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[2015] ZALAC 65
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Communications Workers Union v MTN (DA10/13) [2015] ZALAC 65 (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.