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[2010] ZALCJHB 64
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Pestana v Gideon Pretorius Inc. and Others (JR346/09) [2010] ZALCJHB 64 (13 April 2010)
IN THE LABOUR COURT OF
SOUTH AFRICA
(HELD AT JOHANNESBURG)
CASE NO: JR 346/09
In the matter between:
MARIA DOLORES FERRO
PESTANA
Applicant
and
GIDEON
PRETORIUS INC.
1
st
Respondent
COMMISSION
FOR CONCILIATION,
MEDIATION
AND ARBITRATION
2
nd
Respondent
COMMISSIONER
LUNGILE MTIYA
3
rd
Respondent
JUDGMENT
LAGRANGE,AJ
Introduction
1.
This matter is a review application.
The applicant seeks to set aside a ruling by third respondent in
which the third respondent
dismissed a condonation application for
the late filing of a referral of an unfair dismissal dispute to the
CCMA.
2.
The applicant was dismissed for operational
reasons by her former employer, Gensec Property Services (‘Gensec’),
on
the 30 June 2007, and also alleges that on 1
st
July 2007 the first respondent, a firm of attorneys, took transfer of
the legal department of Gensec.
3.
Initially, the applicant timeously referred
the dispute in respect of Gensec to the CCMA and subsequently
referred an unfair dismissal
claim to the Labour court. The
applicant did not cite the first respondent as a party to any of
those proceedings.
4.
The applicant contends that her dismissal
was automatically unfair in terms of section 187 (1)(g) of the Labour
Relations Act, 66
of 1995, (‘the LRA’) in that it was the
result of a transfer or a reason relating to a transfer, as defined
in section
197 of the LRA. Alternatively, she claimed that her
dismissal was an unfair retrenchment. In her statement of case,
the applicant expands on her claim as follows :
"9.
The cause of the dismissal aforesaid was Respondent's decision to
outsource,
in its entirety, the legal services division
(hereinafter the service) of the Respondent, thereby rendering the
applicant’s
post superfluous.
10.
The respondent outsourced the service
to Gideon Pretorius Attorneys (the service provider) in
terms of an
outsourcing agreement."
5.
The applicant further alleges in her
statement of case dated 30 August 2007, that the retrenchment process
was embarked upon immediately
after the decision to outsource its
legal services division. In consequence, she believed that her
dismissal and that of
the other legal adviser was inevitable.
6.
The applicant’s case against her
former employer was due to be heard late in 2008. According to
the applicant’s
founding affidavit in the condonation
application before the CCMA, her attorney became aware of certain
case law a week or so prior
to trial, which "suggested that an
applicant in her circumstances was obliged also to seek relief
against the party to whom
the business or portion of a business,
undertaking or service had been transferred."
7.
The pending trial was postponed with
Gensec’s consent, and the applicant consulted with counsel.
She and her legal representatives
decided "out of an abundance
of caution" to include the first respondent as the second
respondent in the Labour court
trial.
8.
Somewhat confusingly, the applicant’s
characterisation of her perceived legal position was expressed as
follows: "If
the legal position is such that I am obliged to
join the first respondent to the proceedings by virtue of the fact
that the first
respondent became the new employer on or about 1 July
2007 and that simultaneously, despite having been retrenched, my
employment
was automatically transferred from the second to the first
respondent, then I have excellent prospects of success."
9.
The applicant’s advisers then
counselled that, prior to joining the first respondent in those
proceedings, it would probably
be necessary to conciliate a dispute
between the first respondent and herself, even though it might be
argued that the first respondent
had stepped into the shoes of Gensec
and that the conciliation with Gensec would be deemed to have been
conciliation with the first
respondent.
10.
The applicant’s attorney also
canvassed informally with the attorneys representing Gensec,
whether or not they would
object to the first respondent being joined
in the matter. Although Gensec’s attorneys gave no
undertaking in this
regard, they were clearly doubtful that their
client would oppose an application for joinder.
