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[2015] ZALAC 8
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Communication Workers Union ("CWU") and Others v Mobile Telephone Networks (Pty) Ltd ("MTN") and Another (DA10/13) [2015] ZALAC 8; (2015) 36 ILJ 1819 (LAC) (21 April 2015)
REPUBLIC OF SOUTH
AFRICA
THE LABOUR APPEAL
COURT OF SOUTH AFRICA, DURBAN
Reportable
Case no: DA10/13
In the matter
between:
COMMUNICATION
WORKERS UNION
(“CWU”)
..................................................
First
Appellant
K PILLAY AND
OTHERS
......................................................................................
Second
Respondent
and
MOBILE TELEPHONE
NETWORKS (PTY) LTD (“MTN”)
................................
First
Respondent
INTERACTION CALL
CENTRE (PTY)
LIMITED
............................................
Second
Respondent
Heard: 17 March
2015
Delivered:
21 April 2015
Coram:
Waglay JP, Davis and Ndlovu JJA
JUDGMENT
DAVIS JA
[1]
This case concerns the scope of s197 of the
Labour Relations Act 66 of 1995 (“LRA”). This dispute
regarding the application
of s197 of the LRA turns on whether the
termination of the service agreement concluded between first and
second respondents stands
to be considered as a simultaneous
resumption by first respondent of the service and thus constitutes a
transfer of the business
as a going concern for the purposes of s197.
Factual matrix
[2]
Most of the facts in this case appear to be
common cause. In 2000, first respondent established an MTN call
centre in KwaZulu-Natal.
It was one of the largest call centres
nationally and was designed to serve the needs and answer the queries
of first respondent’s
prepaid customers. Initially, first
respondent managed and administered the operation of the call centre.
In 2006, however, first
respondent concluded a “Call Centre
Service Agreement” (“the agreement”) with second
respondent. In this
agreement, second respondent contracted to
provide first respondent with “services” as defined.
These were defined
in the agreement as “the services to be
rendered by Interaction at the KZN Interaction Call Centre or any
other call centre
managed by Interaction for MTN as more clearly
defined in the service level agreement”.
[3]
In terms of clause 6.5 of the agreement, it
was second respondent who contracted to ensure that the provision of
the services was
in line with the following criteria.
‘
1.
The training, management, discipline, control, administration and
supervision of all Agents under its control, and other matters
related thereto, including, but not limited to, the retention of all
information pertaining to agents, the imposition of restraint
and
confidentiality provisions in accordance with MTN policies. Payment
and administration of wages and salaries, work attendance
and
timekeeping will be in compliance with all applicable laws.
2. To provide and to
ensure the availability at all reasonable times and when necessary of
a knowledgeable, competent and experienced
staff member of
Interaction to assume responsibility to give effect to the provisions
of what is set out in this agreement hereof
at the site where Agents
provided by Interaction are present.
3. To ensure at all
times that it is familiar with MTN’s vision, mission statement,
policies, and strategies to the extent
that they impact on the
nature, type and calibre of Agents suitable for MTN’s needs and
goals as a telecommunications company.
4. To ensure that
the national and/or regional Account Executive is available to attend
such meetings and provides such information
as shall be reasonably
requested by MTN in connection with the rendering of the Services by
Interaction.’
[4]
Of equal importance to the relationship
between first and second respondent was clause 13 which provided
thus:
‘
Management
Control
The parties agree
that it shall be the sole responsibility of Interaction to manage,
administer and control the KZN Interaction
Call Centre or any other
call centre managed by Interaction for MTN and its employees and MTN
shall not be held liable for the
negligence occasioned by Interaction
in the running and management of the KZN Interaction Call Centre or
any other call centre
managed by Interaction for MTN.’
[5]
According to Ms Gugu Mcoyi, a supervisor
who was also the 27
th
applicant, second respondent used the following staff and methodology
to provide services as defined in the agreement:
1. Agents who were
employed by labour brokers dealt with calls from MTN’s clients
regarding technical and other cell phone
queries.
2. Supervisors who
were employed by second respondent managed teams of agents, assisted
agents with queries that they were unable
to handle, coached and
trained agents, managed and assisted the performance of agents and
conducted quality evaluations of the
queries which had been conducted
by these agents.
