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[2010] ZALCCT 37
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SAMWU and Another v SA Local Government Association and Others (C411/2007) [2010] ZALCCT 37 (3 March 2010)
IN
THE LABOUR COURT OF SOUTH AFRICA
HELD
AT CAPE TOWN
CASE
NO C411/2007
In
the matter between
SAMWU
First Applicant
IMATU
Second
applicant
and
SA
LOCAL GOVERNMENT
ASSOCIATION
First respondent
MEC
FOR HEALTH, WESTERN
CAPE
Second respondent
THOSE
MUNICIPALITIES LISTED IN
SCHEDULE
‘A’
Third
to twenty-fifth
respondents
THOSE PERSONS LISTED
IN SCHEDULE
‘B’ Twenty-sixth
and
further
respondents
JUDGMENT
VAN NIEKERK J
Introduction
[1]
The applicants (‘the unions’) seek an order declaring
that any written agreements concluded between any of their
members or
former members and the second respondent (‘the Department’),
in terms of which the employment of those members
is transferred to
the Department, are null and void. The unions also seek an order
directing that all future transfers of employment
from the relevant
municipality to the Department must take place in terms of section
197(2) of the Labour Relations Act (‘LRA’),
unless the
applicants and the Department or the relevant municipality have
concluded a written agreement in terms of section 197(6).
The
facts
[2]
The factual background to the claim is briefly the following. In
2002, it was decided that the Department should assume responsibility
for delivering primary health care services, until then a service
provided by municipalities. This decision (or what has been termed
the ’provincialisation process’) raised the potential
application of s 197 of the LRA. The Department and the
municipalities
affected by the decision accept that the nature of the
transfer in this instance was such that it fell to be regulated by s
197,
i.e. that the contracts of employment of municipal employees
engaged in the provision of primary health care service transferred
automatically to the Department. That notwithstanding, the Department
and municipalities adopted the view that it was not practicable
to
implement an automatic transfer, and that agreements in terms of s
197(6) were necessary to vary that consequence. In
March 2005,
a public statement was issued stating that the Department would
assume responsibility for the primary health care services
then
provided by municipalities with effect from 1 April 2005. The unions
responded by asserting that if a transfer was to take
place
(something to which they in any event objected) it could occur only
in terms of s 197(2). In the course of the negotiations
that were
initiated to conclude a s 197 (6) agreement, the unions refused to
agree to a transfer on varied terms. The Department
and the
municipalities claim that they refused to negotiate at all. Almost
two years passed without any further progress and in
December 2006,
the first respondent, SALGA, accepted that deadlock had been reached.
During the course of these negotiations, the
Department had been
assuming operational control of the assets of the primary health care
services. In June 2006, the Department
and SALGA concluded an
agreement regulating the transfer of the operational control of the
primary health service, the transfer
of assets and liabilities from
the municipalities to the department and what was termed ‘staff
transfer and integration’.
In terms of the agreement, the
latter was to be dealt with in terms of s 197(6) ‘or such other
process as are allowed in
terms of applicable legislation.’
[3]
In February 2007, SALGA issued a further circular indicating that the
transfer of staff engaged in primary health care should
be dealt with
on an ‘individual basis’ i.e. that negotiations should be
conducted directly with individual employees
to conclude agreements
in terms of s 197(6). A number of ‘transfer agreements’
were concluded between the Department,
the relevant municipality and
the affected employees. The transfer agreements provided for the
transfer of the contracts of employment
of the employee parties to
the Department with effect from 1 July 2007. These are the
agreements that the union seek to have
set aside. There is some
uncertainty on the papers as to how many employees remain affected by
these proceedings. The Department
contends that at the time the
answering affidavit was filed, a total of 515 employees had been
transferred, all of whom have long
been absorbed into the Department
on terms that did not financially prejudice them. The Department also
claims that at best for
the unions, some 127 employees have indicated
their support for these proceedings. Given the basis on which I have
come to a decision
in this matter, these are not material issues.
