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 Act Business 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

Security Company New Security Company

Outsource the business of security to….

The Company

Second Generation Transfer

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 terminated the agreement with LGM and refused to take the employees back SAA outsourced its infrastructure and support services i.t.o S197

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)

3 rd and 4 th respondents 2 nd respondent Cancelled franchise arrangement CELL C Awarded franchise

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 [email protected]

www.deneysreitz.co.za