within 20 business days after being requested by the supplier to do so.

Businesses will be relieved to know that these provisions of the act do not apply to franchise agreements or fixed-term agreements between juristic persons. In addition, they only apply to transactions which take place in the ordinary course of business in return for payment.


Claire McGee is an associate partner in Shepstone & Wylie Attorneys commercial law department.
 

 

 

 

 

 

 

 

Employment & Pension Law Update, response to a Sunday Times reader’s question on retrenchment



 

SUNDAY TIMES, Business Times Careers & Money 30 Jan 2011, Page: 2


SUNDAY TIMES, Business Times Careers & Money

MY COMPANY has decided to restructure itself to become more profitable and the transformation makes any department effectively superfluous, so we have been told that we will all be retrenched. We got together and worked out how, with some training, we could still be an important part of the new-look business. However, when we approached management, they said they were not interested in hearing what we had to say as the retrenchment process had already begun. Do we really have no say in this or can we force the company to listen to our ideas?
Response from Michael Maeso, head of the employment law department at Shepstone & Wylie Attorneys: Before a company may retrench any of its employees, it is obliged to comply with Section 189 of the Labour Relations Act. This requires an employer to consult with employees that may be affected by the retrenchment as soon as the employer contemplates dismissing one or more of them.
The word "contemplates" confirms that the process of consultation must begin before a final decision is made to retrench. Consultation, in turn, is defined as a meaningful, joint, consensus-seeking process. This suggests a two-way process requiring input from both the employees, and the employer.
What is important is that the purpose of consultation is to "reach consensus".
There must therefore be a process between employer and employees whereby ideas are exchanged on appropriate measures to avoid the dismissal or, at the very least, to minimise the number of dismissals and mitigate the effect of the dismissals.
Clearly this obligation requires the employer to properly consider any suggestions by employees on how to avoid their retrenchment.
Section 189(5) of the Labour Relations Act requires the employer to allow employees an opportunity during consultations to make these representations, as well as any other matter relating to the proposed dismissals.  The employer is in turn obliged to consider and respond to these representations.
There is no obligation upon the employer to agree to the proposals put forward by the employees. However, the employer is bound to consider the representations and if he disagrees with them, to set out in writing why this is so.
While the employer has the right to refuse to accept the employees' suggestions if the suggestions are manifestly fair and can be implemented with the least amount of upheaval to the employer, it would be very risky for the employer to simply reject these proposals out of hand.
The simple answer to the problem posed is therefore that employees are entitled to make representations in regard to their proposed retrenchment and that, if reasonable alternatives to their retrenchments are put forward, the employer must give careful consideration to these proposals before rejecting them in writing.

Michael Maeso, Partner & Head of Employment & Pension Law

Contact: 031 575 7207 and maeso@wylie.co.za

Employment & Pension Law Update, Sunday Times reader’s question – Accidents will happen, so it’s best to be prepared



Accidents will happen, so it's best to be prepared

ACCIDENTS happen in the workplace – and when they do, knowing how to respond can make a big difference.
Davi Hofman, the operations manager of a Johannesburg based voluntary medical rescue service, says this can start with a company deciding which ambulance service to use.
He suggests choosing one that operates in the area and making sure that every employee knows what number to call in the event of an emergency.
Hoffman says often valuable minutes are wasted while people try to decide who and what number to call.
Vuyo Mkwibiso, an associate in the employment law department at Shepstone & Wylie Attorneys, says the general safety regulations applicable to employers regulates workplace first aid, emergency equipment and procedures.
"It gives employers the duty to take reasonable and necessary steps to ensure that persons at work receive prompt first-aid treatment in cases of injury or emergency." Companies may be required by law to train first aiders and a first-aid officer, but despite being sent on courses few get the chance to perfect their skills.
This means that if someone does require assistance, the first aiders may do nothing because they are afraid of making a mistake.
But Hofman's advice is: "Something is better than nothing; try to do something." Hofman said companies could invest in an automated external defibrillator (AED). This machine will give the patient oxygen while defibrillating their heart and can keep a person alive while the ambulance arrives.
Some of the most common emergencies at work are collapses, including heart attacks, epileptic fits and diabetic-related collapses, he said.
Others are burns, which should be treated with cold water rather than ice, and then wrapped In Burn Shield – and trips and falls.
In the case of a bad fall, Hofman said the injured person should not be moved. If there is any chance of a spinal cord injury as this can make the injury worse. "If in doubt, don't move," he says.
For first-aid teams, the law distinguishes between companies employing between six and 10 people and those employing more than 10. "For the first category, the employer only needs to provide a first-aid box or boxes at or near the work place and ensure that those boxes are accessible," Mkwibiso said.
Companies with more than 10 staff must ensure there is at least one person with a valid certificate of first-aid competency for every 50 employees; for a shop or office, there must be one qualified first-aid person for every 100 employees, he said.

 

 

 

 

 

 

 

Employment & Pension Law Update, Steps to consider before retrenching reported in The Witness



Steps to consider before retrenching

RETRENCHMENT for the purpose of increasing the profitability of a business is acceptable and valid, but employers need to follow a thorough consultation process with employees otherwise the dismissals will be considered procedurally unfair. This was confirmed by the Labour Court in the case Van Rooyen & Others v Blue Financial Services SA (Pty) Ltd.
In this case the employer was a profitable business, but wished to restructure to increase profits. The employer could show that the restructuring was vindicated by an increase in sales. The employer could also show that the role of regional manager in the new structure was sufficiently different to justify assessing the incumbents in regard to their suitability for the new posts. Objective criteria were used to identify suitable candidates.
The employer, however, dismissed a detailed memorandum submitted by the applicants without engaging them on the content. Instead, the employer complied with its deadline previously set in the consultation process and ended consultation. The employer also failed to engage the applicants on selection criteria.
The court accepted that there was no need to lead evidence on the "excessive bleeding and imminent death" of the business and accepted the commercial reasons for the employer's new business model.
The court held that the employer's dismissal of the applicant's memorandum breached their obligation to participate in a meaningful joint consensus seeking process as required by the Labour Relations Act. There were no drastic measures necessary to ensure the survival of the enterprise to explain ignoring the memorandum.
There was no consultation on the selection criteria. Although assessments were conducted on candidates to assess their suitability for the restructured position, the court concluded that there was an obligation to engage the applicants on the outcome of the assessment.
The court concluded that an employer's obligation to consult over alternative employment and to take steps to accommodate affected employees in that employment, is much more onerous in circumstances where the rationale for a proposed retrenchment is to improve profitability.
In these circumstances the court held that the employer had failed to consult adequately and that the applicant's dismissal was procedurally unfair. The applicants did not seek reinstatement and were each awarded compensation equivalent to four months pay.
 

Michael Maeso, Partner and Head of Employment & Pension Law