11.
In accordance with the view adopted by the
applicant’s advisers, she lodged a further dispute referral
with the CCMA on 17
December 2008, citing the first respondent as the
other party for the first time. This occurred nearly 18 months
after the
termination of her employment.
The
Commissioner’s ruling
12.
Unsurprisingly, the commissioner found the
502 day delay excessive. In assessing the applicant’s prospects
of success, the
commissioner held that the applicant had to prove
that she had been unfairly dismissed by the first respondent, which
could not
have occurred if she had not been employed by it. The
commissioner found the answer to this question obvious: the applicant
had never been employed by the first respondent in the ordinary
sense, nor in the sense that her employment had been transferred
to
it in terms of section 197.
13.
The commissioner found that the first
respondent had no say in Gensec’s decision to retrench the
applicant. Further, as a
legal firm, the first respondent could not
have taken over part or all of the business of Gensec as a going
concern, because it
never owned or managed any part of it. Further,
because the first respondent is a firm of attorneys it is legally
prohibited from
owning any other part of a business except that of
other attorneys. The commissioner found that the relationship between
Gensec
and the first respondent was that of client and service
provider respectively. The commissioner also accepted that Gensec had
outsourced
its legal department to the first respondent.
14.
In the commissioner’s view, section
197 had no application to an outsourcing arrangement such as existed
between Gensec and
the first respondent.
15.
The commissioner found that the applicant
as a legal professional ought to ‘have known better’ and
read the LRA, where
she would have learnt of the importance of
dealing with disputes expeditiously. By implication, the commissioner
did not accept
that the applicant had provided a reasonable
explanation for her delay.
16.
A central pillar of the commissioner’s
reasoning rests on her finding that an outsourcing arrangement could
not be construed
as a transfer of a service or undertaking under
section 197 and that no transfer could occur without the sale of
Gensec’s
legal department which did not take place and was
legally impossible because the first respondent, as a firm of
attorneys, could
not acquire ownership of any entity other than the
business of other attorneys.
17.
It
is clear that the commissioner did not have regard to case law which
has established that a transfer under section 197 does not
necessarily entail the sale of a business. She also appears to have
been of the view that a service could not be the subject matter
of a
transfer. Her failure to have regard to the case law on the transfer
of services in the context of outsourcing arrangements
meant she did
not consider the possibility of a section 197 transfer any further.
It is now trite law that a transfer
for the purposes of s 197
does not necessarily entail the sale of a business.
[1]
It is also well established that outsourcing arrangements, even of
non-core business, can give rise to a transfer under section
197.
[2]
The commissioner’s contrary views prevented her even
contemplating these possibilities, resulting in a material
misdirection
on her part regarding a central issue in the matter
before her.
18.
The Commissioner critically assessed the
applicant’s failure as an attorney to appreciate what ought to
have been done and
she would have realised what was necessary had she
only read the LRA. However, as the question of the appropriate
respondent in
such matters was an issue that had only been dealt with
by the LAC in the same year, it seems the commissioner unreasonably
expected
that ordinary scrutiny of s 197 of the LRA would
automatically have clarified matters.
The
Delay and Reasons for the delay
19.
The delay amounts to some 502 days, which
is excessive by any standard. It appears that the first time the
question of the first
respondent’s involvement was considered
was when the applicant and Gensec concluded a pre-trial minute on
16
th
July 2008. In paragraph 2 of the supplementary pre-trial
minute, the applicant alleges that the transfer of the legal services
portion of Gensec’s business ought to have resulted in an
automatic transfer to the first respondent, and accordingly she
ought
not to have been dismissed by Gensec.
20.
Gensec's response to this claim was that it
denied that the service agreement it had concluded with the first
respondent constituted
a sale of a business as a going concern
falling within the terms of section 197. However, if it had been, the
applicant's claim
relating to the unfair dismissal lay against the
first respondent and not against Gensec. Accordingly, it
contended that
the applicant should have joined the first respondent
in the proceedings.
