About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Port Elizabeth Labour Court, Port Elizabeth
SAFLII
>>
Databases
>>
South Africa: Port Elizabeth Labour Court, Port Elizabeth
>>
2015
>>
[2015] ZALCPE 66
|
|
Enviroserv Waste Management v Interwaste (Pty) t/a Interwaste Environmental Solutions and Others (P408/15) [2015] ZALCPE 66; (2016) 37 ILJ 959 (LC) (18 December 2015)
REPUBLIC
OF SOUTH AFRICA
IN
THE LABOUR COURT OF SOUTH AFRICA, PORT ELIZABETH
JUDGMENT
Not Reportable
CASE NO: P408/15
In
the matter between
ENVIROSERV
WASTE MANAGEMENT
Applicant
and
INTERWASTE
(PTY) LTD t/a INTERWASTE
ENVIRONMENTAL
SOLUTIONS
First Respondent
GENERAL
MOTORS SOUTH AFRICA (PTY) LTD Second
Respondent
V.O’
CONNEL AND 21
OTHERS
Third Respondent
Heard:
11 December 2015
Delivered:
18 December 2015
Summary:
The termination of a service agreement on its own does not entitle
employees to have their contracts of employment
to be transferred in
terms of section 197 of the LRA.
JUDGMENT
Lallie
J
[1]
The applicant conducts business in the waste management industry. It
has a number of competitors which include the first respondent.
In
the industry, businesses compete for contracts to render their
services. Those contracts are generally put out to tender. In
the
course of the competition businesses win contracts from and lose
others to competitors. In the course of performing their obligations
in terms of the contracts businesses appoint employees on fixed term
contracts of employment for the duration of each contact the
business
has secured. Both the applicant and the first respondent currently
have hundreds of contracts in which they have employed
over 2000
employees throughout South Africa. In 2012 the second respondent
advertised a tender for waste management. The applicant’s
bid
was successful and the applicant and the second respondent entered
into a three year waste management service agreement (“the
service agreement”) for the period 1 October 2012 to 31
December 2015.
[2]
The second respondent manufactures motor vehicles at a number of
sites in the country some of which are in Port Elizabeth. It
holds a
licence to operate waste facilities at its sites. As the service
agreement was approaching its end, the second respondent
invited
tenders for waste management in August 2015. The first respondent’s
bid was successful and the applicant was informed
of the outcome of
the tender on 22 October 2015. The first respondent’s contract
with the second respondent will commence
on 1 January 2016. Having
lost the tender, the applicant addressed a letter to the first
respondent as the successful bidder and
requested it to be
substituted for the applicant as the new employer of its 22 employees
who are performing their duties at the
second respondent in terms of
the service agreement. The employees form about 1.1% of the parties’
workforce nationally.
The first respondent refused the applicant’s
request and intimated that the employees were entitled to apply for
positions
which the first respondent intended to advertise. It is the
refusal which prompted the applicant to bring this urgent application
in which it seeks the following order:
‘
Declaring
that as a result of the cancellation of the contract between the
Applicant and the Second Respondent for the on-site management
of
waste at the Second Respondent, and the subsequent contract entered
into between the Second Respondent and the First Respondent
for the
on-site management of waste, the first respondent; by operation of
section 197
of the
Labour Relations Act, 66 of 1995
; will
automatically be substituted in place of the Applicant in respect of
all contracts of employment in existence between the
applicant and
those employees listed in Annexure “A” hereto (being the
employees engaged by the Applicant for the purposes
of performing its
obligations in terms of the said contract), as from 31 December
2015’.
[3]
The applicant gave a detailed account of the manner in which it
carries out its obligations in terms of the service agreement.
Part
of the detail is that the applicant manages the relationship between
the second respondent and the recycling companies who
have contracts
with the second respondent. It developed, created, maintained and
reviewed plans, programs and systems to improve
waste management
practices and efficiency in waste management. It provided expert and
qualified staff part of which was trained
by the second respondent to
train the second respondent’s staff. The second respondent
provided the applicant with office
space, furniture and
telecommunication systems on its premises. The applicant submitted
that it operates a business at the second
respondent’s sites
which forms part of its business. Another salient part of the service
agreement is that the applicant
was required to return to the second
respondent all the property that the applicant acquired to perform
its obligations. The property
includes both tangible and intellectual
property. At the termination of the service agreement the applicant
is required to vacate
the second respondent’s facilities and to
provide termination assistance services for the first and second
respondent. The
applicant submitted that from 1 January 2016 the
first respondent will provide the same services to the second
respondent although
in a different manner. In addition to its
equipment, the respondent will use the second respondent equipment
which was previously
used and procured by the applicant and returned
to the second respondent. The first respondent will use the same
office space which
is being used by the applicant.
