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[2016] ZALCCT 5
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NEHAWU obo Cornelius and Others v High Rustenburg Estate (Pty) Ltd and Another (C459/2004) [2016] ZALCCT 5; (2016) 37 ILJ 1183 (LC) (10 February 2016)
IN
THE LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
Reportable
Case
Number: C459/2004
In
the matter between:
NEHAWU OBO
CORNELIUS & 17 OTHERS
Applicant
and
HIGH RUSTENBURG
ESTATE (PTY) LTD
First
Respondent
HIGH
RUSTENBURG HYDRO (PTY) LTD
Second Respondent
Date
heard:
30 July 2015
Delivered:
10 February 2016
Summary:
Determination of a Special C
ase by
order of the Labour Appeal Court in High Rustenburg Estate (Pty) Ltd
v NEHAWU obo Cornelius and 17 Others and the Sheriff
of the High
Court Stellenbosch (CA 11/2010 delivered 26 April 2012); whether
s197(5) of the Labour Relations Act 68 of 1995 applies
to an
arbitration award which was reversed by the Labour Court but only
after the transfer of the relevant undertaking had taken
place.
JUDGMENT
RABKIN-NAICKER
J
[1]
This matter came before me as a special case pursuant to an order by
the Labour Appeal Court in its judgment in
High
Rustenburg Estate (Pty) Ltd v NEHAWU obo Cornelius and 17 Others and
the Sheriff of the High Court Stellenbosch.
[1]
The order by the Labour Appeal Court reads as follows:
“
1.
The appeal is upheld and the order of the court a quo is set aside
and replaced with the
following:
(i)
The dispute between the appellant and the respondent shall, in terms
of Rule 58(6)(i) of the Consolidated Rules of the High
Court be dealt
with by way of a special case to be heard in the Labour Court.
(ii)
The special case must determine whether
s197(5)
of the
Labour
Relations Act 68 of 1995
applies to an arbitration award which was
reversed by the Labour Court but only after the transfer of the
relevant undertaking
had taken place. The parties are granted leave
to apply for the joinder of any other party.
(iii)
In this special case, first respondent shall be the applicant and the
appellant shall be the respondent.
2.
There is no award of costs pursuant to this appeal.”
[2]
Section 197(1)
- (6) of the LRA provides as follows:
197 Transfer
of contract of employment
(1)
In this section and in
section 197A
-
(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 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.
(3)
(a) The new employer complies with subsection (2) if that employer
employs transferred employees on terms and conditions that are
on the
whole not less favourable to the employees than those on which they
were employed by the old employer.
(b)
Paragraph (a) does not apply to employees if any of their conditions
of employment are determined by a collective agreement.
(4)
Subsection (2) does not prevent an employee from being transferred
to a pension, provident, retirement or similar fund other
than the
fund to which the employee belonged prior to the transfer, if the
criteria in section 14 (1) (c) of the Pension Funds
Act, 1956 (Act 24
of 1956), are satisfied.
(5)
(a) For the purposes of this subsection, the collective agreements
and arbitration awards referred to
in paragraph (b) are agreements
and awards that bound the old employer in respect of the employees to
be transferred, immediately
before the date of transfer.
(b)
Unless otherwise agreed in terms of subsection (6), the new employer
is bound by-
(i)
any arbitration award made in terms of this Act, the common law or
any other law;
(ii)
any collective agreement binding in terms of section 23; and
(iii)
any collective agreement binding in terms of section 32 unless a
commissioner acting in
terms of section 62 decides otherwise.
(6)
(a)
An agreement contemplated in subsection (2) must be in writing and
concluded between-
(i)
either the old employer, the new employer, or the old and new
employers acting jointly, on the one hand;
and
(ii)
the appropriate person or body referred to in section 189 (1), on the
other.
(b)
In any negotiations to conclude an agreement contemplated by
paragraph (a), the employer or employers contemplated in subparagraph
(i), must disclose to the person or body contemplated in subparagraph
(ii), all relevant information that will allow it to engage
effectively in the negotiations.