The
relevant legislative provisions
[4]
Section 197(1)(a) defines a ‘business’ to include ‘
the
whole or a part of any business, trade, undertaking or service…’
.
Paragraph (b) defines a transfer as ‘
the transfer of a
business by one employer … to another employer… as a
going concern
.’
[5]
Section 197(2) provides that unless otherwise agreed in terms of s
196(6), if a transfer of a business takes place, the
transferee
is automatically substituted for the transferor as the employer in
respect of all contracts of employment in existence
immediately prior
to the transfer.
[6]
Section 197(6) contemplates the variation of the consequence of the
substitution of the transferee employer for the transferor
contemplated by s 197 (2), and establishes the means by which any
variation might be achieved. The subsection requires any variation
to
be in writing, and concluded between the transferor, the transferee,
or the two of them acting jointly on the one hand, and
‘the
appropriate person or body referred to in section 189(1), on the
other’. Section 189(1) establishes a hierarchy
of parties that
must be consulted prior to any dismissal effected for a reason
related to an employer’s operational requirements.
The parties
who are entitled to be consulted rank as follows – a person
required to be consulted in terms of a collective
agreement, a
workplace forum, and a registered trade union whose members are
likely to be affected by the proposed dismissals,
and the employees
likely to be so affected.
[7]
In the context of retrenchment procedures, this Court has held that s
189(1) defines a hierarchy of entities and that there
is generally no
obligation on an employer to consult with a person or body placed any
lower in the hierarchy (see
Sikhosana & others v Sasol
Synthetic Fuels
(2000) 21 ILJ 649 (LC)). In other words, the
person or body that ranks first in the defined hierarchy has the
exclusive right to
be consulted on the terms of any proposed
retrenchment. In the present instance, of course, the right is
not one of consultation
– s 197(6) defines a hierarchy of
bargaining partners.
The
parties’ contentions
[8]
The applicants contend that they qualify, to the exclusion of any
other body or person, as the negotiating party for the purposes
of
any agreement to be concluded in terms of s 197(6). This being so,
the applicants submit, the agreements concluded between the
Department and the affected employees regulating the terms of a
transfer from the municipalities to the Department are of no force
and effect.
[9]
The respondents accept that s 197 applied to the transfer of primary
health care services to the province. Indeed, in June 2004,
the
relevant Public Service regulations were amended to incorporate a
clause to the effect that “
if personnel are transferred from
an entity outside the public service to a department [whether
national or provincial] the executing
authority shall comply with
section 197 of the LRA
.” The Department concluded, however,
that s 197(2) was not capable of implementation, and that it had no
option but to attempt
to conclude agreements with the unions under s
197(6). In particular, the Department expressed the view that it was
not possible
to take over the existing collective agreements, since
the terms and conditions of employment were not consistent with the
‘equitable
and uniform standards’ which applied to the
public service. In the face of the unions refusal to negotiate the
terms of a
s 197(6) variation agreement and after early 2006, the
respondents began to negotiate with union members directly, with the
express
purpose of securing their transfer to provincial government
on consensual basis. The majority of the affected employees have been
transferred (with their consent) and their support (or lack thereof)
for this application remains unclear.
[10]
The respondents defend the approach to union members directly on the
basis that the unions had obstinately and persistently
refused to
enter into any negotiations to conclude a s 197(6) agreement. They
submit that the unions’ refusal to bargain
since dialogue was
first initiated in April 2005 amounted to bargaining in bad faith,
and that deadlock having been reached in
these circumstances, the
respondents were entitled to negotiate directly with the employees
concerned and to conclude binding agreements
with them.