[4]
The applicant submitted that it operated site-specific business
operation which is an economic entity capable of being transferred
at
the second respondent’s sites. Its transfer as a going concern
will take place when the service agreement terminates and
the first
respondent’s contract with the second respondent commences. As
components of its business will be transferred to
the first
respondent, the applicant’s employees should also be
transferred. The employees were trained to perform site-specific
duties. They have reasonable expectation to be transferred to the
first respondent and carry on with their work at the second
respondent on renewed fixed term contracts with a new service
provider. The termination terms of the service agreement indicate
the
intention for continuity and a seamless transfer from the old to the
new service provider. The first respondent will use the
intellectual
property generated by the applicant and returned to the second
respondent at the end of the service agreement. The
first
respondent’s right to use and control the infrastructure will
trigger the application of
section 197
of the LRA. The applicant
further submitted that on 1 January 2016 when the first respondent’s
contract with the second respondent
commences, the applicant’s
business will change hands and be transferred as a going concern to
the first respondent.
[5]
The first respondent denied that on 1 January 2016, when its contract
with the second respondent commences a transfer of business
as a
going concern as contemplated in
section 197
of the LRA will take
place. Some submissions it sought to rely on are that the service
agreement will come to an end on 31 December
2015 and the fixed term
contracts of employment of 20 the applicant’s employees will
expire as a result of effluxion of time.
There will therefore be no
employees to be transferred to the first respondent and provisions of
section 197
of the LRA will not be applicable. The first respondent
denied that the termination of the service agreement necessarily
constitutes
a transfer of business as a going concern. It submitted
that on 31 December 2015 the service agreement will come to an end
but
the applicant will retain its whole business. Its position is
affirmed by the fact that no assets, goodwill or property of the
applicant would be transferred to the first respondent at the end of
the service agreement and the second respondent never outsourced
the
waste management service as a business as a going concern. The second
respondent only contracted out the business without transferring
its
employees. The first respondent further denied that the work done at
the second respondent is site-specific. It submitted that
all the
applicant does is to fulfil its obligations in terms of the service
agreement and legislation. The first respondent denied
that it was
under a legal obligation to employ the third to further respondents.
It needs no assistance from the applicant including
the programs,
systems, plans, and practices it developed and reviewed in executing
the service agreement. It will utilise its own
strategies, plans and
protocols. The service that the first respondent will be rendering
for the second respondent will be different
from the one the
applicant renderes. It offered a zero to landfill solution and will
not be dealing with the companies with contracts
with the second
respondents. Work will not be carried out by expert and
qualified staff but by unskilled employees.
[6]
When this application was argued it was common cause that it was
urgent.
Section 197
of the LRA provides as follows:
“
(1)
In this section and in
Section 197
A-
(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.
(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 the transfer;
(b)
all the 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
;
(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’.
[7]
The applicant submitted that its operations at the second respondent
constitute a business as envisaged in
section 197
(1) (a) of the LRA.
It sought to rely on
Aviation
Union
of
SA & another v SA Airways (Pty) Ltd & others
[1]
where the circumstances in which provisions of
section 197
apply were
clarified as follows:
‘
It must be
stressed that the key event which brings
s 197
into play is the
transfer of a business as a going concern. The question whether the
section applies to a particular case cannot
be determined, as the
Supreme Court of Appeal did, with reference to the label of the
transaction effecting transfer. The section
does not cite
transactions to which it applies. Nor does it refer to any labels.
Instead, its application must always be determined
with reference to
three requisites, namely, business, transfer and going concern’.
[8]
The applicant further relied on
National
Education Health & Allied Workers
Union
v
University OF Cape Town & others
[2]
where
the SAA decision was referred to with approval with the court further
clarifying the requirement of a simultaneous transfer
by one employer
to another, of an economic entity capable of being transferred. The
economic entity must retain its identity after
the transfer. The
applicant submitted, based on
SAMWU
& others v Rand Airport Management Company (Pty) Ltd &
others
[3]
where it was held that the existence of a business capable of being
transferred does not require the transfer of assets, goodwill,
operational resources and workforce.
[9]
In deciding whether there will be a transfer of business as a going
concern when the first respondent commences its contract
with the
second respondent on 1 January 2016, I will firstly consider whether
the activities of the applicant at the second respondent
constitute a
business as envisaged in
section 197.
