Companies, unions need to develop frameworks for dealing with impact of energy, water outages

29th March 2023 By: Schalk Burger - Creamer Media Senior Deputy Editor

Employers, their employees and trade unions need to develop framework agreements that set out how a company and its employees will respond to the impact of high levels of loadshedding, or even a grid outage, on the ability of the company and employees to perform their functions.

This is the view of specialists from law firm Cliffe Dekker Hofmeyr (CDH), who emphasised that the parties must identify gaps in the Labour Relations Act to address these challenges and then develop a framework agreement that sets out how the company and its employees would respond.

For most companies, their biggest costs were rental and employee costs. Therefore, if companies did not look at employees and the impact of the energy shortage on their ability to perform their function, then this could pose a risk to their viability, said CDH head of employment law practice Aadil Patel.

"Employers will need to think about how to manage the challenges imposed by the energy shortage crisis going forward, especially considering that we are heading into winter and the [electricity] grid is under enormous strain," said CDH employment law practice director and mining and minerals sector joint head Fiona Leppan.

A framework agreement covering topics such as short time in response to energy shortages or temporary layoffs is important to preserve employment and as much of the employee benefits as possible while ensuring that a company does not go out of business, which would result in a loss of employment.

For example, there could be an agreement that, if a company only has electricity for three days a week, then employees will only work for those three days a week and not be paid for the rest.

The main thrust of such frameworks was to secure agreement on various options available to parties before a company and its employees were faced with these situations, she said.

"We are in the centre of a situation that we have not experienced before to this magnitude, particularly as water shortages are also becoming an issue alongside a constrained electricity grid. We need to be proactive, and the sooner we start a dialogue with workers, the better," she said.

"Part of the reason that employers need to have a long-term plan in place is, for example, in the event of a total shutdown of electricity provision that will only be restored within an unknown timeframe, such as a week or two. Ideally, companies will want plans in place before this happens," said CDH employment law practice director and infrastructure, transport and logistics sector head Hugo Pienaar.

Employers will want to consult with employees and workforce unions to secure agreement on what will be done in such situations, including the use of annual leave, short time, suspension of employment, unpaid leave or temporary layoffs.

"Job security can be used as the basis to get a framework agreement that addresses these concerns," he said.

A plan to keep employee relations intact was important, but the question of payment was also crucial. There should be consideration of a situation in which an employer was unable to operate, but employees could tender services. Such a situation would lead to employees asking to be paid, but this impacted on the business and its viability, added Leppan.

A plan for dealing with the potential impacts of energy shortages, therefore, should also include various dispute resolution mechanisms, and this was an opportunity for employers, employees and trade unions to be creative in developing responses to these challenges, she added.

If a company has good relations with its employees and trade unions, then it should be able to start talking about payments and affordability.

However, even if the parties agree to a framework agreement, such as unions agreeing that employees will not be able to tender services and that employers will not be able to operate during loadshedding, this is cold comfort for employees who will suffer financially.

Therefore, a plan may entail employees being more flexible in terms of the conditions of employment, such as short time or reductions in pay. However, some employees may refuse these conditions, and a framework agreement should have an option allowing for employees to leave employment.

"The alternative to overcoming the difficulties is retrenchments, and this can be a lever to draw more employees to be reasonable in the face of the challenges facing companies," Leppan noted.

Additionally, although unions may be strident, there are reasonable voices within these organisations, and these can be harnessed when consulting on topics such as short time or layoffs.

"The February declaration of the National State of Disaster is an explicit expression that we have a problem. The identification of the problem, therefore, is in place," highlighted Patel.

Importantly, companies cannot unilaterally impose different conditions of employment, and it was, therefore, important for them to be proactive in consulting and developing alternative solutions, said Pienaar.

"The current situation differs from the total shutdown imposed during [Covid-19] lockdowns. Therefore, I would advise caution in dismissing employees under the circumstances imposed by the energy shortage crisis.

"If only certain employees are arriving late owing to loadshedding's impact, it could be considered a simple discipline issue," he said.

However, if the impact of loadshedding was a general problem affecting employees, then parties should discuss ways to ameliorate its impact on performance, such as by discussing changing production hours, or starting work earlier or later, said Leppan.

Such considerations may be one of the reasons companies may need to approach the relevant government department for directives on how to proceed in the face of the energy crisis, she noted.

However, if a department, for example, issued a directive that placed a moratorium on retrenchments, this could be untenable for companies to remain in business, and companies can request to be paid by the department to be able to fulfil their obligations.

"The Disaster Management Act is aimed at protecting lives and livelihoods. This is also reflected in the [state of disaster] declaration, which means that the aim is to protect jobs and people dependent on employees' wages.

"Therefore, we would typically want to ensure employee benefits remain in place, even if their earning capacity is down, with the aim of ensuring people remain in employment than be unemployed," she said.

Further, employers must demonstrate reasonableness in the options and actions taken to mitigate the impact of loadshedding on their businesses. This is important in the event that a company is tested in a court on what it did and what it could have done and whether these were reasonable steps, she added.