Analysis
[11]
I deal first with the second prayer in the notice of motion, i.e.
that the Court direct that all future transfers of employment
of the
applicants’ members from the relevant municipality take place
in terms of s 197(2), in the absence of any written
agreement
concluded under s 197(6). In my view, the relief sought in respect of
any future transfers is misguided, for at least
two reasons. First,
in
NEHAWU
v University of Cape Town
2003 (3) SA 1
(CC), the Constitutional
Court observed that the fact that the seller and a purchaser of a
business have not agreed on the transfer
of the workforce as part of
a transaction does not disqualify the transaction from being a
transfer of a business for the purposes
of s 197. Ngcobo J (as he
then was) said: “
Each transaction must be considered on its
own merit, regard being had the circumstances of the transaction in
question. Only then
can a determination be made as to whether the
transaction constitutes a transfer of a business as a going concern
”
(at 29B-C). In my view, this necessarily requires that every
transaction claimed to fall within the ambit of s 197 must
be
scrutinised, on a case by case basis, in order to ascertain whether
the elements established by the section have been met, i.e.
whether
there was a transfer by one employer to another, whether there is an
economic entity capable of being transferred, and
whether the
economic entity that is transferred retains its identity after the
transfer. It is far from clear on the papers before
me that every
future transaction in terms of which services provided by
municipalities are assumed by provincial governments will
assume the
form of the transfer of a business as a going concern. Secondly, it
is a well-established rule that the courts will
not deal with
hypothetical or academic questions in proceedings for a declaratory
order (see Herbstein and Van Winsen
The Civil Practice of the
Supreme Court of South Africa
, 4 ed., Van Winsen, Cilliers and
Loots, edited by Dendy, at p 1054). In so far as any future transfers
of health or other services
from municipalities to provincial
government are concerned, the relief sought by the union is
hypothetical. For these reasons,
the relief sought in prayer 2 of the
Notice of Motion must be refused.
[12]
The unions’ claim to the relief sought in prayer one of the
notice of motion, i.e. the applicant’s contention that
the
agreements concluded directly with its members should be set aside
because they were concluded in breach of s 197(6), raises
a number of
complex issues.
[13]
I deal first with the question whether s 197 applied to the
transaction in terms of which primary health care services were
transferred from the municipalities to the Department. As I have
already indicated, the respondents accept that the provision of
primary health care services constitutes a ‘service’ (and
therefore a ‘business’) for the purposes of s
197(1), and
that the business was transferred as a going concern. The unions’
position is less unequivocal, but I did not
understand Mr Whyte, who
appeared for the applicants, to contend that s 197 was not applicable
in the present circumstances. On
the contrary, the unions’ case
relies on an interpretation of s 197(6) to the effect that in the
absence of their agreement,
the contracts concluded by the Department
with individual employees were invalid. In effect, the unions seek to
assert the status
and to enforce the rights afforded them under s
197(6). This relief is available to the unions if and only if the
transaction under
consideration is one triggered by s 197. It is
common cause that the ‘Transfer and operational framework’
agreement
concluded between the Department and SALGA in June 2006
regulated the transfer of primary health care services from the
municipalities
to the Department. All of the objective facts
establish that the services provided by the municipalities were
indeed transferred
to the Department in circumstances where the
municipalities’ patients, assets, liabilities and the like were
transferred
to the Department, and where the Department continued to
provide the same services after the transfer. In short, the nature of
the transaction between the municipalities and the Department was
such that it attracted the application of s 197.
[14]
Secondly, the relief sought by the applicants raises the nature of
the relationship between s 197(2) and (6). In my view, section
197(2)
clearly establishes a ‘default’ position. In other words,
provided that the nature of a transaction is such
that it falls
within the ambit of s 197, the consequence of an automatic and
obligatory substitution of the transferor employer
for the transferee
can be avoided or varied only by an agreement that complies with s
197(6). The dual purpose of s 197 was explained
in the
NEHAWU
judgment (supra) – it serves to protect workers against loss of
employment, but also to facilitate the transfer of businesses.
Section 197(6) provides additional flexibility to both parties. For
example, workers who do not wish to be employed by the transferee
employer may elect not to be transferred and to accept a severance
package from the transferor. The limits on the variation of
the
consequence of an automatic transfer of employment contracts are
determined only by the relevant parties’ capacity to
agree.