3. Second respondent
also employed call centre managers to manage teams of supervisors and
conduct performance and quality control
as supervisors.
4. It appears that
there was also a workforce department which was mandated to draw up
work and shift schedules to ensure that there
were sufficient agents
and supervisors to perform the business of the call centre.
5. A quality
assurance specialist ensured quality control of the service. There
was also an operations manager, a financial manager,
operations
administrators, a human relations officer and trainers.
[6]
In June 2010, first respondent informed
second respondent and the appellants that it had decided to terminate
the agreement with
second respondent effective from December 2010. In
terms of a letter generated by Mr Eddie Moyce, Executive: Customer
Operations
of MTN on 1 June 2010, second respondent was informed
that:
‘
We
regret to inform you that MTN’s management has taken a
strategic decision to internalise the sourcing of the Pre-Paid Call
Centre Services which services would be provided by Interaction under
the agreement.’
It
appears from the record, particularly from the evidence of Ms Mcoyi,
that all the call centre managers with an average of four
years of
experience, the entire workforce department, eight supervisors with
the average of four years’ experience and three
quality
controllers with the average of four years’ experience were
employed by first respondent following the cancellation
of the
agreement and first respondent’s resumption of running the call
centre from 1 December 2010.
[7]
In February 2011, a further four former
supervisors previously employed by second respondent were employed by
first respondent.
It appears as well that the first respondent also
retained the services of at least 47 of the agents employed by the
labour brokers,
but utilised initially by second respondent. In terms
of clause 19 of the contract between first and second respondent, the
first
respondent had taken over responsibility for these agents.
[8]
As a result of these developments,
appellants’ attorneys wrote to first and second respondent on
30 November 2010, noting
that s197 of the LRA provides for the
automatic transfer of employment contracts of employees from one
employer to another where
a business is transferred as a going
concern. Appellants’ attorneys contended that where employees
were dismissed because
of a transfer, the dismissal was regarded as
automatically unfair and, where employees have been re-employed with
the loss of service
and on less favourable terms, this act also
constituted an automatically unfair dismissal.
[9]
Once first and second respondents adopted
the approach that s197 was inapplicable to the facts as I have
outlined them, appellants
approached the Labour Court for an order
couched in the following terms:
‘
(i)
declaring that there was a transfer of a business as a going
concern by Interaction Call Centre (Pty) Ltd [the second
respondent
in the court
a quo
]
to MTN. the respondent and that such transfer falls within the ambit
of s 197 of the Labour Relations Act, 1995;
(ii) declaring that
the second and further appellants are in law employees of the
respondent with effect from 1 December 2010 with
no loss of service;
(iii) directing the
respondent to take into its employ the second and further appellants
on terms prescribed by s 197 of the LRA.’
The court
a
quo
[10]
Cele J dismissed the appellants’
case. The central reasoning employed by the learned judge is captured
in the following passage
of his judgment:
‘
I
am persuaded by the first respondent’s submission that at no
stage did the second respondent have its own infrastructure
as it had
to utilise that of the first respondent infrastructure. The employees
it employed to provide the services to the first
respondent played a
very limited, constricted role in the first respondent’s call
centre in KZN. The actual work in the call
centre was performed by
the agents employed by a labour broker and everything done by the
managerial or supervisory staff employed
by the second respondent had
to conform to the first respondent’s standards and directions.
Moreover, the majority of employees
used by the second respondent
were not required by the first respondent when it commenced on 1
December 2010 to provide the service
of managing the agents in the
call centre. Managers and supervisory staff were
transferred from Johannesburg and only
some of the second
respondent’s employees who had the required skills were
appointed.’