(c)
Section 16 (4) to (14) applies, read with the changes required by the
context, to the disclosure of information in terms of
paragraph (b).”
[3]
The background facts relevant to this special case are as follows:
3.1
The National Education Health and Allied Workers Union (Nehawu)
represents J
Cornelius and 17 Others (“the Claimants”) in
these proceedings.
3.2
The Claimants were employed by High Rustenburg Hydro (Pty) Ltd
(Hydro). Their
employment was terminated and they referred an unfair
dismissal dispute in terms of the LRA, which was dismissed in the
CCMA but
upheld by the Labour Court in review proceedings. The Labour
Court, in its review judgment delivered in May 2008, further awarded
each Claimant compensation equivalent to 12 months compensation.
3.3
After the CCMA Arbitration, but before the Labour Court hearing,
Hydro had sold
the business conducted by it under the name and style
of High Rustenburg Hydro as a going concern to Iprop (Pty) Ltd who in
turn,
onsold the business as a going concern to High Rustenburg
Estate (Pty) Ltd (the First Respondent).
3.4
The sheriff thereafter attached property at the High Rustenberg
Hydro. First
Respondent challenged the validity of that attachment in
the Labour Court. The Labour Court held that it was appropriate to
apply
the interpleader provision found in High Court Rule 58 to the
situation and further held that, by reason of section 197 of the LRA,
Claimants were entitled to enforce their claims against First
Respondent.
[4]
The task of this court is essentially to decide on the interpretation
to be given to the phrase contained in section 197(5)
(a) of the LRA
i.e.: “
For
the purposes of this subsection, the collective agreements and
arbitration awards referred to in paragraph (b) are agreements
and
awards that bound the old employer in respect of the employees to be
transferred, immediately before the date of transfer.”
As
stated by Wallis JA in his oft quoted dictum: “The inevitable
point of departure is the language of the provision
itself', read in
context and having regard to the purpose of the provision and the
background to the preparation and production
of the document.”
[2]
[5]
One case that is of particular assistance to the court, which was not
referred to by the parties is that of
Edgars
Consolidated Stores Ltd v SA Commercial Catering & Allied Workers
Union & others
,
[3]
in which Le Grange AJ (as he
then was) considered the authorities on the meaning of
'immediately before', and was of the
view that the interpretation of
the ordinary meaning of the phrase provides the best guide to what is
meant by 'immediately before'
as used in ss 197 and 197A of the LRA .
He stated as follows:
“
[20]
In analysing the phrase 'immediately before' it is useful to consider
the way an equivalent phrase 'immediately preceding'
was interpreted
in the case of Ackerman v Cape Law Society
1933 CPD 171.
In that
case, the court was contemplating the meaning of that phrase in s
2(c) of Act 30 of 1892, which governed the admission
of attorneys.
The provision required an applicant for admission as an attorney to
produce proof that for a period of three years
'immediately
preceding' the date of his admission or enrolment as an attorney of
the Orange Free State Provincial Division he had
been articled to
serve or had served as a clerk to an enrolled attorney in the
division. In the case before it the applicant had
only been admitted
three years after completing his articles. The court decided to
condone the delay between the conclusion of
the applicant's articles
and his admission because he had continued to work for the attorney
he had served articles with up to
the time of his admission and the
delay was attributable to his only passing his exams three years
after completing his articles.
The court decided that a 'liberal
interpretation' ought to be given to the phrase 'immediately
preceding' as had been done
in the case of Ex parte Middleton. In
that case a full bench of the CPD looked at the purpose of the
provision and decided that
the phrase was inserted in the section to
ensure that clerks should not take up some other work after serving
their articles and
then, having forgotten what they had learnt,
revert to the law and then be admitted as attorneys.
[21]
For present purposes, what is relevant about these cases is that the
ordinary meaning of the phrase 'immediately preceding'
was understood
to refer to a three-year period of articles which ended very shortly
before the candidate's admission, even though
the courts ultimately
adopted a far more relaxed interpretation of the phrase taking into
account the purpose of the provision.