However, while s 197(6) establishes scope for flexibility, it also
provides safeguards. It does in the cross-reference to
s 189(1), and
effectively establishes a strict hierarchy of bargaining partners
with whom ‘contracting-out’ agreements
may be concluded.
This provision is clearly intended to protect the interests of
affected workers and in particular, to ensure
that any rights under
section 197(2) that are compromised are compromised only after a
process of negotiation with a properly authorised
and legitimate
representative body. Although the process in this instance is one of
negotiation rather than consultation, I see
no reason to depart from
the principles established by this Court under s 189 that recognise a
hierarchy of persons and bodies,
the first relevant to the particular
factual circumstances excluding all others that rank below it. (See
Sikhosana
(supra) and
Maluleke & others v Johnson Tiles
(Pty) Ltd
(2008) 29
ILJ
2606 (LC)). In the present
instance, it is common cause that the unions were parties to
collective agreements with the municipalities
that entitled them to
be consulted in the event of a proposed retrenchment. That being so,
the respondents were obliged to seek
the agreement of the unions to
vary the consequences of the application of s 197 to the transaction.
They sought that agreement,
but failed to secure it. In these
circumstances, the default prevailed and the Department was
substituted, by the operation of
law, as the employer of those
employees who provided primary health care services for the
municipalities. In my view, this occurred
in June 2006, on the date
that the services were transferred (see
Van der Velde v Business
and Design Software (Pty) Ltd & another
[2008] ZALC 85
;
[2006] 10 BLLR
995
(LC)).
[15]
It follows that the Department’s attempts after June 2006 to
secure agreements in terms of s 197(6) from individual employees
were
futile. When the services were transferred, so were the contracts of
employment and in the absence at that point of an agreement
with the
unions, the Department became bound by the employees’ terms and
conditions of employment as they applied immediately
before the
transfer, and also by any collective agreements and arbitration
awards that bound the municipalities (see s 197 (5)(a)).
[16]
In view of this conclusion, it is not strictly necessary for me to
deal with the respondents’ submission that the unions’
intransigence was a legitimate reason to initiate negotiations on a s
197(6) agreement with the affected employees directly. Nevertheless,
I would make the following observations. The authority relied on by
the respondents (
NUM v East Rand Gold and Uranium
[1991] ZASCA 168
;
1992 (1) SA
700
(AD)) is predicated on a statutory duty to bargain in good faith,
and the powers afforded the courts to enforce that duty. The LRA
introduced a voluntarist system of collective bargaining, a system in
which this court (nor any other court or tribunal) is empowered
to
scrutinise bargain conduct or make pronouncements on the good faith
or otherwise exhibited by any of the parties to collective
bargaining
(see
SANDU v Minister of Defence & others; Minister of Defence
& others v SA National Defence Union & others
[2006] 11 BLLR 1043
(SCA)).
[17]
It is also no defence for the respondents to claim that the
consequences of s 197 were impracticable, or somehow not practically
capable of implementation. The fact that this may have been
logistically difficult to manage the employment-related components
of
the transfer did not justify the recourse to negotiating s 197(6)
agreements at individual level. In short, in the absence
of an
agreement concluded with the unions prior to the transfer to vary s
197(2), whether this was the consequence of a refusal
to bargain or
otherwise, the respondents had two choices – to abandon the
transfer or revert to the default represented by
s 197(2) and seek
post-transfer, through a process of collective bargaining, to align
the conditions of employment of the transferred
employees with those
of existing incumbents.
[18]
In summary:
The transfer of primary
health services from the affected municipalities to the provincial
government triggered the application
of s 197.
The consequences of s
197 (and in particular, the consequence of an automatic and
obligatory substitution of the Department for
the relevant
municipality) could have been varied or avoided by agreements that
complied with s 197(6).
In the absence of the
unions’ agreement, the agreements concluded by the Department
with affected employees or their purported
representatives did not
comply with s 197(6).