The appeal
[11]
Appellants’ contended that second
respondent had run a defined and discrete business. The running of
this business was sufficiently
autonomous from that of first
respondent. In appellants view, the business comprised of the
following elements:
1. a business
objective, being the generation of revenue for first respondent by
maintaining an unproblematic network for first
respondent’s
prepaid clients;
2. the fulfilment of
contractual obligations as set out in the agreement;
3. a specific
operational method of rendering a service;
4. a contractual
right to use the infrastructural assets and resources owned by the
first respondent to render the specified services;
5. an organised
grouping of employees as well as agents who were recruited from
labour brokers;
6. specific
activities performed by these affected employees; and
7. goodwill in the
form of a quality service which generated business accolades which
were awarded to the centre during the duration
of the agreement.
When
the agreement was terminated, this business was transferred as a
going concern to the first respondent in that, the latter
performed
the services previously provided by the second respondent in the form
of a call centre. Services were rendered to the
same category of
clients. The main business objective remained the same as it had been
during the duration of the agreement. The
same operational methods of
rendering services were pursued by first respondent. Furthermore,
first respondent took over a significant
part of second respondents’
former employees together with a significant number of agents, all of
whom were assigned to provide
a necessary service.
[12]
Section
197 of the LRA has been subjected to significant jurisprudential
scrutiny. It might have been thought after the careful
judgment of
the Constitutional Court in
Aviation
Union of South Africa and Another v South African Airways (Pty) Ltd
and Others
[1]
,
which judgment had built upon the law as set out in an earlier
decision in
National
Education Health and Allied Workers Union v UCT and Others
(NEHAWU),
[2]
that
judicial clarity and certainty had been given to the scope of this
section.
[13]
However,
this Court has been confronted with a number of further challenges.
See
TNS
Group Industrial Services (Pty) Ltd v Unitrans Supply Chain Solutions
(Pty) Ltd
[3]
and
City
Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd and
Others (City Power (Pty) Ltd).
[4]
As this Court remarked in
City
Power (Pty) Ltd,
a court is required to examine the substance of the agreement to
determine whether an entity retains its identity after a transfer
so
that it can be concluded whether the transferor carries on the same
or similar activities with the same personnel and/or business
assets
without substantial interruption.
[5]
As the court stated:
‘
[t]he
question is whether the activities conducted by a party such as first
respondent constitute a defined set of activities which
represents an
identifiable business undertaking so that when a termination of an
agreement between first respondent and appellant
takes place, it can
be said that this set of activities, which constitutes a discrete
business undertaking has now been taken over
by another party.’
[6]
[14]
Mr van der Riet SC, who appeared together
with Mr Baloyi on behalf of first respondent, submitted that at no
stage did second respondent
own its own infrastructure. It provided a
service to first respondent, using the latter’s infrastructure.
In his view, the
employees, who were employed to provide a service to
first respondent, played a very limited and restricted role in the
call centre.
The core of the work had been performed by agents who
were employed by a labour broker. Further, all activities performed
by the
managerial/supervisory staff employed by second respondent had
to conform to standards imposed by first respondent. Further, the
majority of employees employed by the second respondent had not been
required by first respondent when it commenced on 1 December
2010 to
provide the service of managing the call centre itself.
[15]
Mr van der Riet correctly conceded
that it was fair to classify the operation of a call centre as a
separate business, albeit
that this was only a component of the
broader business enterprise of first respondent. The thrust of his
argument was that second
respondent did not operate the call centre,
partly because it had no infrastructure but employed that of the
first respondent and
partly because key elements of the activities of
a call centre were performed by agents who were employed by labour
brokers as
opposed to employees of the second respondent. Viewed
accordingly, employees of second respondent played a limited role in
the
operation of the call centre.
[16]
These submissions are contradicted by the
express agreement which was entered into between the parties. In
terms of clause 3.2,
second respondent was held to have “expertise
and adequate resources means to render and complete the Services”.
[17]
Insofar as the personnel who answered the
calls were agents and employed by a labour broker and not by second
respondent, clause
4.4 states: “All benefits to which an Agent
is entitled to is the subject matter of an agreement between
Interaction and
such agents”. The agreement thus envisaged a
relationship between second respondent and the agents. First
respondent had
no role insofar as these agents are concerned. This
provision should be read together with clause 2.2 of the Service
Level Agreement
which provides “below is a ramp up plan showing
the minimum number of trainable agents that Interaction will recruit
at the
time level shown below.” Thereafter, follows a table
which indicates dates and trainable agents that must be recruited by
second respondent. Again, the agreement makes it clear that first
respondent played no role in the manner in which these agents
were to
be integrated into the business operation nor in the recruitment
thereof. Further support for this conclusion is to be
found in clause
6.7:
‘
In
the event of an Agent’s violation and/or failure to adhere to
uphold MTN’s policies, brand values, procedures, and
code of
business conduct or due to incompetence, MTN reserves the right to
escalate such violation and/or non-adherence to Interactions’
management.
