http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.78Change: 0.10
R/$ = 12.50Change: 0.06
Au 1095.40 $/ozChange: 0.05
Pt 983.00 $/ozChange: 0.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Jun 14, 2012

Facts of business transfer determine labour law applicability

Back
Africa|LGM South Africa|South African Airways|Africa|Contracting|Maintenance|Service|Services|Similar Services|Claire Gaul|Operations
Africa||Africa|Contracting|Maintenance|Service|Services|||Operations
africa-company|lgm-south-africa|south-african-airways|africa|contracting|maintenance|service|services|similar-services|claire-gaul|operations
© Reuse this



The facts around the transfer of a business, specifically whether the business and services continue after the transfer, will determine whether Section 197 of the Labour Relations Act (LRA), No 66 of 1995, is applicable, in which case the employees must continue to be employed by the new employer to provide the services.

Webber Wentzel partner Claire Gaul explains that the Constitutional Court, with clarification provided by the Labour Court, in December 2011, stated that the facts around a transfer determine the applicability of Section 197 of the LRA. That is irrespective of whether the entity is profit-making or not, whether there is a sale of a business, a donation of a business or a sale of part of a business, and if there is an identifiable entity that provides similar services after the transfer.

Section 197 states that there are automatic statutory employment consequences if a transaction conforms to a transfer of a business, trade, undertaking, service, or part thereof.

All the rights and obligations between the old employer and an employee at the time of the transfer continue to remain in force as if they had been the rights and obligations entered into between the new employer and the employee. Further, 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.

“The Constitutional Court said two key ques- tions must be answered to determine if Section 197 will apply. Does the transaction create rights and obligations that require one entity to transfer something in favour of or for the benefit of another, or to another? If the answer is ‘yes’, does the obligation imposed within the transaction contemplate a transferor who has the obligation to effect the transfer or to allow the transfer to happen, and is there a transferee who receives the transfer?

“If the answer to both questions is ‘yes’, the transaction contemplates a transfer by the transferor to the transferee, and hence Section 197 may apply.”

However, the Constitutional Court noted that it is important to determine whether the transfer is of going concern, meaning that operations continue after the transfer. Further, the court said that what must be transferred is a business in operation, so that the business remains the same, or similar, but in different hands.

“One must determine the facts around a transfer objectively with regard to the substance of the transaction, regardless of the form that the transaction takes. If a business or coherent entity, which is identifiable and conducts identifiable activities, . . . continues in the hands of another, it is enough to trigger the application of Section 197 regarding employment protection,” says Gaul.

“Is there a transaction which involves the movement of an identifiable service from one entity to another entity and which will be continued in the hands of the latter? This is the critical question to ask.

“The theme throughout the Section 197 cases before the courts is the necessity of reviewing decisions from an employment perspective, not the principles of property, company or insolvency. The crucial question is whether, taking a realistic view of the activities in which employees are employed, there exists an economic entity which, despite changes, remains identifiable, but not necessarily identical, after the alleged transfer,” she explains.

Further, Gaul highlights the case of national airline South African Airways (SAA) and facility management company LGM South Africa heard by the Constitutional Court, in which there was reference to the original outsourcing contract whereby SAA outsourced maintenance operations to LGM South Africa. SAA, at the end of its contract with LGM South Africa, wanted to appoint another service provider to provide similar services.

The Constitutional Court noted that, in that specific case, the original agreement was of importance but not of overriding importance.

“This means that the question of first-generation outsourcing and whether second-generation outsourcing, where the business receiving the services changes service providers, triggers Section 197 is moot. As long as a transfer or transaction fulfils the requirements to trigger Section 197 of the LRA, then the section is applicable to that transfer.

“Again, one has to look at the facts to deter- mine if the service is of going concern (continuing), rather than a simple contracting out of a service to a service provider, which does not trigger the application of Section 197,” explains Gaul.

“The scope of Section 197 of the LRA is wide open and each case must be considered on its facts to determine if Section 197 will apply,” she concludes.

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other News This Week News
Updated 6 hours ago Meyerton-based steel tank manufacturer Structa Technology is currently rolling out a water infrastructure build programme that supports local municipalities, water utilities, schools, hospitals and clinics.
Alternative funding models could be expected to begin coming to the fore in South Africa’s renewable-energy sector as the market becomes more competitive and domestic development finance institutions (DFIs) begin scaling back their direct involvement in projects....
DIMITRI MARKOULIDES An innovation champion must involve employees in innovation projects and keep them updated to enable them to support and drive innovation and create the future of the business
An innovation champion course that trains executives to manage innovation in their organisations aims to help companies grow revenue streams and tap new markets, says business change management consultancy BMGI South Africa innovation practice lead Dimitri...
More
 
 
Latest News
Updated 45 minutes ago Not only were new oil and gas (O&G) discoveries in East Africa a catalyst for investment into road, rail and pipeline infrastructure, but they also contributed to the region’s economic growth, with growth of 5.5% projected for this year and an estimated 6% to 7% for...
Updated 1 hour 2 minutes ago Transnet has won the 2014 Nkonki State-Owned Company (SOC) Integrated Reporting Award for the best performer. Assurance and advisory firm Nkonki on Wednesday released the findings of its 2015 review of integrated reporting by South African SOCs. The report, titled...
Updated 1 hour 3 minutes ago Leading water scientists say it is no longer debatable that South Africa is experiencing a water crisis given that there are already serious problems in supplying enough water of sufficient quality to meet the country’s social and economic needs. CSIR researchers...
More
 
 
Recent Research Reports
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Construction 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Electricity 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Road and Rail 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
 
 
 
 
 
This Week's Magazine
Updated 6 hours ago Meyerton-based steel tank manufacturer Structa Technology is currently rolling out a water infrastructure build programme that supports local municipalities, water utilities, schools, hospitals and clinics.
Alternative funding models could be expected to begin coming to the fore in South Africa’s renewable-energy sector as the market becomes more competitive and domestic development finance institutions (DFIs) begin scaling back their direct involvement in projects....
DIMITRI MARKOULIDES An innovation champion must involve employees in innovation projects and keep them updated to enable them to support and drive innovation and create the future of the business
An innovation champion course that trains executives to manage innovation in their organisations aims to help companies grow revenue streams and tap new markets, says business change management consultancy BMGI South Africa innovation practice lead Dimitri...
Future digital workplaces will require employees to continuously learn new “literacies”, including new media, information and technical skills, to help their company thrive and spur personal growth. Information technology (IT) research firm Gartner, thus, suggests...
Only 25% of large construction projects surveyed in KPMG’s Global Construction Project Owner’s Survey, released in June, were concluded on time and within budget over the last three years. “Every project owner wants predictability when it comes to large projects, and...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96