Article 8/2023

To what extent is an employer entitled to request that an employee’s pension benefits be withheld pending finalisation of civil and criminal cases for damages caused and unlawful conduct committed during such employee’s employment?

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• Section 37D(1)(b) of the Pension Funds Act 24 of 1956 (‘the Act’) provides that the fund may
  make deductions from the pension benefits of an employee:
  • in respect of an amount due to the employer by such employee
  • on the date of his retirement or when he ceases to be a member of the fund
  • in respect of damages either admitted in writing or judgment obtained
• So, what is the scenario where, at the date when the employee ceases to be a member, on a
  prima facie basis, he caused damage to the employer but has not admitted to same in writing, or
  a judgment has not been obtained?
• In Highveld Steel and Vanadium Corporation Limited v Oosthuizen (2009) 20 (2) SALLR 1
  (SCA), the supreme court of appeal considered the above question and held that the board of a
  retirement fund has the power to withhold payment of pension funds due to an employee pending
  the outcome of a claim of damages to be instituted by the employer
• Highveld Steel further indicated that the object is to protect the employer’s right to pursue
  recovery of money misappropriated by the employee and that payment is delayed so that the
  employer can properly investigate – however, pension funds are to exercise their discretion with
  care and balance the competing interests of the employee and the employer. The aforesaid
  approach was subsequently followed in SABC v SABC Pension Fund 2019 (4) SA 608 (GJ), as
  well as Jacobs v Telkom (2022) 33 SALLR 23 (GP)
• Lastly, in Jacobs, the court specifically dealt with the following issues relevant to the exercise of
  the board of a retirement fund’s discretion in the above regard as well as the delays caused by
  the institution of proceedings by the employer:
  • the delay in finalising the matter may not be excessive – in considering whether the delay is
    excessive or not, various factors should be taken into account, namely, the attitude of the
    national prosecuting authority, the failure by the employer to actively pursue civil litigation to
    finality, the failure by the employee to bring an application to review the decision of the
    pension fund adjudicator, etc
  • not only has the employer a duty not to cause a delay, but the employee also has a duty not
    to contribute to the delay
  • the employer is required to establish at least a prima facie right
  • it also has to be established that, if the monies are paid to the employee, he would meet his
    existing financial obligations which, in turn, would leave the employer with no recourse
    (therefore, establishing irreparable harm)