Tag Archives: Knowles Husain Lindsay Inc

RESIDENTIAL TENANT, LANDLORD RIGHTS UNDER LOCKDOWN

In the economic turmoil caused by Covid-19 lockdown, many people have not been able to pay their residential rent. Under government lockdown regulations – which try to ameliorate this problem – where do tenants and landlords stand legally?

Two main scenarios emerge in the regulations passed by government in terms of the Disaster Management Act, says Grant Nirenstein, director at law firm Knowles Husain Lindsay Inc. One is where the tenant is actually occupying the landlord’s premises, and the other is where a residential lease agreement has been signed but the tenant has been prevented by the lockdown regulations from taking occupation.

“Where the tenant is in the premises, any financial hardship resulting from the lockdown in no way detracts from their obligations to pay rent,” says Nirenstein. “If parties were able to wriggle out of their contractual obligations by virtue of economic hardship – which is often unforeseen – written agreements would have little value. Indeed, the rule of law would be compromised, and financial lending institutions would have no incentive to advance credit.”

Where the tenant wants to take occupation but cannot, the situation becomes more complicated. A case like this could occur if the tenant is prevented from crossing a provincial border to reach the premises.

“This amounts to a supervening impossibility of performance,” he says. “That is to say, performance by the parties was possible when the contract was initially concluded, but thereafter became impossible through no fault of the parties.”

In this case, the contract remains in force if the impossibility of moving into the premises is only temporary. The parties’ contractual obligations are therefore not extinguished, but may well be suspended.

“The tenant would usually then be allowed to not pay rent for the period during which the premises cannot be accessed or enjoyed,” he says. “However, the terms of the lease agreements should always be consulted, as the parties might have agreed to something different.”

If taking occupation becomes permanently impossible, then the parties’ respective contractual obligations are extinguished, as if the contract was never concluded.

Then comes the issue of tenants who cannot or will not pay their agreed rent during the lockdown; can they be evicted or not? Under normal circumstances, the landlord would have the right to evict – as long as they are fair and do not discriminate.

Under the lockdown regulations, however, it is no longer that simple. Initially, the regulations provided that no person may be evicted from their place of residence during the lockdown; the stipulated period ran from 26 March to 30 April 2020.

“This changed in Alert Level 4, when the courts were permitted to grant eviction orders, provided that any order of eviction would be stayed and suspended until the last day of Alert Level 4 – unless the court decided otherwise,” he says. “The position is the same under Alert Level 3.”

Ideally, landlords and tenants should try to resolve contractual disputes amicably and without the need for lengthy, costly litigation, says Nirenstein.

“A suitable compromise – such as a temporary ‘rent holiday’ or some other relaxation of the terms of the lease – is often better than letters of demand and months of legal wrangling,” he says. “Having said that, the parties should take some legal advice to protect their rights, especially when wanting to alter the lease agreement.”

WORKPLACE COMPENSATION AND THE COVID-19 VIRUS

Since March, employees in South African have been expressly entitled to claim for compensation if they become infected with the Covid-19 virus in the course of their work. Proving that the infection occurred in the workplace, however, could still be difficult.

According to Grant Nirenstein, director at law firm Knowles Hussain Lindsay Inc, the March notice by the Compensation Commissioner opened the door for compensation claims resulting from ‘occupationally-acquired’ Covid-19 infections. This was done in terms of the Compensation for Occupational Injuries and Diseases Act – or COIDA – which compensates employees for personal injury occurring in the course of their employment.

“The notice stipulates that occupationally-acquired Covid-19 must result from single or multiple exposures to confirmed cases of Covid-19 in the workplace, or after an official trip to high risk countries or areas,” says Nirenstein. The employee must, of course, have been previously free from Covid-19 infection.

For employees to claim for occupationally-acquired Covid-19, the notice requires them to show occupational exposure to a known source of the virus, and to receive a reliable diagnosis in line with World Health Organisation guidelines. There must also be a chronological sequence between the work exposure and the development of symptoms.

If the employee believes they contracted the virus on a work trip, they must show that the travel was approved and official. They must also document their travel history to countries or areas of high risk for Covid-19. A successful diagnosis for compensation could also rely on a presumed high-risk work environment where transmission of the virus in inherently prevalent.

“It is not yet clear, though, how an employee will prove that the virus was occupationally acquired, and what evidence will be required,” Nirenstein says. “While the employer’s premises may be hygienic and properly sanitised, employees could still contract the virus on their way to work or from shopping in a supermarket. If this happened, the infection would be unrelated to their employment, and therefore would not be compensated.”

Another issue relates to Schedule 3 of COIDA, which lists the types of work in which certain occupational diseases can be assumed to have been contracted. Section 66 of COIDA provides that if an employee who has contracted an occupational disease was employed in any work mentioned in Schedule 3 of COIDA, it shall be presumed – unless the contrary is proved – that such disease arose out of and in the course of his employment.

“While this presumption is pragmatic in most cases, Covid-19 is not listed as a disease in Schedule 3,” he says. “The prescriptions contained in section 69 of COIDA, which allow Schedule 3 to be amended, have not been followed. So, the section 66 presumption does not appear to apply to occupationally-acquired COVID-19.”

He notes that this is not to say that the necessary amendment will not be made effective at some point, and this may then be retrospective. In the meantime, though, the Compensation Fund is obliged to make payment to the employee, where it accepts liability. This would include reasonable burial expenses and, where applicable widows’ and dependents’ pensions.

“The rumour that employers would be held liable for all their employees contracting COVID-19 must be taken with a pinch of salt,” says Nirenstein. “At the same time, this does not mean that the employer is freed from payment responsibilities.”

