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[2019] ZALCJHB 261
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Logwood Village NPC v Lecso Manufacturing Proprietary Limited and Others (J1586/19) [2019] ZALCJHB 261 (3 October 2019)
IN
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not Reportable
Case No: J 1586/19
In the matter between:
LOGWOOD VILLAGE
NPC
Applicant
And
LECSO MANUFACTURING
PROPRIETARY LIMITED
First
Respondent
THE INDIVIDUALS LISTED
IN ANNEXURE “A”
TO THE NOTICE OF
MOTION
Second to Further Respondents
Heard: 8 August
2019
Delivered:
3 October 2019
JUDGMENT
TLHOTLHALEMAJE,
J
Introduction:
[1]
In this
opposed application, applicant (‘Logwood’) seeks an order
declaring that the employment contracts of the Second
to Further
Respondents have transferred from it to the First Respondent
(‘Lesco’) in terms of section 197 of the Labour
Relations
Act (The LRA),
[1]
and that
pursuant to the transfer of the employment contracts, Lesco is
directed to comply with its obligations under the provisions
of
section 197 of the LRA.
The
background:
[2]
The factual background, to the extent that it is undisputed may be
summarised
as follows;
2.1
Logwood is a non-profit organisation registered in terms of the laws
of the
Republic. It is also a residential facility catering for about
150 intellectually disabled individuals. It provides these
individuals
with living, therapeutic and recreational facilities, and
meaningful work opportunities for which they are remunerated.
2.2
Logwood also has an outreach programme registered with the National
Department
of Social Development in terms of which it employed about
60 members of the local community residing near Nooitgedacht, to
assist
in its income producing workshop.
2.3
Lecso is a producer and supplier of electrical components such as
switches,
wall sockets, extension cords and multiplugs. Since 1998,
Logwood and Lesco have had in place, a verbal commercial agreement
(Assembly
Agreement) in terms of which Lecso effectively outsourced
the full assembly and packaging process relating to about 80% of its
total product requirements to Logwood.
2.4
The services in question were provided at Logwood’s workshop in
Muldersdrift.
Lecso supplied the workshop which was made available by
Logwood with equipment for its operational requirements, including
conveyor
belts, spot welders, tools, machines, shelving, tables
printers, consumables, raw material, containers and other associated
assets.
2.5
The Logwood workshop was exclusively used to assemble Lesco’s
products.
Logwood in turn utilised three categories of its employees
for Lesco’s operations,
viz
;
a)
Members of the local community (Outreach employees), who were
paid a
daily minimum wage. Logwood contends that despite these employees
having been employed in terms of contracts which required
of them to
perform work as and when they were directed to perform, the
de
facto
position was that they had devoted all of their time to
Lesco’s operations.
b)
Residential employees, who were paid a fee per unit assembled
and,
c)
Three supervisors, who were paid a fixed monthly salary and
also
provided with accommodation on site.
2.6
The Second to Further Respondents are either outreach employees or
supervisors.
In terms of the Assembly Agreement, Lecso had also made
a donation of R20 000.00 per month in addition to paying Logwood
a
fixed amount per unit assembled in the workshop. The Agreement
endured over 22 years with its terms being amended over time to
provide for Lecso to attend to the delivery and supply of the raw
material and components parts to the workshop for assembly, as
well
as the removal of the assembled components to its own workshop and
warehouse.
2.7
Logwood had also over time effected improvements and upgrades to the
workshop
utilised for Lesco’s operations, some of which were
done at the latter’s request.
2.8
Various meetings were held between Logwood and Lecso from early 2019
in relation
to the changes in the latter’s pricing model to be
applied in the assembling of its products.
2.9
In a letter
addressed to Lesco on 7 February 2019
[2]
,
Logwood raised concerns and the sustainability of the parties’
business model and indicated that an alternative pricing
strategy
needed to be developed to address the concerns it had raised. These
engagements could not yield an agreement between the
parties.