In the absence of a
valid agreement varying the consequence of an automatic and
obligatory transfer of all contracts of employment,
the Department
was substituted as the employer of the affected employees on the
date that the business was transferred, i.e.
in June 2006, and the
Department simultaneously became bound by all collective agreements
and arbitration awards that bound the
municipalities immediately
prior to the transfer.
Relief
[19]
The relief sought in terms of prayer 1 falls within the ambit of the
court’s powers under s158(1)(a)(iv) of the LRA,
i.e. a
declaratory order. In exercising this power, this court ought
appropriately to approach the matter in accordance with
the
principles established by the High Court in considering matters for
declaratory relief under s 19 (1)(a)(iii) of the Supreme
Court Act,
1959.
[20]
In
Eagles Landing Body Corporate v Molewa
2003 (1) SA 412
(T),
Kroon J, dismissing the application, said the following
“
Should the
orders sought be granted, that might be a moral victory for the
applicant, but nothing more. The practical
status quo
would
remain. The required tangible or justifiable advantage in relation to
the applicant’s position with reference to an
existing, future
or contingent right would not flow from the grant of the declaratory
orders sought.”
[21]
In the present matter, I am not persuaded that any justifiable or
tangible advantage can accrue to the unions. The process
of
negotiation on the employment-related consequences of the transfer
commenced in 2005. The Court sits in the unenviable position,
some 5
years later, of having to deliver judgment in opposed motion
proceedings, in circumstances where the Department has long-since
finalised the transfer of some 515 employees, all of whom are
de
facto
now employed by the Department, on terms that do not appear
to be materially less favourable than those that applied when the
employees
were engaged by the municipalities. The LRA was intended to
introduce a system of dispute resolution capable of adjudicating
disputes,
such as the present, which involve significant numbers of
employees and matters of public policy, on an efficient and
expeditious
basis. Given the delay in bringing this matter to the
point of adjudication, it would appear that a significant number of
these
employees have no interest in returning to work for the
municipalities – at best, it would seem that some 127 employees
(about
25% of those affected) support this application. I am also
mindful of the fact that collective agreements concluded in the
bargaining
council to which SALGA and the unions are members
(certainly insofar as terms and conditions of employment are
concerned) are entered
into for defined and limited periods, and that
in the public sector, collective agreements concluded in the
bargaining council
established for that sector are routinely extended
by the Minister to bind non-parties to the agreement. I make no
finding
in this regard; I simply make the observation that at this
point, some four years after the transfer, the terms and conditions
of employment on which the affected employees were transferred (i.e.
those that applied between them and the municipalities) have
become
subsumed by binding collective agreements concluded in the public
sector. Finally, a declaration such as that sought by
the unions
would have far-reaching financial and organisational consequences,
and may compromise the delivery of services to citizens
in need of
them. For these reasons, I am inclined, in the exercise of the
discretion conferred upon me, to refuse the declaratory
relief
sought.
[22]
Finally, in relation to costs, s 162 of the LRA confers a discretion
on this Court to make costs orders on the basis of the
requirements
of law and fairness. In
NUM v East Rand Gold and Uranium Ltd
(supra), the then Appellate Division of the Supreme Court held that
the existence of a collective bargaining relationship and the
prejudice that any costs order might pose to it, was a relevant
factor. In the present instance, there is no collective bargaining
relationship between the unions and the respondents, but the present
dispute arose within a context of such a relationship, and
in
circumstances where the unions sought to exercise their rights as
collective bargaining representatives. I also take into account
the
fact that the unions have largely succeeded in respect of the merits
of their claim, albeit that the relief they sought has
been refused.
For these reasons, it is appropriate that no order for costs should
be made.
I
accordingly make the following order:
1.
The application is dismissed.
2
There is no order as to costs
ANDRE
VAN NIEKERK
JUDGE
OF THE LABOUR COURT
Date
of hearing: 24
February 2010
Date
of judgment: 3 March 2010
For
the applicants: Mr. J Whyte
Cheadle Thompson and
Haysom Inc.
For
the first and second respondents:
Adv P Gamble SC with Adv N Bawa
Instructed by the state
attorney