He highlights that the employer is required to pay the employee for the first three months after the illness is contracted. Only after this will the Compensation Fund reimburse the employer. If the employee is absent for longer than three months, then the Compensation Commissioner takes over the monthly payments.

“The employees’ recourse to compensation in no way absolves the employer from ensuring that it complies with its duties to ensure a safe working environment,” he says. “Never before has this been more challenging, and clearly this can only be achieved through effective communication and cooperation between employers and employees.”

He concludes that the Compensation Commissioner’s notice gives a degree of comfort to employees who are at risk of contracting COVID-19. However, it remains to be seen how the occupationally‑acquired element is to be established.

INSURANCE IN THE TIME OF CORONAVIRUS

The unprecedented halt to business activity brought on by the coronavirus lockdown has many businesses wondering if their insurance will cover any of their losses. It is complicated, explains Nicholas Taitz, director at legal firm Knowles Husain Lindsay Inc.

“Inevitably, the consequence of lockdown is that businesses across the board are suffering,” says Taitz. “At the very least, they face loss of revenue, laying-off of staff and supply chain failures. At worst, they are forced to shut down for good.”

Are such losses of revenue or business closure covered by insurance? Taitz cautions that there is no simple answer. 

“The harsh reality is that – in most commercial policies issued in South Africa – there will no protection against loss of revenue,” he says. “While there are certain extensions of cover available in the South African market, there are also exclusions from cover in some policies.”

In terms of insurance policy benefits, the consequences of the coronavirus shutdown should not be confused with a force majeure situation – where a contract cannot be performed, or a sports event cannot take place for reasons beyond anyone’s control. The first step for any business is to get professional advice on whether it is entitled to any insurance benefits against the consequences of the state of disaster. 

“Where a company has cover for business interruption, this may well include the impact of an infectious disease or pandemic like the coronavirus,” he says. “However, this would have to be evaluated in the light of the particular insurance contract in question.”

Taitz urges businesses to take legal advice on the details of their insurance agreements, and also to consider appropriate extensions of cover or additional cover in the light of the current crisis and its consequences.

“It’s important to remember though that no insurer will provide cover for coronavirus-related losses now,” he says. “It is a fundamental principle of insurance that it is undertaken to cover potential occurrences or fortuities, and not ones which have already taken place.”

He raises a further insurance issue related to the widespread necessity for work-from-home arrangements, especially where people are taking company-insured computers and office equipment home.

“Insurance contracts covering such equipment will ordinarily have been issued on the understanding that it is physically located in a secure office space,” he says. “Where employees have taken equipment home, the insurer needs to be notified in the manner prescribed by the relevant insurance contract.”

Neither should it be assumed that it is enough simply to notify the insurer; the contract may not entitle the insured business to unilaterally alter the terms of the policy in this way. The level of security at a private home, for instance, may be much lower than the office – requiring the insurer’s risk and insured’s premium to be adjusted.

DEMYSTIFYING ‘NO WORK, NO PAY’ AND OTHER COVID-19 OPTIONS

Employers must understand that the Covid-19 and the national lockdown has not suspended employment rights, warns Grant Nirenstein, director at law firm Knowles Hussain Lindsay Inc.

“The disregarding of employees’ rights will prove to be a costly mistake, especially now the Commission for Conciliation, Mediation and Arbitration (CCMA) has opened and labour courts are set to resume operations,” says Nirenstein. “These agencies will inevitably be inundated with referrals by employees, and transgressions will not be sympathetically viewed.”

He notes that recent weeks have seen much confusion among both employers and employees, fuelled by misinformation about employment obligations. A key principle for employers to remember is that employment is a binding contract, and they are not permitted to unilaterally change material employment conditions – especially where this will prejudice an employee.

“Unsurprisingly, one of the material terms of an employment contract is remuneration,” he says. “To amend the terms of remuneration therefore needs the agreement of the employee.”

To understand how the principle of ‘no work, no pay’ may be applied, a distinction must be drawn between two common scenarios. One is where the employer is taking steps to salvage the viability of their businesses in the face of reduced income and the other is where employees are lawfully prohibited from working during the lockdown period.

“The restaurant industry, for example, has been lawfully precluded from operating during the lockdown period to date, so restaurant employees have been precluded from working,” he says. “This is a direct consequence of the lockdown regulations and not the product of operational considerations on the part of any employer.”

This situation – referred to as the supervening impossibility of performance – allows ‘no work, no pay’ to be unilaterally implemented by the employer. This means an effective suspension of the employment relationship, often referred to as ‘temporary layoff’.

“A difficulty employers face is how to deal with employees who refuse to agree to a reduction of earnings or short time,” says Nirenstein.

There are effectively four options for employers, he says. The first is not to change the terms of employment, which under the circumstances may not be feasible. The second option is to implement a ‘no work, no pay’ policy, which is more prejudicial than reduced earnings or moving to short-time.

“Employees who refuse to agree to a payment reduction or imposition of short-time should judiciously consider their options, as an unreasonable refusal may, in itself, constitute a career-limiting decision,” he says. This is because cost-saving measures such as these are generally not contemplated by employers who need not implement such measures. Failing to agree to an employer’s request in these circumstances may lead to retrenchment proceedings in terms of section 189 of the Labour Relations Act – which is the third option for employers.

“Commencing retrenchment proceedings is exceptionally prejudicial, particularly in the context of a Covid-19 ravaged economy,” he says. “It is important to note that intrinsic in legitimate Section 189 proceedings, options short of dismissal must be considered and explored. In this context, payment reduction and short-time can be implemented as an alternative to dismissal, failing which retrenchment would be the fallback position.”

The fourth option is to consider liquidation or business rescue proceedings.