Although the phrase
'immediately preceding' is used to describe the point in time at
which a person completed articles relative
to their application for
admission, I believe the interpretation of the ordinary meaning of
that phrase provides a better guide
to what is meant by 'immediately
before' as it is used in the provisions of ss 197 and 197A of the
LRA.
[22]
In this sense, I would agree with the applicant that the phrase
'immediately before' contemplates two virtually contemporaneous
occurrences.
The two 'occurrences' that
are under consideration in s 197A(4) concern, firstly, the existence
of a binding arbitration award
and, secondly, the act of placing the
employer in provisional sequestration. It is important to note that
the section does not
refer to an arbitration award being issued
immediately before the employer's provisional sequestration,
but
rather refers to an arbitration award which is binding on the old
employer immediately before the sequestration
.
In other words, it describes a state of affairs in which an employer
that is currently bound by an arbitration award, is placed
in
provisional liquidation. For this reason, I think the applicant is
incorrect when it argues that the event which must be compared
with
the occurrence of the transfer, is the issuing of the award. Rather,
the question is whether or not an arbitration award is
still binding
on the old employer on the eve of the transfer. (My emphasis)
[23]
In order for an award to bind an employer it need not have been
issued recently: it is sufficient that it simply has not yet
prescribed. Because of the various actions of the parties since the
award was handed down, prescription would have been interrupted
in
this matter and, understandably, was not raised as an issue by the
applicant. The award in question here had been issued less
than eight
months prior to CNA's provisional liquidation, and
therefore s 197A(4) applied to the award because
it was still binding
on that date. Consequently, by virtue of the operation of s 197(5)
the award became binding on Edcon when
the business of CNA was
transferred to it. For this reason the award is enforceable against
the applicant.”
Evaluation
[6]
I find no reason to depart from the interpretation given to the words
“immediately before” as set out above. In
this matter,
the Award (until its setting aside and substitution by the review
court) bound the old employer (and the affected
employees)
immediately before transfer of the business on the approach taken by
the court in the
Edgars Consolidated Stores
matter above. The
Award declared that the dismissal of the claimants was fair. Had the
Award not been set aside and substituted,
the claimants would have
had no recourse against the new employer. The question to ask then
must be this: Is an award that bounds
the old employer in terms of
section 197(5) susceptible to review and does a new employer
take on the risk of an award (which
serves its interests at date of
transfer), from being substituted on review subsequent to transfer,
by an award that does not.
[7]
In
Aviation
Union of South Africa and Another v South African Airways (Pty) Ltd
and Others
[4]
the
Constitutional Court dealt with the proper approach to the
interpretation of section 197 of the LRA:
“
[34]
It is important to identify the correct approach to interpreting
provisions of the LRA at the outset. Section 3 of the LRA
obliges any
person interpreting the LRA to adopt a construction that complies
with the Constitution and public international law
while at the same
time giving effect to the LRA's primary objects. These objects are
listed in s 1. They include the regulation
of and giving effect
to the rights entrenched in s 23 of the Constitution.
[35]
In National Education Health and Allied Workers Union v University of
Cape Town and Others (NEHAWU) this court had occasion
to interpret s
197. In that case the correct approach to interpreting the section
was defined in the following terms:
'The
proper approach to the construction of s 197 is to construe the
section as a whole and in the light of its purpose
and the context in
which it appears in the LRA. In addition, regard must be had to the
declared purpose of the LRA to promote economic
development, social
justice and labour peace. The purpose of protecting workers against
loss of employment must be met in substance
as well as in form. And,
as pointed out earlier, it also serves to facilitate the transfer of
businesses. The section is found
in a chapter that deals with unfair
dismissal. Construed against this background, the section makes
provision for an exception
to the principle that a contract of
employment may not be transferred without the consent of the workers.
Subsection (1) says so
and it makes it possible to transfer the
business on the basis that the workers will be part of that transfer.
This will occur
if the business is transferred as a going concern.'
