The short answer
An employer can only withhold your salary if they have a court order. They cannot withhold the provident fund.
The whole question
My son was sent on a mixology training course by his employer (a wine estate). He has not had a salary increase in three years so he found a new job.
Now, his previous employers are withholding his salary and provident fund because he left twelve months into his 18-month contract. Are they allowed to do that?
The long answer
There are a number of issues here:
What the consequences can be for an employee who breaches a contract;
The nature of fixed-term contracts;
Whether the employer can withhold the provident fund;
Whether wine estates get assistance from government for training.
For 1.) Where an employee agrees to work for a fixed period, the contract will usually state that the employee may not give notice before this fixed period has expired. Resigning before the agreed period would then be a breach of contract. Even if it could be argued that working for three years without a salary increase is unfair, it does not entitle an employee to breach the contract he has signed.
The employer can accept the resignation, cancel the contract and pursue damages in court. They can also hold the employee to what’s left of the contract and then the contract will only end after the full notice period.
In theory the employer has the right to claim the value of the employee’s salary for any period of notice not served, but the employer must get a court order in a civil court to do this, and because that is a long and expensive business, most employers won’t go that route.
For 2.) Fixed-term contracts:
Generally, a fixed-term contract cannot be for longer than three months, unless:
The employee is replacing another employee who is temporarily absent from work;
Is employed on account of a temporary increase in the volume of work which is not expected to endure beyond twelve months;
Is a student or recent graduate employed for the purpose of being trained or gaining work experience to enter a job or profession.
The third option (bolded) may be the reason in your son’s case.
For 3.) Whether the employer can withhold the provident fund:
In terms of Section 37D(b)(ii) of the Pension Funds Act, the trustees of the pension or provident fund must weigh up the rights of both the member and the employer, when considering whether the provident fund can be withheld or deductions made from it. The employer is not allowed to withhold the provident fund.
Section 37 says that a fund may deduct from a member’s benefit payable any amount in damages caused to the employer by the member as a result of theft, fraud, dishonesty or misconduct, only if the member has admitted liability in writing and agreed to the amount of damages, or a civil court has found that the employer is entitled to specific damages or criminal court judgement has been obtained against the member. In the case of a criminal judgement the employer also has to apply for a compensatory order from the court for damages to be paid. All this must be submitted to the fund by the employer before the fund will consider any deductions or withholding of the member’s benefit.
In 2019, the Sygnia asset management company said that, “the employer must show that the member acted intentionally and maliciously in a particular situation. For example, failure to pay back a study loan is a breach of contract but is not considered an act of dishonesty (or any other categories) in terms of the requirements for a deduction under Section 37D.”
So, it does not seem at all likely that the pension fund will agree to deductions from or withholding of your son’s provident fund. He should contact the administrator of the fund and discuss what has happened. If he does not get the assistance he needs from the fund, he can contact the Pension Funds Adjudicator and lay a complaint. The adjudicator's office investigates and decides complaints of abuse of power, maladministration, disputes of fact or law and employer dereliction of duty concerning pension and provident funds. The Office of The Pension Funds Adjudicator is in Pretoria, Gauteng. You can contact the office for general enquiries or to lodge a complaint at www.pfa.org.za or call 012 346 1738.
For 4.) Whether wine estates receive government funding for training:
There are various initiatives by winemakers in association with government to provide different sorts of stipends and bursaries for students, but this would not affect the contract your son signed.
Wishing you the best,
Answered on June 22, 2021, 1:56 p.m.
Please note. We are not lawyers or financial advisors. We do our best to make the answers accurate, but we cannot accept any legal liability if there are errors.