2.10
In a meeting held on 2 May 2019 between the parties, Lecso
informed Logwood that the
longstanding Assembly Agreement between the
parties was to be terminated on the basis that changes were to be
made to its business
strategy, to insource the assembly of its
products from its own workshop.
2.11
Lecso on 6
May 2019 issued a written notice of termination of the agreement to
Logwood
[3]
. The notice read:
‘
Dear
Logwood.
Lesco hereby gives 30
Days Notice is hereby given to the Board of Trustees of Logwood
Ranch. (Sic)
Notice to terminate the
use of the facility and provision of labour.
We thank you most
sincerely for the past 20 years of service
Kind regards,
David Shapiro
Director’
2.12
On 9 May 2019, Logwood sent a written termination proposal
to Lesco which addressed
a variety of issues including staffing; the
terms and timing of the vacating of the premises; the proposed
financial settlement
of
inter alia
trading debts; and the
retrenchment costs related to the three categories of employees. The
proposed financial settlement of all
these issues was in the amount
of R718 580.92.
2.13
Lesco in response to Logwood’s proposals made a once off final
offer of a payment of a
donation of R60 000.00, and an
undertaking to pay 8 consecutive donations of R30 000.00 from
30 June 2019 in
return for unhindered access to the
workshop for the purposes of removal of its stock and equipment.
2.14
When an agreement could not be reached on the termination proposals,
Logwood then issued notices
to its outreach employees informing them
of the termination of the commercial agreement with Lecso.
The
legal framework:
[3]
Central to
the dispute between the parties is whether the termination of the
Assembly Agreement by Lesco, taken together with other
factors
pointed out on behalf of Logwood, such as the alleged employment of
one of its employees and the intention to take on others,
constituted
a transfer of a business as a going concern for the purposes of
section 197 of the LRA.
[4]
[4]
The purpose
of section 197 of the LRA is to protect the rights of employees to
continued employment flowing from a sale or transfer
of a business.
In
Aviation
Union of South Africa & another v South African Airways (Pty) Ltd
& others
[5]
,
the Court stated that purpose of these provisions was to alter the
employment related consequences of the transfer of a business
as a
going concern at common law, consistent with the constitutional right
to fair labour practices, with a view to safeguard employees’
security of employment, and to facilitate the smooth transfer of the
business by guaranteeing the employer a workforce to continue
the
business.
[6]
[5]
The test
for determining whether a business is transferred as a going concern,
is as laid out in
National
Education Health and Allied Workers Union (NEHAWU) v University of
Cape Town and Others
[7]
as follows;
‘
What
is transferred must be a business in operation “so that the
business remains the same but in different hands.”
Whether that has occurred is a matter of fact which must be
determined objectively in the light of the circumstances of each
transaction.
In deciding whether a business has been transferred as a
going concern regard must be had to the substance and not the form of
the transaction. A number of factors will be relevant to the question
whether a transfer of a business as a going concern has occurred,
such as the transfer or otherwise of assets both tangible and
intangible, whether the workers are taken over by the new employer,
whether customers are and whether or not the same business is being
carried on by the new employer. What must be stressed is that
this
list of factors is not exhaustive and that none of them is decisive
individually.’
[6]
Whether there was a transfer of a business as a going concern by the
old
employer to the new employer is a question of fact to be
determined objectively, taking into account;
i.
Whether there was a transfer by the
old to the new employer;
ii.
Whether what was transferred was the
whole or part of the business,
trade, undertaking or a service; and,
iii.
Whether the
whole of part of the business was transferred as a going concern
[8]
.
[7]
As to what
constitutes a ‘transfer’ was explained in
Rural
Maintenance
[9]
in the following terms;
“
With
regard to “transfer”,
Aviation Union
tells us
that:
“
For
the section to apply the business must have changed hands, whether
through a sale or other transaction that places the business
in
question in different hands. Thus the business must have moved from
one person to the other. The breadth of the transfer contemplated
in
the section is consistent with the wide scope it is intended to
cover. Therefore, confining transfers to those affected by the
old
employer is at odds with the clear scheme of the section.