21.
In the supplementary pre-trial minute,
Gensec reiterated that the applicant was fairly dismissed for
operational reasons, and maintained
its version that the service
agreement concluded between it and the first respondent did not
constitute the sale of a business
as a going concern within the
meaning of section 197.
22.
The essence of the explanation for the
delay lies in applicant’s new appreciation of the law
applicable to her situation at
the end of 2008. At the hearing
of this application the applicant revealed that it was the Labour
Appeal Court decision in
Anglo Office
Supplies [Pty] Ltd v Lotz
(2008)
29 ILJ 953 (LAC)
, which led to a change
of view. That judgment was handed down on 22 November 2007, and
was reported in the Industrial Law
Journal in April 2008. It is
not entirely clear when that particular volume was actually
published, but it would seem that
some time between its publication
and the trial in November, the applicants’ legal
representatives became aware of the judgment.
23.
Relying
on previous authorities, the LAC held in
Lotz’
s
case that unless there is an agreement with employees or their
representative to the contrary, the new employer assumes liability
for all the actions of the old employer done in relation to each
employee. Thus, if an employee is dismissed before the transfer
of the business or the relevant part of the business the new employer
is liable for such dismissal even though it is the old employer
which
actually dismissed the employee. All the rights that the
dismissed employee had against the old employer at the time
of the
transfer of the business, including the right to pursue legal
proceedings in the dismissal dispute, become rights that he
has
against the new employer. Consequently, the court held that
where an employee has instituted proceedings against the
old
employer, he must pursue those proceedings against the new employer
instead of the old one.
[3]
It is
true, if one has regard to this decision, that such a procedural
outcome might have been foreseen on the basis of the earlier
authorities referred to in the
Lotz
judgment.
However, it seems that this was the first decision which
unequivocally pronounced on the question of the proper
respondent in
such cases.
24.
In view of this, I'm inclined to accept
that the applicant’s legal representatives were not unduly
remiss in reaching this
conclusion only during the latter half of
2007. At first sight, it seems difficult to understand
why the applicant
did not simply join the first respondent in the
Labour Court proceedings. However, it could well be argued that the
new employer
ought to have been a party to the conciliation
proceedings, as a matter of necessity, since the original
conciliation could only
have taken place after any supposed transfer
of an undertaking. In that case, the abundant caution exercised by
the applicant’s
legal advisers might prove to have been
justified and the applicant’s legal position might not have
been adequately protected
by simply joining the new employer at the
trial stage.
25.
Any claim for unfair retrenchment, can of
course still be pursued against Gensec, if it is subsequently
established that no transfer
of a service or undertaking to the first
respondent did take place. The applicant expressly disavows any
intention of seeking relief
for her unfair retrenchment from the
first respondent, in the form of alternative relief.
26.
In these circumstances, where the very
issue of the existence of a transfer is in dispute, it is prudent for
the applicant to include
both the old and the possibly new employer
in the proceedings.
Prospects
of Success
27.
The first respondent contends that the
applicant could never succeed in establishing that a transfer of an
undertaking had occurred,
since a firm of attorneys cannot acquire
ownership of another business except that of other attorneys.
The applicant’s
response is that she was part of a legal
services department of JH Isaacs which was previously taken over by
Gensec, and that Gensec
decided to outsource those services to the
first respondent.
28.
Relying
on the authority of
SAMWU
v Rand Airport Management Company (Pty) Ltd
[2007] ZALC 93
;
[2005] 3 BLLR 241
(LAC)
the
applicant points out that even the outsourcing of a non-core service
can constitute a transfer in terms of s 197.
As already
mentioned, it is now established law that a transfer for the purposes
of s 197 does not necessarily entail the sale
of a business.
[4]
29.
