Employers cannot hide from the law

1st February 2021

Employers cannot hide from the law

It quite often happens that an employer loses a CCMA case and then closes its business in order to avoid having to pay the compensation. However, especially where the employer then opens the same business under a different name and/or in a different place, the new business could be found liable for the compensation payment award made against the old business.

The new business might be registered as a separate company so as to protect it from liability for any legal obligations of the old entity. However, arbitrators and judges may be willing to ignore this corporate protection where they deem it appropriate. This practice of ignoring the Companies Act protection is known as ‘piercing the corporate veil’ because it breaks through the protective shield behind which the employer is hiding. This the courts and arbitrators might do where:

For example, in the case of Marllier vs G7 Technologies cc & Another (2004, 4 BALR 480) the employer retrenched its production manager while the owners of the employer were still running other similar profitable businesses. The CCMA found that:

In the light of this decision it is most important for employers to:

Employers must also ensure that when considering retrenchments:

To book for our 17 November seminar on DEFEATING THE DANGERS OF DISMISSAL please phone Lee on 0824568247 or 787-5445.

Written by lvan lsraelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011)888-7944 or 0828522973 or on e-mail address: labourlaw@absamail.co.za.