Online Reporter
Fidelis Munyoro-Chief Court Reporter
The Constitutional Court has confirmed a High Court ruling declaring unconstitutional a provision of the Reconstruction of State-Indebted Insolvent Companies Act that prevented former employees of SMM Holdings from accessing their terminal benefits.
In a judgment handed down on June 17, 2026, the Constitutional Court upheld an order invalidating Section 28(2) of the Reconstruction Act, finding that it unlawfully suspended workers’ labour rights for an indefinite period.
The case was brought by 27 former SMM Holdings employees who argued that the provision had denied them access to salaries, retrenchment packages and other terminal benefits following the termination of their employment.
Writing for a unanimous bench, Justice Anne-Mary Gowora held that the impugned provision was inconsistent with Section 65(1) of the Constitution, which guarantees fair labour practices, as well as Sections 2A(3) and 13 of the Labour Act.
“The applicants, having been either dismissed or retrenched by their erstwhile employer, are owed terminal benefits. That these are due is not disputed,” the court said.
The former workers told the court that many affected employees had spent years without receiving their dues, while some had died before obtaining payment. They argued that Section 28(2) effectively barred them from enforcing their rights against the company, which has been under reconstruction for more than two decades.
The Minister of Justice, Legal and Parliamentary Affairs, the Attorney-General and SMM Holdings opposed the application. They argued that the matter was not ripe for constitutional determination and that alternative remedies were available under existing insolvency legislation.
However, the Constitutional Court rejected those arguments, finding that a real and live dispute existed between the parties.
The court held that the Labour Act expressly prevails over any inconsistent legislation and that employees of companies under reconstruction remain entitled to the protections afforded by labour laws.
“It follows, inevitably, that Section 13 applies with full force to employees whose contracts of employment are terminated in the course of a company’s reconstruction,” Justice Gowora said.
The court further ruled that Section 28(2) imposed an unfair, unreasonable and disproportionate limitation on workers’ constitutional rights.
“Section 28(2) fails the proportionality test as it completely removes from employees the fair labour rights enshrined in Section 65(1),” the judgment reads.
The Constitutional Court confirmed the High Court’s declaration of invalidity but suspended the order for 180 days to allow the responsible minister to amend the legislation.
The declaration will not apply retrospectively and will not affect actions taken before the date of the order.
The judgment was concurred in by Deputy Chief Justice Elizabeth Gwaunza and Justice Paddington Garwe, Justices Ben Hlatshwayo, Bharat Patel, Susan Mavangira, and Acting Constitutional Court judge Justice Nicholas Mathonsi.
The ruling is expected to have significant implications for employees of companies placed under reconstruction, reinforcing the supremacy of labour protections over legislation that delays or suspends the payment of terminal benefits.