But
whether a transfer as contemplated in section 197 has occurred or
will occur is a factual question. It must be determined with
reference to the objective facts of each case. Speaking generally, a
termination of a service contract and a subsequent award of
it to a
third party does not, in itself, constitute a transfer as envisaged
in the section. In those circumstances, the service
provider whose
contract has been terminated loses the contract but retains its
business. The service provider would be free to
offer the same
service to other clients with its workforce still intact.
For
a transfer to be established there must be components of the original
business which are passed on to the third party. These
may be in the
form of assets or the taking over of workers who were assigned to
provide the service. The taking over of workers
may be occasioned by
the fact that the transferred workers possess particular skills and
expertise necessary for providing the
service or the new owner may
require the workers simply because it did not have the workforce to
do the work. Without the protection
afforded by section 197, the new
owner with no workers may be exposed to catastrophic consequences, in
the event of the workers
declining its offer of employment.””
[8]
As further
observed in
Imvula
[10]
,
for a
transfer of a business as a going concern to occur, not all the
assets of the business have to be transferred, nor is it a
requirement that
all
the relevant employees should be transferred,
as
that depends on the nature of the business. Equally so, what must be
transferred are those assets and personnel that are essential
to the
business as it was operated by the transferor, as
without
the transfer of the means to do the work, there could be no transfer
of the business as a going concern.
The
transfer allows the actual business or a clearly demarcated portion
thereof to operate seamlessly after the transfer
[11]
.
[9]
Whether in
a particular case it can be said that a transfer of business as a
going concern has occurred was further explained in
NEHAWU
[12]
as follows;
“
The
phrase “going concern” is not defined in the LRA. It must
therefore be given its ordinary meaning unless the context
indicates
otherwise. What is transferred must be a business in operation “so
that the business remains the same but in different
hands.”
Whether that has occurred is a matter of fact which must be
determined objectively in the light of the circumstances
of each
transaction. In deciding whether a business has been transferred as a
going concern, regard must be had to the substance
and not the form
of the transaction. A number of factors will be relevant to the
question whether a transfer of a business as a
going concern has
occurred, such as the transfer or otherwise of assets both tangible
and intangible, whether or not workers are
taken over by the new
employer, whether customers are transferred and whether or not the
same business is being carried on by the
new employer. What must be
stressed is that this list of factors is not exhaustive and that none
of them is decisive individually.
They must all be considered in the
overall assessment and therefore should not be considered in
isolation.”
[13]
(footnotes omitted)
The
submissions:
[10]
Logwood, in consideration of the above and other authorities and
principles set out therein
contends that;
10.1
The termination of the Assembly Agreement and the subsequent
performance of the same assembly
services previously rendered by its
workshop employees to Lesco, but now performed by the latter’s
employees working at its
site (in-sourcing), and the continued use of
the same infrastructure by Lesco employees, triggered the application
of section 197
of the LRA.
10.2
The services performed by its employees on behalf of Lesco at the
workshop as a result of the
outsourcing, comprised an ‘organised
grouping of resources constituting an economic entity’.
10.3
The assembly operation had as its sphere of activity, the assembly of
units for Lesco, meaning
that it operated from a discrete premise,
using Logwood employees who were supervised by Logwood staff to
produce units to the
requirements of Lesco.
10.4
The
workshop as operated by Logwood constituted an organised grouping of
persons and assets facilitating the exercise of an economic
activity
which was the assembly and packaging of Lesco’s products.
[14]
This further comprised a defined set of activities which represents
an identifiable and discrete business undertaking.
10.5
The units previously assembled at the Logwood premises were now
assembled at Lesco’s premises,
using exactly the same equipment
for assembly by employees who operated in substantially the same
manner, and thus the economic
entity retained its identity after the
transfer.
