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Eversheds South Africa e-Brief: The Constitution and its impact on Insolvent Employers and Domestic Employees

  • South Africa
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In the matter of Stratford and Others v Investment Bank Limited and Others CCT 62/14 (2014) ZACC 38, the Constitutional Court ruled that the word ‘employees’ in section 9(4A) of the Insolvency Act 24 of 1936 (“the Act”) includes domestic employees. This means that all employees, including household staff, must be informed if their employers are declared insolvent.

Previously, section 9(4A) was interpreted to apply only to ‘business employees’ and was not intended to apply to ‘domestic employees’. This was evidenced in the matter of Gungudoo and Another v Hannover Reinsurance Group Africa (Pty) Ltd and Another [2012] ZASCA 83 where the court held that section 9(4A) only required notice to be provided to business employees and not domestic employees.

In a period of only two years following the Gungudoo decision, the Constitutional Court interpreted the word ‘employees’ in a different manner to the court in Gungudoo.

Some of the issues it considered are as follows:

1. whether section 9(4A) of the Act includes domestic employees;

2. if not, whether the differentiation between ‘business’ and ‘domestic’ employees renders the provision inconsistent with the Constitution; and

3. whether compliance with section 9(4A) is peremptory.

In determining whether section 9(4A) of the Act includes domestic employees in its reference to ‘employees’, the Constitutional Court held that it must be guided by the Constitution which requires the courts to promote the spirit, purport and objects of the Bill of Rights when interpreting legislation. Apart from the definition of the word ‘employee’ in section 9(4A), the Act does not define the word ‘employees’. It follows, held the court, that the word ‘employees’ does not distinguish between domestic household employees and employees of the debtor’s place of business, meaning that ‘employees’ is capable of including domestic employees.

This judgment serves not only to direct that domestic employees must also receive notification of the provisional or final winding up of their employer’s estate, but in so doing it further secures their rights in labour law where such circumstances result in their dismissal due to operational requirements.

Author: Naledi Mdyesha, Candidate Attorney

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