[36]
Section 197 is located in Ch 8 of the LRA, which deals with
dismissals and unfair labour practices. It promotes the right to
fair
labour practices, guaranteed by s 23 of the Constitution. This right
is enjoyed by the workers and the employers, and consequently
the
provision serves a dual purpose of advancing both their interests.
These interests may sometimes come into conflict.
[37]
The dual purpose of s 197 was pronounced in NEHAWU where this court
said:
'Section
197 strikes at the heart of this tension and relieves the employers
and the workers of some of the consequences that the
common-law
visited on them. Its purpose is to protect the employment of the
workers and to facilitate the sale of businesses as
going concerns by
enabling the new employer to take over the workers as well as other
assets in certain circumstances. The section
aims at minimising the
tension and the resultant labour disputes that often arise from the
sales of businesses and impact negatively
on economic development and
labour peace. In this sense, s 197 has a dual purpose, it facilitates
the commercial transactions while
at the same time protecting the
workers against unfair job losses.'
[38]
The section achieves its purpose
by preserving all contracts of employment between the
workers and the
owner of the business which is transferred as a going concern. In
this way, on the one hand, the workers' employment
is safeguarded
and, on the other, a new owner is guaranteed a workforce to continue
with the operation of the business. Section
197 must be
interpreted against this background.”
[8]
Taking into account the approach of the Constitutional Court to the
interpretation of section 197, which emphasises the dual
purpose of
the section in the interests of both employers and employees, it may
be apposite to consider the issue before us in
an opposite scenario
to the one
in casu
.
In such a scenario, the old employer is unsuccessful at the CCMA and
an award is issued prior to the transfer of the business
that the
dismissal of the employees was unfair and reinstatement and/or
compensation is awarded. The old employer takes this decision
on
review and the Labour Court hands down judgment after the transfer of
the business to a new employer has taken place. If the
court then
substitutes the Award with an order that the dismissals were fair, on
the logic of the respondent in this matter, the
new employer would
not be in a position to benefit from the terms of the court order but
carry obligations towards the said employees.
[9]
In my view, an award binding on the old employer immediately before
date of transfer in terms of section 197(5), cannot be considered
sui
generis
, i.e that it is an award not
susceptible to review in terms of the LRA. It could not have been
intended that a review judgment
in respect of such an award could
have no legal force and effect, if the award is reviewed and
substituted subsequent to the transfer
of the business. That the
effect of such substitution by the Labour Court may impact on the
employees of the old employer and on
the new employer (who has
stepped into the shoes of the old), is consistent with a
constitutionally sensitive reading of section
197. In other words
both
employees of the old employer and new employers carry the risk that a
court order may intervene after transfer, affecting the respective
rights and obligations between them by virtue of section 197. Of
course this risk is tempered by the opportunity provided
by section
197(5)(b) that the parties may enter into an agreement in terms of
section 197(6).
[10]
I therefore find, that
s197(5)
of the
Labour Relations Act 68 of 1995
applies to an arbitration award which was reversed and substituted by
the Labour Court but only after the transfer of the relevant
undertaking had taken place. In the context of this matter, I
therefore make the following order:
Order
1.
The rights which the Applicant’s members had, following their
unfair dismissal by Second
Respondent, were rights which were
transferred to First Respondent by virtue of
Section 197
of the
Labour Relations Act.
2.
The
writ of execution under case number C459/04 issued by the
Applicant, on behalf of the said members, was lawfully issued, and
the
assets attached pursuant to such writ may be sold in order to
satisfy the claims of the Applicant’s members.
_____________________________
H.
Rabkin-Naicker
Judge
of the Labour Court of South Africa
Appearances:
Applicant:
A.C. Oosthuizen S.C. with C MD Tsegairie instructed by Marius A
Abrahams Attorneys
First
Respondent: C. Joubert instructed by Werksmans Attorneys
[1]
CA11/2010
[2]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA) ([2012]
2 All SA 262
;
[2012] ZASCA 13)
para 18
[3]
(2010)
31 ILJ 2578 (LC)
[4]
2012
(1) SA 321
(CC)