10.6
Consequently, there was a transfer of a full business, with Lesco
having removed all of the essential
infrastructure and placed it at
its premises for the continuation of the same activities, in
pursuance of the same objectives.
[11]
Lecso denied that the provisions of section 197 of the LRA were
triggered on the grounds
that;
11.1
The termination of the contractual relationship between the parties
only meant that Logwood lost
its contract. Logwood however retained
its business, and was free to offer those services to other clients.
11.2
The termination of the contractual relationship between the parties
was due to unreasonable demands
by Logwood for an amendment in the
commercial terms of the contract;
11.3
The employment contracts of the outreach employees contained
provisions affording Logwood the
flexibility to require them to
perform work other than that performed for Lesco.
11.4
The parties were in dispute about a financial settlement pursued by
Logwood.
11.5
The business moved from Logwood’s premises to Lesco’s
premises some 55 km away.
Evaluation:
[12]
At the core of this dispute in determining whether the provisions of
section 197 of the
LRA were triggered is that it can be accepted
that;
12.1
Lesco outsourced the full assembly and packaging process relating to
about 80% of its total product
requirements to Logwood. Logwood in
turn made available its workshop to Lesco for the purposes of
assembly and packaging of the
products. It further utilised the
services of the three categories of employees,
who
were paid as per their own contractual arrangements with Logwood.
Those contractual arrangements were such that other than performing
work on the Lecso’s operations, Logwood was at liberty to
utilise the employees’ services in other areas unrelated
to
Lecso’s operations
.
12.2
Lecso had equipped the workshop to its own specifications, with
Logwood being required to incur
expenses in maintaining and ensuring
that the workshop remained at Lesco’s standards and
expectations.
12.3
When the Assembly Agreement came to an end Lecso took away all its
own movable assets and equipment
associated with its assembly and
packaging operations, and continued with the same operations
utilising the services of its own
employees at its own premises. In a
nutshell, the business, once continued with at Lecso, retained its
identity.
[13]
In addressing the principal question, the starting point in relation
to the other grounds
raised by Lecso is that a determination of
whether or not there was a transfer of business as a going concern
from the Logwood
to Lecso cannot be dependent on the specific grounds
of the termination of the Assembly agreement, or what the demands of
the one
party were for the sustainability of that agreement.
[14]
Equally so, that determination does not also depend on the new
location of the operations
of Lecso. The fact that if it were to be
found that section 197 of the LRA was triggered, this would imply
that the employees transferred
would have to travel long distances to
the new premises is clearly a non-issue. The question remains whether
on the objective facts,
what took place constituted a transfer of
business as a going concern as contemplated in section 197 of the
LRA.
[15]
The dispute surrounding the nature of employment contractual
arrangements between Logwood
and some of the outreach employees can
be resolved by an acceptance from the pleadings that the three
categories of employees were
primarily engaged in the servicing of
the contractual arrangements between Lecso and Logwood. Thus, they
had primarily devoted
to performing work on the Lesco contract.
[16]
It is indeed equally correct that there were incidents where some of
these employees had
to perform other unrelated tasks,
i.e
.
work for other customers as per their own contracts of employment
dictated. Be that as it may, it can be accepted that that the
outreach employees, were not solely employed for the purposes of
servicing the Lesco operations, as it is further common cause
that as
a condition for receipt of donations from the
National
Department of Social Development, Logwood was in any event obliged to
employ a certain number of employees from local communities
to assist
in its income producing workshop
. The facts and circumstances
of this case are distinguishable from those in
Rural
, where
employees had to be specifically employed to service the agreement
between Rural and the Municipality. In this case, the
residential
employees were always available as the facility was designed
primarily with their needs in mind, whilst the outreach
employees
were employed by Logwood as part of the donation deal with the
Department of Social Development.
[17]
It is also correct as pointed out on behalf of Lesco, that central to
any dispute regarding
an alleged transfer in accordance with the
provisions of section 197 of the LRA is whether there is any business
(including a service)
capable of being transferred as a going
concern. Such a business must constitute an ‘economic entity’
as equally pointed
out by Logwood, which when transferred, must
retain its identity.
