The Prescription Act 68 of 1969 safeguards employers against the indefinite pursuit of severance pay claims. This legislation sets a definitive time limit within which claims must be initiated, thus providing employers with certainty and protection from protracted liabilities.

In terms of the Basic Conditions of Employment Act (BCEA), specifically Section 41(1), a retrenched employee is entitled to severance pay equivalent to at least one week’s remuneration for every year of completed service with the employer. Severance pay is offered to employees dismissed for operational requirements (retrenchment), such as an employer’s economic, technological, structural, or similar needs.

The Prescription Act 68 of 1969 stipulates a three-year prescription period for claims of debts to be initiated.  This applies to severance pay as well. This period commences from the date the debt becomes due and payable, which, in the context of severance pay, is typically the date of termination of employment. For employers, this means that they are no longer legally obligated to entertain claims for severance pay, barring exceptional circumstances once the three-year mark has passed. The Act also incentivises employees to promptly address their severance pay claims, leading to swifter dispute resolution. This benefits employers by reducing the likelihood of unexpected claims arising long after an employee’s departure, which can disrupt business and financial planning.

The Act specifies that prescription periods can be interrupted, effectively resetting the prescription clock. The following are some key ways in which a prescription can be interrupted:

  • Acknowledgment of Debt: If a debtor acknowledges the debt explicitly or implicitly, this can interrupt the prescription.
  • Legal Action: The creditor’s initiation of legal action, such as serving a summons on the debtor to claim payment of the debt due, also interrupts the prescription.
  • Judicial Interruption: Prescription can be interrupted by judicial operation with the formal service of a legal process, such as a summons.

Current judicial decisions have reinforced the application of the Prescription Act to labour disputes, confirming that arbitration awards and other determinations related to severance pay are indeed subject to the Act’s provisions. In Mazibuko v Concor Plant Cellucity (Pty) Ltd v Communication Workers Union on behalf of Peters (2016) 37 ILJ 413 (LAC), the Labour Appeal Court found that arbitration awards are also subject to the Prescription Act. Therefore, the Prescription Act applies to labour law.

In Buz v Minister of Defence and Military Veterans and Others (C493/2019) [2021] ZALCCT 69 (21 September 2021), the Court held that The Prescription Act applies to claims under The Basic Conditions of Employment Act 75 of 1997. This provides employers a robust defence against outdated claims, ensuring that only timely and legally valid demands are addressed.

In conclusion, The Prescription Act 68 of 1969 is an important piece of legislation that supports employers in managing their legal and financial responsibilities. By imposing a reasonable time frame for severance pay claims, it protects employers from the burden of indefinite liability. It promotes a more efficient and predictable legal environment for the resolution of employment disputes.

Article by Nihal Dasraj

Legal Assistant at Consolidated Employers Organisation (CEO SA)