SECOND GENERATION TRANSFERS
The SCA speaks: SAA Aviation Union of South Africa
The final word?
Murray Alexander, Director
S197’s Application to 3 Transactions:
Transfer
of a Business
Outsourcing
Second Generation
Transfers
WHETHER EMPLOYEES AUTOMATICALLY TRANSFER
• NEHAWU v UCT (Constitutional Court)
Employees automatically transfer
IF
Business transferred …”by one employer to another employer
as a going concern”
• 2002 LRA Amendment Act
WHETHER EMPLOYEES AUTOMATICALLY TRANSFER
• s197 pre 2002 LRA Amendment Act
“(1)
A contract of employment may not be transferred from
one employer (referred to as “the old employer”) to
another employer (referred to as “the new employer”)
without the employee’s consent, unless(a)
the whole or any part of the business, trade or
undertaking is transferred by the old employer as
a going concern;”
WHETHER EMPLOYEES AUTOMATICALLY TRANSFER
• s197 post 2002 LRA Amended Act
“(1)
In this section and in section 197A-
(a) ‘business’ includes the whole or a part of any business,
trade, undertaking or service; and
(b) ‘transfer’ means the transfer of a business by one
employer (‘the old employer’) to another employer
(‘the new employer’) as a going concern.
WHETHER EMPLOYEES AUTOMATICALLY TRANSFER
(2)
If a transfer of a business takes place, unless otherwise
agreed in terms of subsection (6)(a) the new employer is automatically substituted in the
place of the old employer in respect of all contracts of
employment in existence immediately before the date of
transfer;
(b) all rights and obligations between the old employer and
an employee at the time of the transfer continue in force
as if they had been rights and obligations between the
new employer and the employee;
WHETHER EMPLOYEES AUTOMATICALLY TRANSFER
(c)
anything done before the transfer by or in relation to the
old employer, including the dismissal of an employee or
the commission of an unfair labour practice or act of
unfair discrimination, is considered to have been done by
or in relation to the new employer; and
(d)
the transfer does not interrupt an employee’s continuity
of employment, and an employee’s contract of
employment continues with the new employer as if with
the old employer.”
OUTSOURCING
• NEHAWU v UCT (2002) (LC)Outsourcing is not a transfer of business as a going concern
Therefore no automatic transfer of employees
• 2002 LRA Amendment ActBusiness includes
“Whole or part of any business, trade, undertaking or service”
• SAMWU v RAND AIRPORT (LC)
Outsourcing is a transfer of a business as a going concern
Therefore automatic transfer of employees
SECOND GENERATION TRANSFERS
Million Dollar Question:
Is there a transfer of a business/service by one employer to
another employer?
SECOND GENERATION TRANSFERS
New Security
Company
Security Company
Second Generation
Transfer
Outsource the business
of security to….
The Company
SECOND GENERATION TRANSFERS
What do the courts say?
• COSAWU v Zikhethele (2005) (LC) – YES
• Aviation Union v SAA (2008) (LC) – NO
• Aviation Union v SAA (2009) (LAC) – YES
• Adam Sanders v Cell C (2010) (LC) – YES
• SAA v Aviation Union (2011) (SCA) - NO
COSAWU v ZIKHETHELE (LC)
Khulisa
Zikhethele
Awarded
contract
Terminal & Steverdoring
Fresh Produce Terminals
COSAWU v ZIKHETHELE (LC)
MURPHY AJ:
• The business of FPT is transferred automatically from Kholisa
to Zikhethele as a going concern;
• The employees are automatically transferred.
Aviation Union v SAA (LC)
L.G.M.
SAA outsourced its
infrastructure and
support services i.t.o
S197
SAA terminated the
agreement with LGM
and refused to take the
employees back
S.A.A.
AVIATION UNION v SAA (LC)
BASSON J:
• must have regard to ordinary and literal meaning of words
unless ambiguous or would lead to an absurdity
• definition of “transfer” – “transfer of a business by one
employer to another employer as a going concern”
• transfer does not mean from old contractor to new
contractor.
AVIATION UNION v SAA (LAC)
• “The use of “by” indicates that the transferor has a positive
role to play in bringing about the transfers. Its replacement
by the word “from” eliminates ... and reduces the transferor
to a passive position to which it may not only not do anything
to bring about the transfer but may very possibly ...
strenuously resist it.”
‘Is Outsourcing In? An Ongoing Concern’ by MJD Wallis SC.
AVIATION UNION v SAA (LAC)
DAVIS JA:
• considers and disagrees with Wallis
• s197 does apply to second generation transfers
• employees automatically transfer to SAA and/or new
service provider.
AVIATION UNION v SAA (LAC)
ZONDO JP:
• purposive approach is consistent with constitution
• protection of workers is paramount in a transfer
• therefore s197 applies to second generation transfers
SANDERS V CELL C (LC)
3rd and 4th respondents
2nd respondent
Cancelled
franchise arrangement
Awarded
franchise
CELL C
SANDERS V CELL C (LC)
DE SWARDT AJ:
• Seamless change of proprietor.
• No s197 transfer on a literal interpretation – this would
defeat purpose of s197 to safeguard jobs.
• Interpretation of an automatic transfer accords with
constitution and objects of the LRA.
• Automatic transfer of business and therefore Sanders
employee of new franchise.
SAA v AVIATION UNTION (SCA)
“Where parties wish to enter into an outsourcing agreement, and then for
the business to revert to the outsourcer, or to be transferred to another
provider, there must be a clear re-transfer, demonstrated through written
contracts or conduct, of all assets and obligations of business, including the
transfer of workforce rights and obligations so that no difficulty arises in
invoking the protection afforded by s197 to affected employees who have
been involved in carrying out the services provided for in the initial
outsourcing agreement”
• no transfer “by” old employer (LG) to new employer (SAA)
• no basis in law to extend the meaning of “by” to include
“from”
SAA v AVIATION UNION (SCA)
Quote
LABOUR RELATIONS AMENDMENT BILL 2010
“S197 of the principal Act is hereby amended by the
substitution in subsection (1) for paragraph (b) of the
following paragraph:
(b) ‘transfer’ means the transfer of a business [by]
from one employer (‘the old employer’) to
another employer (‘the new employer’) as a going
concern.”
SECOND GENERATION TRANFERS
Is this the final word?
CONTACT DETAILS
For further information please contact
Murray Alexander
Tel
:
Fax
:
Email :
Website :
+27 31 582 5640
+27 31 582 5740
murray.alexander@deneysreitz.co.za
www.deneysreitz.co.za