[18]
Lesco further correctly pointed out that only once an assessment of
Logwood’s business
was made could it be possible to determine
whether that business was capable of being transferred. In this
regard, reference was
made to a Facebook post dated
25 June 2019 (After the termination of the Assembly
Agreement), in which the nature
of Logwood’s business was
characterised as;
18.1
Being a non-profit organisation which strives to provide meaningful
work opportunities for its
residents within the safety of a
protective environment.
18.2
Being committed to the development of adults with intellectual
impairments towards self-actualisation
and leading a meaningful life.
18.3
The provision of labour to execute any form of work which is labour
intensive and repetitive
in nature.
18.4
The use of its facilities at its premises to provide services; to
execute contracts to individual
specifications, and the provision of
flexible contracts of employment that allowed for the deployment of
employees to provide any
particular service as and when required.
[19]
The Facebook post was also in a form of an appeal to businesses for
work in its income
producing workshop, subsequent to the termination
of agreement with Lesco.
[20]
Taking into account what is at the core of this
dispute, the nature of Assembly Agreement, and the nature of the
parties’
businesses,
and further to the extent that it
is accepted
that for a transfer to have occurred
there must be components of the original business which are passed on
to the third party, and
that what is capable of being transferred is
the business that supplies the service and not the service itself,
the following invariable conclusions ought to be reached;
20.1
There can be no doubt that throughout the tenure of the Assembly
Agreement, Lesco for all intents
and purposes retained ownership of
the assets associated with the operations other than the workshop. It
is therefore correct as
pointed out on behalf of Lesco that these
assets could not have been transferred from Logwood to Lesco, as they
always remained
its property in any event.
20.2
In the
light of the nature of Logwood’s business as can be gleaned
from its Facebook post, and further in the light of the
evidence in
regards to the ownership of the assets necessary to continue with the
business, it is my view that the mere provision
of labour or the type
of service in this case on its own cannot constitute a business or an
‘economic entity’ as submitted
on behalf of Logwood. In
this regard, Lecso, and correctly so, took issue with Logwood’s
reliance on the concept of ‘economic
entity’ and
correctly pointed out the caution sounded in
Tasima
(Pty) Ltd v Road Traffic Management Corporation and Others
[15]
,
and
also in
Rural
Maintenance.
[16]
Accordingly, it cannot be accepted as suggested by Logwood, that the
mere organised grouping of persons by Logwood (The employees)
and
assets (which in any event belonged to Lesco), would ordinarily
constitute an economic activity for the purposes of section
197 of
the LRA.
20.3
It can
further be accepted on the facts that none of the employees were
taken over as a consequence of the termination of the Assembly
Agreement. In the founding affidavit, it was averred on behalf of
Logwood that one of its key employees (Ms Magwede), was employed
at
the Lesco’s workshop. Lesco’s response however was that
this employee has been in its employ since December 2017
and
long before the current dispute. The replying affidavit on the other
hand contained a bare denial, and on the
Plascon
Evans
[17]
principles, it can be accepted that indeed no employees were taken
over by Lecso flowing from the termination of the Assembly Agreement.
Whether Lesco has any intention to take some of those employees at
some point in the future does not take Logwood’s case
any
further.
[21]
In the end, the only transfer that took place in this case is in
respect of tangible assets
that in any event belonged to Lecso. None
of Logwood’s employees were transferred to Lecso, and I did not
understand from
Logwood’s case that any of its customers (if
any) were transferred or that any of its goodwill was equally
transferred. Thus,
on the whole, the termination Assembly Agreement
and the subsequent insourcing by Lecso did not in itself, constitute
a transfer
as envisaged in section 197 of the LRA. Logwood, which
merely supplied the facilities and labour, only lost a contract with
Lecso,
but retained its own business, which it is described in its
own Facebook post. The businesses operated by Logwood and Lecso are
not in any shape or form similar, and it is inconceivable as to how
it can be said that there was a transfer of Logwood’s
business
as a going concern, when Logwood retained the essentials of its
business after the termination of the Agreement. Ultimately,
Logwood
as it has sought to do
via
its Facebook post, is still in a
position, and at liberty to offer similar services at its workshop to
other clients, with its
workforce still intact.
