EMI ex-directors fighting E17.2m terminal benefits payment
Eswatini Meat Industries’ (EMI) former directors have put in an urgent application at the High Court to stop an order issued by the Industrial Court from being implemented.
On September 18, 2023, the Industrial Court ordered the former directors to pay 200 EMI employees their terminal benefits after they rushed to court to demand payment following the takeover by Inyatsi Group Holdings (Pty) Ltd for E120 million.
The employees demanded over million as their terminal benefits.
Judge Faith Ng’andu ordered the former directors to pay all the workers in compliance with Section 33 bis of the Employment Act of 1980 within 30 days of the judgement.
The Section states that an employer cannot sell their business to another person or allow a takeover unless they first pay all the benefits accruing or due for payment to the employees at the time of such a sale or takeover.
Judge Ng’andu noted that the former directors had undertaken to comply with Section 33 before the takeover of the company. However, according to the court, the former directors failed to ensure compliance with Section 33 of the Act. The judge said the court was called upon to determine if Section 33 applied to the agreement that the parties labelled a ‘share purchase agreement’.
In an affidavit filed on April 18, 2024, Jonathan Williams on behalf of the former directors, moved an application to stay the execution of a judgment of the Industrial Court issued on September 18, 2023, pending the conclusion of the review application lodged against the judgements.
He stated that when the shareholders sold their shares to Inyatsi Group Holding on June 16, 2023, the purchase agreement contained several clauses including Section 33 bis of the Employment Act 1980.
Williams stated that the former were reluctant to import the provisions of Section 33 bis into the agreement because they had been advised that a sale of shares did not trigger the application of that section.
“We remain of the view that this advice was correct. However, at the insistence of
E17.2
Inyatsi, certain provisions were inserted into the agreement,” William submitted.
He quoted Clause 12 of the agreement the import which was that the shareholders would ensure that EMI would comply with Section 33 bis.
According to Williams, the former duly complied with their obligations by passing a resolution of the EMI Board of Directors on July 13, 2023, authorising payment of employees’ terminal benefits by the company.
Further providing that these benefits would be funded from the employer’s portion of the EMI Provident Fund, allowable in terms of Section 34 (3) of the Employment Act.
After signing, the
conditions
precedent was met, and the agreement was fully implemented on July 21, 2023, when EMI shares were transferred to Inyatsi.
Williams argues that EMI did not pay its employees their terminal benefits as per its undertaking to do so in a letter to the staff association where it notified employees that because of the sale, all employment contracts would be affected.
This meant the employees’ contract would be terminated effective July 31, 2021, in accordance with Section 33 bis of the Act.
They further stated that this triggered the payment of terminal benefits and “EMI intends that as of July 31, 2023, these will be calculated and paid.”
This also meant that each employee’s Provident Fund would be terminated and paid out to them, and EMI would use some or all the employer contribution to the fund for the severance portion of all terminal benefits.
Williams submitted that the former shareholders were dissatisfied with several judgments including that of the Industrial Court where they were found to have failed to comply with Section 33 bis of the Act and were ordered to pay the employees their terminal benefits.
They filed an appeal at the Industrial Court of Appeal for a stay in the judgment.
The IAC ordered a stay but further ordered the former shareholders to place an amount of E10 million into an interest-bearing account as security for the employees’ claims.
He submitted that it was done, a specific call account was opened, and the funds were placed.
“The funds remain in that account less the amounts which have been paid. The applicants (former shareholders) have paid E4.09 million. That payment was made under protest, with a denial of liability, and not as an acceptance of the IAC judgment,” he said.
The amount, however, constitutes the total amount of the terminal benefits and the payment constitutes compliance with the Industrial Court judgment.
He further submitted that despite this, EMI have issued Writs of Execution and are seeking to obtain for themselves the additional money held in trust.
A Writs of Execution is a
court
order granted to put in force a judgment of possession obtained by a plaintiff from a court. Williams stated that the employees are not entitled to any further payment and their issuing of the Writs in the present circumstances is an attempt to take the law into their own hands and to enrich themselves unjustifiably.
He stated that there had not been a response as to what amount, if any, is still due, adding that none is due, and the Industrial court judgement has been satisfied.
Williams submitted that the former shareholders have in good faith put up the funds as directed by the court into an interest-bearing account which remains, less the amount paid to EMI’S attorneys which constitutes the full amount of the employee’s terminal benefits.
“If the court ultimately upholds the review, it will likely be an impossible task to recover the funds. This is particularly so in circumstances in which 200 individual respondents would by then likely have utilised the funds, or at least most of them.”
He stated that in the circumstance, without an order to stay, the former shareholders will be unable to obtain substantial redress at a hearing in due course. Therefore, they stand to suffer real and substantial prejudice which cannot be ameliorated once the judgement is executed.
He said if the application is not enrolled urgently, EMI will take possession of the funds held in the trust and disburse them to each of the employees, “although they are not entitled to them because they have received their terminal benefits.”
He added that EMI would not be prejudiced if the relief was sought, adding that based on the former’s calculations, which had not been disputed, they were not entitled to the balance of the funds in the trust.