The applicant submitted that
its activities at the second respondent constituted a business and
sought to rely on
Harsco
Metals SA (Pty) L td & another v Arcelormittal SA Ltd &
others
[4]
where the court, relied on the SAMWU judgement and found that in the
context of an outsourcing transaction of an economic entity
Harsco
conducted an economic entity which was capable of transfer in terms
of
section 197
of the LRA. The facts of the matter at hand are
distinguishable from those on which the Harcso Metals decision is
based. In the
latter, Harsco had been a service provider to AMSA for
40 years and had employed 890 employees. In giving an account of its
activities
at the second respondent the applicant made a number of
concessions that it was performing its obligations in terms of the
service
agreement and legislation in conducting the activities it
sought to rely on to prove that it is conducting part of its business
at the second respondent. The applicant has a three year contract
with the second respondent. It employed 22 employees 20 of whom
are
on fixed term contracts. The applicant has about 1500 to 2000
employees nationwide and manages hundreds of projects. It is
in the
nature of the industry that the applicant and the first respondent
operate in that businesses win and lose tenders to provide
services
for a limited period. When the activities of the applicant at the
second respondent are scrutinised the only conclusion
that can be
reached is that the applicant was performing its obligations in terms
of a service agreement which was intended to
last for a limited
period of three years. Performing obligations in terms of a service
agreement does not on its own constitute
business as envisaged in
section 197
of the LRA.
[10]
The applicant argued that when the first respondent commences its
contract with the second respondent, its business as a going
concern
will be transferred to the first respondent. It relied on HEHAWU
where it was held that what must be transferred must be
a business
operation so that the business remains the same but in different
hands. Although the applicant conceded that the manner
in which the
first respondent will perform its obligations in terms of the
contract with the second respondent is different from
the manner in
which it is carring out its current obligations, it was adamant that
on 1 January 2016 the business will remain the
same but will only be
in different hands. I have already rejected the applicant’s
submission that its activities at the second
respondent constitute a
part of its business. If those activities constituted its business,
based on the concessions made by the
applicant a conclusion cannot be
reached that from 1 January 2016 the business will remain the same.
It is common cause that unlike
the applicant the first respondent
will use its own telecommunications and offers a zero to landfill
solution. The first respondent
will not use expect and qualified
staff but unskilled employees. It has been in the waste management
business for a considerable
time and will use different methods in
executing its obligations in terms of the contract with the second
respondent. I accept
the first respondent’s submissions
that it does not need and will not use the intellectual property
which includes plans
and strategies which the applicant will leave as
the property of the second respondent when the service agreement
comes to an end.
The first respondent will no longer be required to
deal with recycling companies with contracts with the second
respondent which
the applicant presently spends time and expertise to
manage. It will not be required to train the second
respondent’s
staff. From 1 January 2016 the manner in which
waste will be managed at the second respondent will be totally
different from the
manner in which it is presently managed. The
operations will not be the same in different hands.
[11]
When the change is viewed from an employment specific it reflects
that the applicant has 20 employees on fixed term contracts
which
will be terminated by effluxion of time on 31 December 2015. The
applicant’s argument that the employees have a reasonable
expectation to be transferred to the first respondent is not
supported by the circumstances of this matter. If the employees have
an expectation, it is unreasonable because when they entered into
fixed term contracts for the duration of the service agreement,
they
were aware that they would come to an end with the service agreement.
By employing the other two employees on permanent contracts
knowing
that the service agreement was for a period of three years the
applicant created the problem of their possible unemployment
at the
end of the service agreement and must take responsibility for it. The
applicant has not established that the third to further
respondents’
contracts of employment should be transferred to the first respondent
in terms of
section 197
of the LRA on 1 January 2016.
[12]
I could find no reason for costs not to follow the result.
[13]
In the premises, the following order is made:
13.1
The application is dismissed.
13.2
The applicant pay the first respondent’s costs.
Lallie
J
Judge
of the Labour Court of South Africa
Appearance
For
the applicant: Advocate Gerber
Instructed
by Erika Bester Attorneys
For
the respondent: Advocate Hutchinsin
Instructed
by Fluxmans Incorporated
[1]
(2011)
32 ILJ 2861 (CC) at para 44 (SAA)
[2]
(2003)
24 ILJ 95 (CC) (NEHAWU v CCT)
[3]
(SAMWU)
[2005] 3 BLLR 241 (LAC)
[4]
(2012)
33 ILJ 901 (LC) (Harsco Metals)