[22]
In the light of the above, it follows that Logwood's case must fail.
I have further had
regard to the requirements of law and fairness,
and in the light of the circumstances of this case, it is my view
that a costs
order is not warranted.
[23]
Accordingly, the following order is made:
Order:
1. The Applicant’s
application is dismissed.
2. There is no
order as to costs
___________________
E.
Tlhotlhalemaje
Judge
of the Labour Court of South Africa
APPEARANCES:
For
the Applicant: A
Redding SC and R Itzkin, instructed by Wilken INC
For
the First Respondent: J
Berger, instructed by Smit Sewgoolam Incorporated
[1]
Act
66 of 1995 (as amended)
[2]
Annexure
‘JW5’ to the Founding Affidavit
[3]
Annexure
‘JW6’ to the Founding Affidavit. The letter reads:
[4]
Which
provides:
‘
197
Transfer of contract of employment
(1)
In this section and 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 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.’
[5]
2012 (1) SA 321
(CC);
2012 (2) BCLR 117
(CC);
[2012] 3 BLLR 211
(CC); (2011) 32 ILJ 2861 (CC) at paras 37 - 38
[6]
See
also
Harsco
Metals South Africa (Pty) Ltd and Another v Arcelormittal South
Africa Ltd and Others
[2012]
4 BLLR 385
(LC); (2012) 33 ILJ 901 (LC) at para 12;
Rural
Maintenance (Pty) Limited and Another v Maluti-A-Phofung Local
Municipality
2017 (1) BCLR 64
(CC); (2017) 38 ILJ 295 (CC);
[2017] 3 BLLR 258
(CC)
at
para [140], where it was held;
“
In
the interpretation and application of section 197, it is important
that the primary purpose of the section be borne in mind
at all
times. The primary purpose of section 197 is the
protection or safeguarding of the rights of employees whenever
there
is a transfer of business as a going concern from one employer to
another. The principle upon which section 197 is
based is that,
whenever a business in which workers are employed is transferred as
a going concern from one employer to another,
the workers go with
the business. This avoids the loss of jobs that used to result
from transfers of businesses prior to
the current LRA. The
transferor ceases to be the employees’ employer and the
transferee becomes their employer, with
full recognition of their
years of service, benefits and other terms and conditions of
employment unless there has been an agreement
in writing as
envisaged in section 197(2) read with subsection (6).”
See
also
National Education Health and
Allied Workers Union (NEHAWU) v University of Cape Town and Others
(2003) 24
ILJ
95 (CC) at para 53, where
it was held;
“
Section
197 …. 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 result 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 workers against job losses.
[7]
At
para
56
.
See also
Rural
Maintenance (Pty) Limited and Another v Maluti-A-Phofung Local
Municipality
2017 (1) BCLR 64
(CC); (2017) 38 ILJ 295 (CC);
[2017] 3 BLLR 258
(CC) at paragraphs 28 -29;
Imvula
Quality Protection (Pty) Ltd and Others v University of South Africa
[2018]
12 BLLR 1151
(LAC); (2019) 40 ILJ 104 (LAC) at para 16; See also
City
Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd and
Others
[2014] 10 BLLR 945
(LAC); (2014) 35 ILJ 2757 (LAC) at para [23],
where it was held that;
‘
All
of these factors indicate that a court is required to examine the
substance of the agreement to terminate the outsourcing,
in this
case between appellant and first respondent. In essence,
the approach adopted in Nehawu,
supra
follows
that of the European Court of Justice in the application of the
Business Transfers Directive (2001/23/EC) which
is applicable in the
European Union, and dictates that a transfer must relate to an
autonomous economic entity (defined to mean
an organized group of
persons and assets facilitating the pursuit of an economic activity
that promotes a specific objective).
