From lay-off to pay-off: Labour court enforces contractual obligations

In a significant judgment, the Labour Court of South Africa ruled in favour of two senior employees in the case of Caydavul & Gurcu v Kamal Steel Ltd (Tanzania), awarding over R5.6 million in unpaid remuneration. The case underscores the importance of lawful lay-off procedures, the enforceability of employment contracts, and the constitutional right to fair labour practices.

Background

The plaintiffs, Mr Serkan Caydavul and Mr Ibrahim Kinyas Gurcu, were employed by Kamal Cape Town Iron and Steel Co. (CISCO), which was later acquired by Kamal Steel Ltd (Tanzania). Both were placed on lay-off in March 2020 due to alleged financial difficulties. While the Main Collective Agreement (MCA) permits lay-offs for up to eight weeks without pay, the employer extended the lay-off period unlawfully—without the employees’ consent—until their eventual dismissal in December 2023.

Despite repeated attempts to resume work and engage in consultation, the plaintiffs were left in limbo for over three years, receiving no remuneration outside of a brief business rescue period. The Labour Court found that the employer had breached its contractual obligations and ordered full payment of outstanding salaries.

Legal implications of the judgement

Lay-offs must be lawful and limited

The MCA clearly limits unpaid lay-offs to eight weeks, unless extended by mutual agreement. The Court confirmed that any extension beyond this period without consent is unlawful, and employees remain entitled to remuneration if they continue to tender their services.

“Any period (such as a period of lay-off) during which [an employee] will accrue no remuneration must be agreed upon.” — Daniels J

Tender of services triggers remuneration rights

Drawing on established common law principles and case law (e.g. Buthelezi), the Court reaffirmed that employees are entitled to be paid if they tender their services, even if the employer chooses not to utilise them.

This principle protects employees from being sidelined without pay and ensures that employers cannot evade financial obligations by simply ignoring service tenders.

Work permit expiry does not automatically terminate employment

The employer argued that Mr Gurcu’s contract terminated when his work permit expired. The Court rejected this, citing Discovery Health Ltd v CCMA, which held that a lapse in work authorisation does not render the employment contract void. The employer’s conduct—continuing to treat Mr Gurcu as an employee—further undermined this defence.

Business transfers do not nullify employment contracts

When Kamal Steel Ltd (Tanzania) acquired CISCO as a going concern, it assumed responsibility for existing employment contracts. The Court found no basis for the employer’s belief that Johannesburg-based employees were excluded from the transfer.

This reinforces the principle that employees are protected during business transfers, and new owners cannot arbitrarily exclude them from continuity of employment.

Costs awarded for unjustified litigation

The Court awarded costs against the employer, noting that it had no substantive defence and had forced the plaintiffs to litigate unnecessarily. This sends a strong message: employers who act in bad faith or delay resolution may face financial consequences beyond the claim itself.

Broader impact

This judgment has wide-reaching implications for:

• Employees: Reinforces protection against indefinite lay-offs and unlawful contract breaches.
• Employers: Highlights the importance of adhering to collective agreements and respecting contractual obligations.
• Legal Practitioners: Provides clarity on the enforceability of employment contracts, especially in complex scenarios involving business rescue and immigration status.
• HR Professionals: Underscores the need for transparent consultation processes and lawful handling of operational dismissals.

Final thoughts

The Labour Court’s ruling in this matter is a powerful reminder that employment contracts are not optional commitments. Employers must act lawfully, transparently, and in good faith—especially during times of financial distress or organisational change.

Let’s continue to uphold the principles of fairness and accountability in the workplace. If you’ve encountered similar challenges or have insights on managing lay-offs and business transfers, share your thoughts below.

For advice or more information, contact Riona Kalua, Head of our Labour and Employment Team.