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[2018] ZALCJHB 125
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EOH Mthombo (Pty) Ltd v Naude and Others (JR1676/16) [2018] ZALCJHB 125 (20 March 2018)
IN THE LABOUR COURT OF SOUTH
AFRICA, JOHANNESBURG
Not Reportable
Of interest to other judges
Case no: JR 1676/16
In
the matter between:
EOH
MTHOMBO (PTY) LTD
Applicant
And
ADRIAAN MATHYS NAUDE
FONTANELLA CONSULTING (PTY) LTD
COMMISSION
FOR CONCILIATION,
MEDIATION & ARBITRATION
BONGANI
KHUMALO N.O.
First Respondent
Second Respondent
Third Respondent
Fourth
Respondent
Heard:
27 February 2018
Delivered:
20 March 2018
Summary:
Labour Relations Act 66 of 1995
: Review of award in terms of
s145
– Transfer of business as going concern – Cancellation of
sale of business contract reversing transfer – Contract
of
employment of employee
ipso facto
reverting to
seller – Employee allegedly dismissed after cancellation –
Seller real employer of employee at time of
alleged dismissal –
Award set aside and matter remitted for determination of fairness of
alleged dismissal.
JUDGMENT
LEKALE, AJ
Background and introduction
[1] On or about 06 February 2013 the
applicant and the second respondent concluded a sale of business
agreement in terms of which
the former took transfer of the business
of the latter known as Fontanella business unit as a going concern,
thus, triggering the
operation of the provisions of
section 197(2)
of
the
Labour Relations Act
(“the LRA”) with regard to
automatic transfer of employment contracts of the employees of the
said business.
[2] The first respondent was, as at
the date of transfer of the business in question, in the employ of
the second respondent and,
as such, his employment contract was
transferred to the applicant. At the time of the conclusion of the
sale agreement and the
transfer the business of the second respondent
was managed by one Grobler, who continued to manage it on behalf of
the applicant
as an employee after the transfer.
[3] It was a material term of the sale
agreement that should the business not meet profit warranties the
applicant could cancel
the agreement. The profit warranties could, in
fact, not be met and the applicant proceeded to cancel the agreement
with effect
from 06 August 2015.
[4] The first respondent continued
rendering services to the business after the cancellation and was
paid salaries for August 2015
and September 2015 in error by the
applicant. The applicant, further, paid him for October 2015 on what
it calls “humanitarian
grounds” when he queried
non-payment. The second respondent, on his part, paid him for
services rendered for November 2015.
[5] The first respondent had issues
with the position he found himself in and referred the dispute
concerning alleged unfair dismissal
to the third respondent against
the applicant citing the date of dismissal as 19 November 2015.
[6] The first respondent, further,
confronted Grobler in respect of the status of his employment on 25
November 2015 and the latter
advised him that he, as the second
respondent, could not afford to employ him on the same terms and
conditions as the applicant
and offered him employment as a
consultant.
[7] The dispute remained unresolved
after an attempt at conciliation on 08 January 2016. The first
respondent, thereafter, directed
an email to the second respondent on
11 January 2015 indicating,
inter alia
, that the latter was
obliged in terms of
section 197
of the LRA to take transfer of his
employment contract on the same terms and conditions applicable as at
the date of transfer of
business back to it.
[8] The second respondent was,
thereafter, joined as co-respondent before the third respondent and
the matter, eventually, proceeded
to arbitration before the fourth
respondent who found, in his award, that the applicant was the
employer and directed it,
inter alia,
to pay compensation to
the first respondent.
[9] The applicant feels aggrieved by
the award and now approaches the court in terms of
section 145
of the
LRA for its review and setting aside.
[10] The matter serves before the
court on an unopposed basis with the first, third and fourth
respondents expressly abiding by
the decision of the court.
Issue for determination
[11] The question for determination is
whether or not the award of the fourth respondent is the one that
could reasonably not be
made on the material properly before him with
specific reference to whether or not the applicant was the first
respondent’s
employer at all times material to the alleged
dismissal.
[12] In the event of a positive
determination of the preceding question, I am enjoined to
either substitute the decision
of the fourth respondent as to the
identity of the first respondent’s employer at the relevant
time or remit the matter as
a whole to the third respondent for
arbitration
de novo
before a commissioner other than the
fourth respondent.
Contentions for and on behalf of
the applicant
[13] Mr Lennox submits for the
applicant,
inter alia
, to the effect that the fourth
respondent misconstrued and/or ignored the evidence before him
insofar as it was patent from the
same that there was a “reverse”
transfer of business such as confirmation by the second respondent’s
Mr Grobler,
in opposition of application for summary judgment before
the High Court, that the sale agreement was cancelled. In this regard
he, further, refers the court,
inter alia
, to a letter from
the said Grobler to the first respondent confirming the offer made to
the latter for consultancy position as
opposed to retaining him as an
employee in terms of the employment agreement between him and the
applicant.
[14] In Mr Lennox’s view, the
reasonable conclusion on available evidence is that following
cancellation of the sale of business
agreement the Fontanella
business unit transferred back to the second respondent and that, by
operation of law, the employment
contract of the first respondent
also transferred back to the second respondent.
Applicable legal position
[15]
Transfer of business as a going
concern takes place when the economic entity that comprises the
business retains its identity after
the transfer.
