LABOUR LAW ARR 214 Theme 14

THEME 14 TRANSFER OF A BUSINESS PGL (2006: ); WL (2009: ); PLL (2005: ) SEE ADDITIONAL MATERIAL FOR CASE LAW.

THEME 14 (LEARNING OUTCOMES) Know and comprehend the meaning and extent of the concept of transfer of a business. Discuss the meaning and extent of the concept “going concern”. Know the effect of the LRA on a contract of sale. Be acquainted with matters pertaining to disputes about the transfer of a business. Be acquainted with matters relating to possible penalties/remedies. Discuss the application of a transfer of a business through case law. Explain the effect of outsourcing. Distinguish between the rights and obligations of the buyer and seller of a business.

THEME 14 (INTRODUCTION) Sect 197 Transfer of contract of employment in case of voluntary transfer of business to new employer. Art 197A Transfer of contract of employment in circumstances of insolvency where business is transferred to new employer. Art 197B Disclosure of info regarding insolvency.

THEME 14 (TRANSFER OF A BUSINESS) Business includes whole/part of business, trade, undertaking or service. Transfer refers to transfer of business as going concern by one employer (old employer) to other employer (new employer). Business is transferred as going concern if movable and immovable assets (i.r.o. core business) and bulk of employees are transferred. (Rand Airport Management)

THEME 14 (SECT 197 I) Whenever (part of) business is sold as going concern, new employer is automatically substituted in the place of old one. (All contracts of employment in force immediately before date of transfer.) All the employment rights and obligations of employees as well as collective agreements pass over automatically as well. Old employer need not seek employees’ consent before their contracts are transferred and he need not retrench them. Employees must be employed on terms and conditions “that are on the whole no less favourable to employees than previous terms and conditions”. Parties may vary transfer terms by agreement. Where circumstances are substantially less favourable, employee may terminate contract and claim constructive dismissal from new employer. (Anglo Office Supplies) Where new employer provides equivalent terms and conditions, employee who is unwilling to be transferred must resign on notice.

THEME 14 (SECT 197 II) Amendment 12/2002 Note the amendment in LRA 12/2002 which came in operation on 1 Aug 2002: New employer steps in shoes of old employer. (Before amendment there were opinions that old employer had choice between transfer of contract en termination of contract of employment. But after amendment there now is compulsory and automatic transfer of contracts of employment.) No break in continuance of service. New employer must ensure that conditions of employment are on the whole no less favourable than previously. Provident funds may differ. Amendment also proposes that old and new employers may agree with employees to vary transfer terms. Old and new employers must agree beforehand on the accrued employee entitlements (leave pay, severance pay and other payments). Employers must agree as to who will be responsible for these payments. Old employer will be liable for these payments for a period of 12 months after transfer if employees are retrenched or if business becomes insolvent. Must therefore take precautionary measures e.g. Insurance.

THEME 14 (SECT 197A) Transfer of employment contracts in cases of insolvency. 1.New employer is automatically substituted in the place of old employer in all employment contracts of old employer. 2.All the rights and obligations between old employer and employees, remain rights and obligations between new employer and employees. 3.Anything done before transfer by old employer will be considered to have been done by new employer. 4.Transfer does not interrupt employee’s continuity of employment and it continues with new employer.

CONCLUSION No focus on outsourcing this year as there are pending amendments in this regard and current negotiations between business, unions and Government in this regard. You need not focus on case law for tests and exams pertaining to this last lecture (theme 14) only. Please note that the Rand Airport LC case had been overturned by a LAC decision which now stipulates that outsourcing falls under section 197 Transfer of business in that a service includes not only service but a type of business. Good luck for the test/s. Test 2 : Units 9-14 (inclusive of both modules) and there is no promotion test. Do not forget to study the case law. Please be reminded to study the Codes of Practice found in your handbook p There will be class before the exam- please see your roster.