The applicant alleges that the legal
services described in the scope of work which the first respondent
offered to Gensec in its
service proposal, are the same services she
previously provided in-house to Gensec. The first respondent disputes
that it took
over the functions of the legal department mainly
because it could not legally acquire ownership of such an entity and
also because
it provided legal services using its own resources
without acquiring any assets from Gensec. It further contends
the in-house
legal department still exists and has at least one
employee, though no specificity is provided in this regard.
30.
The first respondent does not directly
dispute the applicant’s claim that she performed functions now
encompassed by the first
respondents’ service proposal. Another
factor indicating that there might have been a transfer of a service
or undertaking
is Gensec’s response to the applicant’s
claims in the supplementary pre-trial minute. Gensec does not dispute
that
a decision was taken to outsource its legal function in April
2007, but contends that this decision was only taken after two
retrenchment
consultation meetings had already taken place.
31.
In the circumstances, the applicant has
advanced a tenable basis for arguing that the first respondent took
over the role and function
previously performed in the in-house legal
department, and her prospects of establishing that the provision of
certain legal services
formerly provided in-house were transferred to
the first respondent are not unreasonable. Because the consultation
meetings commenced
on the basis that they would address the “possible
outsourcing of the legal department”, there also appears to be
a
reasonable basis for believing that the termination of her services
was linked to the outsourcing decision when it was taken in
April
2007. As such, I believe she has demonstrated a reasonable prospect
of succeeding with a claim that her dismissal was for
a reason
related to the transfer or a business, in terms of section 187(1)(g).
Prejudice
32.
It is true that the first respondent is now
facing the prospect of litigation it ought to have been confronted
with in the latter
of half of 2007. On the other hand, it is possible
if the first respondent is not a party to the proceedings, the
applicant may
be deprived of a remedy for an automatically unfair
dismissal, if a transfer of an undertaking did in fact take place and
the first
respondent were properly held liable for the actions of
Gensec that resulted in the termination of her services. Moreover, if
in
law the first respondent is the party that ought to be held liable
for such a claim as the new employer, to shield it from the risk
of
being held to account for such liability as a result of a bona fide
error on the part of the applicants’ legal advisors,
which was
not unreasonable and which they did act upon once it was appreciated,
would tip the balance of prejudice too far in the
first respondent’s
favour in my view.
Conclusion
33.
As set out above, the commissioner’s
failure to appreciate the law relating to the application of section
197 to the outsourcing
of services resulted in her misdirecting her
analysis of the prospects of success. For this reason her award must
be set aside
34.
On the evaluation above, I am satisfied
that the applicant has made out a sufficient case for the late
referral of the dispute to
the CCMA in respect of the first
respondent to be condoned, and it would serve no purpose in this
instance, and entail unnecessary
further delay to refer the
condonation application back to the CCMA for reconsideration.
Order
35.
Accordingly, it is ordered that:
35.1.
the condonation ruling of the third
respondent under CCMA case number GAJB 37691-08 dated 30 January 2009
is reviewed and set aside;
35.2.
the condonation ruling of the third
respondent is substituted with an order granting the applicant
condonation for the late referral
of her dismissal dispute in respect
of the first respondent to the Commission for Conciliation, Mediation
and Arbitration;
35.3.
no order is made as to costs.
ROBERT
LAGRANGE
ACTING
JUDGE OF THE LABOUR COURT
Date
of hearing: 26 January 2010
Date
of Judgment: 13 April 2010
Appearances:
For
the Applicant: J D Crawford of Crawford & Associates
Attorneys
For
the First Respondent : Advocate A Landman
Instructed
by Gideon Pretorius Inc.
[1]
See
NEHAWU
v University of Cape Town & others
(2003) 24 ILJ 95 (CC)
at 125 par [71]
[2]
SAMWU
v Rand Airport Management Company (Pty) Ltd
[2007] ZALC 93
;
[2005] 3 BLLR 241
(LAC)
[3]
Judgment
at
962, par [22].
[4]
See
fn 1
supra