’
[18]
I have already referred to clause 13 which
makes it clear that the management, registration and control of the
call centre were
to be the sole responsibility of second respondent.
Indeed first respondent ensured, by way of the contract, that it
could not
be held liable for negligence which might be occasioned by
second respondent’s running of the call centre. For example, if
an agent performed negligently, any loss occasioned thereby would
have to be made good by second respondent. First respondent thus
ensured that it remained “out of the legal picture”.
[19]
Clause 19 headed the “Termination
Clause” provided some further measure of guidance: “in
the event of Interaction
ceasing its trade and/or going into
liquidation, MTN reserves the right to take over onto its payroll all
or any Agents and/or
management governed by this agreement at no
cost”.
[20]
Returning to the law, the application of
s197 depends upon a finely grained analysis of the facts of a
particular case. Such an
analysis will produce an answer to the key
question, whether in substance a discrete business operation had been
transferred from
entity A to B. See also
NEHAWU,
supra
at
para 56.
[21]
In my view, the evidence which was provided
to the court
a quo
justifies an answer that the second respondent was operating a call
centre as a discrete business. The fact that it was its only
business
is hardly material to the case. In terms of clauses 7 and 8 of the
agreement, second respondent could not, without permission
of first
respondent, operate a call centre for another cell phone company. It
was therefore not surprising that, in relation to
the running of a
call centre business for a cell phone company, second respondent had
but one client. Outside of a cell phone company,
it was possible for
second respondent to create another business. The fact that it had
but one client and operated a discrete business
for this client
should not detract from a conclusion that it was operating a call
centre business which constituted a discrete
business, sufficient to
fall within the scope of s197 of the LRA.
[22]
There was some debate about certain of the
appellants who refused re-employment and thus being the beneficiaries
of retrenchment
packages which appeared to have been paid by second
respondent. This set of facts does not prevent the relief that must
be granted
in terms of s197 of the LRA. If s197 of the LRA applies,
it must then follow that, in terms of s197(2) of the LRA, 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. All the rights and
obligations between the old employer and an employee, at the time of
the transfer,
continue to be in force as rights and obligations
between the new employer and these employees.
[23]
For these reasons, therefore a declaration
of s197 of the LRA is required and applies in this case. It means
that the individual
appellants (as set out in Annexure A to the
statement of claim) will continue to be employed but now by first
respondent as opposed
to second respondent.
Order
[24]
Accordingly, the following order is made:
1. The appeal is
upheld with costs.
2. The order of the
court
a quo
is set aside and replaced with the following
order:
2.1 It is declared
that there was a transfer of a business as a going concern by the
second respondent to first respondent and that
such transfer falls
within the ambit of
s197
of the
Labour Relations Act 66 of 1995
.
2.2 Second and
further appellants are declared in law to be employees of first
respondent effective from 1 December 2010 with no
loss of service.
2.3
The first respondent is ordered to pay appellants costs.
________________
Davis
JA
I agree
_________________
Waglay
JP
I agree
________________
Ndlovu
JA
APPEARANCES:
FOR
THE APPELLANTS: Adv P Schumann
Instructed
by Brett Purdon Attorneys
FOR
THE FIRST RESPONDENT: Van der Riet SC and Adv F Baloyi
Mashiane,
Moodley & Monama Inc
[1]
2012
(1) SA 321 (CC).
[2]
2003
(3) SA 1 (CC),
[3]
[2014]
10 BLLR 974 (LAC)
[4]
[2014]
10 BLLR 945 (LAC).
[5]
City
Power (Pty) Ltd
at
para 23,
[6]
City
Power (Pty) Ltd
at
para 24.