[1]
[16]
Cancellation of a contract
restores the
status quo ante
with the result that each party is obliged reciprocally to make
restitution to the other party
[2]
.
[17]
Section 197(6)
of the LRA
regulates consensual variation of the statutory consequences of
transfer of business as a going concern and prescribes
that an
agreement in that regard be in writing.
[3]
Application of legal position to
the facts and findings
[18] The fourth respondent was first
seized with the question as to who between the applicant and the
second respondent was the
real employer of the first respondent as at
the date of the alleged dismissal.
[19] It was, effectively, common cause
between the parties at arbitration level that the applicant cancelled
the sale of business
agreement and the first respondent continued
rendering services to the Fontanella business after such
cancellation. The parties
were, further, effectively in agreement
that the first respondent got remunerated for at least November 2015
by the second respondent
for services he rendered. It was,
furthermore, undisputed before the arbitrator that the second
respondent, through Grobler, declined
to take over the first
respondent as an employee on the terms and conditions of the
agreement the latter had with the applicant
before the cancellation
of the sale of business agreement.
[20]
A perusal of the impugned award
reveals that the fourth respondent, in fact, regarded the
cancellation of the sale of business agreement
in the instant matter
“as a gross violation of any procedural and legal
requirements”. He, further, concluded that
“there was no
“reverse” transfer to justify that [the second
respondent] was the [first respondent’s] employer”.
[4]
[21] The reason for the aforegoing
conclusion by the fourth respondent appears to be the fact that there
existed no agreement contemplated
by
section 197(2)
read with
section
197(6)
of the LRA insofar as the arbitrator found that:
“
50. The [first respondent] was
never required to enter into an agreement contemplated in
terms of
section 197(6)
of the LRA with either EOH or Fontanella as
alleged employers”.
[22] The effect of
section 197(6)
of
the LRA is to make it possible for employers and
employees to reverse the default position in the event of transfer
of
business as a going concern insofar as it provides that:
“
(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”.
[23]
The default position which
arises from the transfer of business within the contemplation of
section 197(1)
of the LRA is that the new employer
(purchaser/transferee) of the business steps into the shoes of the
old employer as far as,
inter
alia
, existing employment
contracts of the employees of the relevant business are concerned in
the absence of any written agreement
to the contrary.
[5]
[24] The fourth respondent
misconstrued the provisions of
section 197
of the LRA insofar as he
understood that for the first respondent’s employment contract
to revert to second respondent either
the applicant, the second
respondent or both of them acting jointly should conclude a written
agreement with the first respondent
substituting the second
respondent for the applicant as the employer. To this extent the
arbitrator lost sight of the fact that
the default position
eventuates
ipso facto
once transfer of business takes place
within the contemplation of
section 197(1)(b)
of the LRA. The parties
are only obliged to conclude an agreement in writing where they wish
to alter the default position. The
question which fell for
determination by the arbitrator was whether or not there was transfer
of business as a going concern in
favour of the second respondent. A
positive answer to that question would have, without more, identified
the second respondent,
and not the applicant, as the employer in the
absence of a written agreement to the contrary as a matter of law.
[25] The material properly before the
arbitrator indicates that there was cancellation of the sale of
business agreement which resulted
in the transfer of the business, as
a going concern. back to the second respondent. That the second
respondent took transfer of
the business as such is evident from the
fact that the first respondent continued to serve it and, in fact,
received remuneration
at least in November 2015 from it as well as
the fact of the correspondence sent to him by Grobler on behalf of
the second respondent
and the former’s deposition before the
High Court in Johannesburg.
[26] I am, thus, persuaded that the
impugned award could not reasonably be made on the material before
the fourth respondent.
[27] I am, however, not in the
position, on available evidence, to confirm or substitute the
arbitrator’s findings as to the
alleged dismissal and
compensation with specific reference,
inter alia
, to the
position of the second respondent as far as the justness and
equitability of the compensation awarded is concerned.
Order
[28] In the result:
1.
The arbitration award issued by the fourth respondent under case
number GAEK
9755/2015 and dated 01 August 2016 is reviewed and set
aside;
2.
The arbitration award is substituted with a finding that the second
respondent
was the employer of the first respondent at all times
material to the alleged dismissal;
3.
The matter is remitted to the third respondent for a fresh
arbitration hearing
by a commissioner other than the fourth
respondent on the fairness of the alleged dismissal as well as
related issues;
4.
I make no order as to costs.
____________________
LJ
Lekale
Acting
Judge of the Labour Court of South Africa
Appearances
For
the Applicant:
Mr MA Lennox
Instructed
by:
Botoulas Krause & da Silva Inc.
For
the Respondent:
No Appearance
[1]
NEHAWU
v University of Cape Town & Others
(2003) 24 ILJ 95 (CC) and A van Niekerk
et
al
Law@work 4 LexiNexis
2018 at page 370.
[2]
Van
Heerden v Sentrale Kunsmis Korporasie
(Edms) Bpk 1973 1 SA 17 (A).
[3]
SAMWU
& Another v SALGA & Others
[2010]
8 BLLR page 882 (LC) and Law@Work
supra
at page 381.
[4]
Paragraph 50
of the Award.
[5]
See
section
197(2)(a)
of the LRA and Law@Work
supra
at page 381-382.