A way for employers to help indebted workers

It is good to see employers finally doing something about the abuse of emoluments attachment orders (EAOs).

Creditors use these orders, often wrongly referred to as garnishee orders, to force employers to collect debt repayments from employees’ salaries. But they have been roundly abused and applied without taking into account the debtors’ circumstances, their ability to afford the repayments, or whether the debt was granted recklessly in the first place.

Many of these orders are implemented in courts miles away from where the debtors live, because lawyers engaged by credit providers know that that is where the orders will get signed without too much scrutiny.

The abuse of EAOs was tackled in a recent case in the Cape High Court in which the the University of Stellenbosch Legal Aid Clinic ( LAC) challenged the EAOs obtained by attorneys and debt collectors Flemix and Associates against 15 low-income earners in the Stellenbosch area.

The presiding judge in that case, Judge Siraj Desai, found the EAOs were invalid because they were obtained in jurisdictions other than those in which the debtors live or work, and that Flemix had engaged in “forum-shopping” (seeking out courts known to provide favourable judgments or issue EAOs liberally).

The LAC also applied for an order declaring sections of the Magistrates’ Court Act inconsistent with the Constitution, because these sections allow for EAOs to be issued by a clerk of the court without judicial oversight. And they applied for an order declaring invalid any EAOs obtained in jurisdictions other than where the debtor lives or works, where the debtor gave written consent to such a destination.

The judge granted these orders, but his ruling now needs to be confirmed by the Constitutional Court.

In the meantime, some employers have started taking a long hard look at the EAOs they implement against their staff on behalf of credit providers.

In recent article in our sister newspaper, Business Report, Mathias Sithole, Group Executive for People at Implats, related how the mining group recently audited the EAOs of miners and found 370 of them to be illegal. The company went to court and had the EAOs declared invalid.

But a Cape Town lawyer and shareholder in three smaller companies recently went a step further than his counterparts in bigger companies like Implats by asking the Cape High Court to exempt all Western Cape employers from implementing illegal EAOs.

Tinus Slabber used his legal skills to have the EAOs against a number of employees of the three companies set aside. Slabber is a beneficiary of a trust that invests in the companies.

He argued in court that he believed the six credit providers in whose favour the EAOs were issued, Bayport Securitisation, Real People, Van Heerden and Vennote, Debt Management Consultancy, Sanlam Direct Axis and Capitec Bank, had purposefully sought the EAOs in magisterial districts remote from the employees. This prevented them An emoluments attachment order (EAO) is a court order that compels your employer to deduct from your wages or salary money that you owe a creditor who has taken default judgment against you. EAOs are a popular means of collecting unsecured debt from you rather than attaching property. For debtors who work in low-paid jobs, their wages are invariably their only asset and means of survival. from actively challenging the orders, he says.

The employees had given their consent to the credit providers getting EAOs in other jurisdictions when they took out the credit. But Slabber says in his court affidavit that he believes the consents signed by the debtors have no standing or validity and there is “no prospect” of them having understood what they signed.

“I believe that, as a matter of law, such consents are oppressive, contra bonis mores (against public morals) and against public interest and public policy,” Slabber says.

He says the debtors’ plight was dire and they needed immediate assistance from the court.

“The individual respondents were in financial trouble before seeking finance from the corporate respondents and are in the most helpless of situations, in that they cannot gain access to the courts to have these orders rescinded or varied in law in line with their financial commitments,” his affidavit says.

He asked for an order exempting all employers in the Western Cape from implementing EAOs obtained in jurisdictions other than the Cape until such time as the Constitutional Court has confirmed the ruling in the LAC case. Judge Desai granted the orders. Slabber spent his own time and money on the case, but he has saved all Western Cape employers a trip to court to have invalid EAOs set aside. The least they can do is take note and audit the EAOs against their own employees.

Where employers fail to act, it is a matter for employees and unions to take up.

Odette Geldenhuys, a senior associate at Webber Wentzel, the attorney in Slabber’s case and in the Stellenbosch Legal Aid case, says the Constitutional Court case will the argued on March 3 next year. She hopes the Constitutional Court judgment will be handed down by April or May next year and is confident it will confirm Judge Desai’s ruling.

In the interim, Slabber’s order will help Western Cape employers.

At least one employer in each of the other provinces should stand up and challenge orders obtained against its employees in their companies to obtain an order similar to the one Slabber obtained in the Western Cape.

Geldenhuys says much of the work required to argue for such an order has already been done in the Stellenbosch Law Clinic case and it is set out in Desai’s judgment handed down in July.

And it shouldn’t be too difficult to find employees with invalid EAOs. Summit, a company that provides a service of checking EAOs for employers, estimates that 40 percent of the orders were obtained in the wrong jurisdiction.

Employees and employers should remember that getting an EAO declared invalid or preventing one from being implemented does not remove the debt or the need to pay it. If handled properly, debts can be paid off in a way that debtors can afford.