EMBIVENI EMPLOYEES WIN E17.2M CASE

MBABANE – The Industrial Court has ordered former directors of Eswatini Meat Industries (EMI) to pay the 200 employees of the company their terminal benefits.

This was after the employees, whose services were terminated, ran to court to demand the payment of their terminal benefits, following the takeover of EMI by Inyatsi Group Holdings (Pty) Ltd, at a price of E120 million. They demanded a over E17.2 million from the former directors of EMI as their terminal benefits. Yesterday, Judge Faith Ng’andu ordered the former directors to pay all the workers their terminal benefits in compliance with Section 33 bis of the Employment Act of 1980 within 30 days of the judgment. The former directors were also ordered to pay costs of the application on an attorney and own client scale.

Conclusion

In conclusion, Judge Ng’andu stated that the sale and takeover of all shares and assets of EMI by Inyatsi Group Holdings triggered the operation of Section 33 of the Act. This section provides that an employer shall not sell his business to another person or allow the takeover of the business to another person unless he first pays all benefits accruing and or due for payment to the employees at the time of the sale or takeover. Judge Ng’andu noted that the former directors of EMI 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’.  “Did this sale of shares fall squarely within the provisions of Section 33 bis, thus entitling the applicants (workers) to demand payment of their terminal benefits by the employer as provided for in the above section?

“Section 33 bis clearly states two conditions or transactions that attract the liability of the employer to pay the terminal benefits. It is when the employer sells the business to another person, the payment of terminal benefits is immediately activated. The second condition is where the employer allows the takeover of the business by another person, then the terminal benefits of the employees ought to be paid,” said the judge. Judge Ng’andu said in the agreement between the shareholders of EMI and Inyatsi Group Holdings, despite it being labelled a ‘share purchase agreement’ in terms of Clause 2(b) thereof, the purchaser was acquiring all the issued share capital held by the former shareholders in the company. “Indeed the 10th respondent (EMI) is a legal entity that enjoys a legal personality apart from the shareholders. It had the right and duties and was the employer of the applicants herein. Further, the 10th respondent was separate from the shareholders. However, the sale of the entire shares in the 10th respondent by the first to ninth respondents (former directors) to the purchaser, allowed the takeover of its business by another as envisaged by Section 33 bis. Not only is that read from the terms of the sale agreement, but also can be seen from the event that followed thereafter,” further stated the judge.

The court also pointed out that as a clear indication of all the parties understanding of the transaction falling in the ambit of Section 33 bis, and not at the Board meeting of EMI, the Board also discussed the payment of the employees severance benefits by the company in terms of Section 33 bis of the Employment Act. On July 17, 2023, EMI wrote to the labour commissioner, notifying him of the sale by the former directors of all their shares to Inyatsi Group Holdings. In the said letter, mentioned the judge, it clearly highlighted to the commissioner Clause 12 (b) of their agreement as follows; ‘The parties will abide by the relevant Section of the Employment Act as set out in Clause 4(a) (vi). ‘Furthermore the seller (former directors) shall ensure that the company (EMI) shall pay to all eligible employees the benefits payable in terms of Section 33 bis, being the difference between the amount payable between the provident fund benefit and the amount due in terms of Section 33 bis’.

In court, the 200 employees submitted that the shareholders of the company had sold all their shares to Inyatsi Group Holdings and left without paying them all their benefits, amounting to E17 268 956.90. They told the court that Jonathan Williams, who was the Managing Director (MD) of EMI and a major shareholder, had resigned from the company and was believed to be planning to relocate overseas. Respondents in the matter were Williams, Kjott-OG Fjorfebransjens Landsforbund, Ben Dlamini, Vincent Lukhele and Sipho Shongwe. Others were Richard Dlamini, Mguntu Dlamini, Howe Investments (Pty) Ltd, TWK Agriculture Limited and EMI. In their founding affidavit, Derrick Shongwe submitted that on July 21, 2023, the EMI’s Board served them with a letter, allegedly informing them about the sale of the company to a third party. He stated that in the letter, the respondents advised the employees that their contracts of employment would terminate on July 31, 2023. Derrick informed the court that the letter also stated that EMI would use each employee’s contribution to Eswatini National Provident Fund (ENPF) for the severance portion of their terminal benefits.

Addressed

The letter was addressed to the staff association. According to the letter: “The Board and management would like to inform you that the company shareholders have concluded a sale of shares agreement with Inyatsi Group Holdings, effective July 21, 2023. “As a result of the sale, all contracts of employment will be affected. This means that your current contract of employment shall be terminated effective July 31, 2023, in accordance with Section 33 bis of the Employment Act,” reads part of the letter. In the answering papers, Williams denied that the company was sold to Inyatsi Group Holdings. He said the shareholders had sold their shares. He also stated that there was a difference between the sale of shares and the sale of a business.

In the workers’ replying papers, Derrick submitted that while the title of the agreement was a share purchase agreement, its contents clearly showed that this was a sale of not only shares, but of the business. The applicants were represented by Modicai Donga and Banele Gamedze. EMI was represented by Derrick Jele, while John Henwood appeared for the former shareholders.

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