The short answer
Judges are divided, but it seems the Prescription Act can apply to labour matters.
The whole question
If an employer owes their employee money that was meant to be paid three years ago, would that debt be extinguished?
The long answer
Whether the Prescription Act is consistent with the Labour Relations Act has been hotly debated in the courts for the last few years, and though the judges all came to the same decisions on the outcomes of the cases, they differed in their reasons. Perhaps we should start by looking at what the Prescription Act of 1969 says and then look at what was decided in the courts:
“(1) Subject to the provisions of subsections (2), (3), and (4), prescription shall commence to run as soon as the debt is due.
(2) If the debtor wilfully prevents the creditor from coming to know of the existence of the debt, prescription shall not commence to run until the creditor becomes aware of the existence of the debt. (my emphasis – in case this applies to you)
(3) A debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises: Provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care.”
Reana Steyn, the credit ombud, says:
“The Prescription Act is clear. Generally, contractual and civil debts will be extinguished if not paid or acknowledged as being owed to the creditor by the debtor for a period of three years from the date when the payment was due. There are exceptions, where the prescription period for certain contractual and civil debts is longer. For example, a bank’s claim for the repayment of a monetary debt based on a court judgment, as well as claims for debts secured by mortgage bonds, prescribe after 30 years and not three years.”
The term “debt” is not explained in the Prescription Act, but the courts have said it means “that which is owed or due; anything like money, goods or services which one person is under an obligation to pay or render to another.”
Contracting parties (like employer and employee) are required to conduct their relationship in good faith, but the employer may, for example, deny that an allowance was part of a contract, and the onus of proving the existence of a contract rests on the person who alleges that the contract exists.
A permanent employee would have a contract setting out the terms of their employment, and would have a contractual claim for payment of any arrear wages which accrued in terms of this contract. But as such a claim is a contractual one, it would prescribe three years after it became due, if it had not been acknowledged by the employer.
Moving to your question whether the Prescription Act applies to the Labour Relations Act (LRA): as I mentioned above, there have been several cases concerning the relationship between these Acts that have gone all the way to the Constitutional Court, but these cases have been concerned with failure to reinstate employees after dismissals were found to be unfair by the CCMA and/or the Labour Court, or failure to pay wages for the period the employees were off work with the employers arguing that the obligation or debt had prescribed after three years.
Although the judges were divided on how the Prescription Act applied to the LRA, they agreed on the outcomes of each case. In one of the Constitutional Court judgments, while Judge Froneman agreed with Judge Jafta that the Prescription Act must be reinterpreted to give the right of access to justice. He did not agree that the Prescription Act was in opposition to the LRA. He said the two Acts could complement each other in a way that protected the right of access to justice as well as the speedy resolution of disputes, which the LRA provided for. He found that if a person started proceedings with the CCMA, that would indeed interrupt prescription, but emphasized that the "golden thread" running through both Acts was "fairness to both sides and certainty in the process."
So to sum up, it seems to me that unless your employer has acknowledged that he owes you money, either verbally or in writing, your claim has been prescribed. (editor's emphasis)
You could also ask for advice from The Black Sash, who give free paralegal advice. These are their contact details:
The Black Sash
Helpline: 072 66 33 73, 072 633 3739 or 063 610 1865.
Wishing you the best,
Answered on Feb. 2, 2024, 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.