In turn this
involves a determination whether that entity retains its identity
after the transfers; that is, the transferor
must carry on the same
or similar activities with the personnel and/or the business assets
without substantial interruption.
See in this
connection Spijkers v Gebroeders Benedik Abbatoir CV
(1986) CMLR 296
and the instructive judgment of Van
Niekerk J in Unitrans Supply Chains Solutions (Pty) and others
v Nampak Glass
(Pty) Ltd and others [2014] ZALCJHB 61 at para
15.’
[8]
City
Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd and
Others
(CCT133/14)
[2015] ZACC 8
;
2015 (6) BCLR 660
(CC);
[2015] 8 BLLR 757
(CC); (2015) 36 ILJ 1423 (CC) at para 35;
Imvula
Quality Protection (Pty) Ltd and Others v University of South Africa
[2018] 12 BLLR 1151
(LAC); (2019) 40 ILJ 104 (LAC) at para 13;
Imvula
Quality Protection and Others v University of South Africa
[2017] 11 BLLR 1139
(LC); (2017) 38 ILJ 2763 (LC) at para 6
[9]
At para 100 (The Minority judgment of Jafta J (Mogoeng CJ and
Madlanga J concurring))
[10]
Supra
at Fn
(7)
[11]
at
para 21
[12]
Supra
at Fn
(6)
[13]
NEHAWU
at para 56; See also
Rural
,
at para 148
[14]
With
reference to
Harsco
Metals South Africa (Pty) Ltd and Another v Arcelormittal South
Africa Ltd and Others
[2012] 4 BLLR 385
(LC); (2012) 33 ILJ 901 (LC) where it was held;
“
[25]
Section 197 (1) defines a ‘business’ to include ‘the
whole or
any part of a business, trade or undertaking, or service.
The definition is broad, but it requires the court to subject the
entity
that is the subject of a transfer to scrutiny. In doing so,
the courts have drawn on the jurisprudence developed by the European
Court of Justice in applying EU Directives on the Transfer of
Undertakings, and adopted the concept of an ‘economic entity’,
defined as an organised grouping of persons and assets facilitating
the exercise of an economic activity which pursues a specific
objective’. This formulation suggests that there may be a
distinction, especially in the case of a labour-intensive business,
between an ‘economic entity’ and an ‘activity’;
the latter comprising only the provision of services
under a
specific contract.
[26]
The ‘economic
entity’ test is more easily applied where a substantial
business, with its assets and employees, is the subject of the
transfer. At the other end of the spectrum is the business that
comprises only the provision of services. In those instances, the
ECJ has recognised the requirement laid down in
Spijkers
to have regard to the transfer of the business's tangible
assets may be unrealistic. Businesses engaged in this type of
activity
may in fact have no assets, or have only assets whose
importance is negligible in relation to the overall conduct of their
activities.
Hence the caution in
Suzen
that an entity
cannot be reduced to the activity entrusted to it. In the United
Kingdom, this problem has been largely resolved
by the incorporation
of Regulation 3 (1) – (2) of TUPE 2006, and the addition of a
‘service provision change’
within the broader definition
of a relevant transfer. In effect, this provides that if immediately
before the service provision
change, there is an organised grouping
of employees which has as its principal purpose the carrying out of
activities on behalf
of the client and where the client intends that
the activities will, following the service provision change, be
carried out by
the transferee.”
[15]
(2017) 38 ILJ 2385 (LC), where it was held;
“
[25]
Mr
Redding
pointed
out that this approach has also been adopted by this Court
in
Harsco
:
“
Section
197 (1) defines a ‘business’ to include ‘the whole
or any part of a business, trade or undertaking,
or service. The
definition is broad, but it requires the court to subject the entity
that is the subject of a transfer to scrutiny.
In doing so, the
courts have drawn on the jurisprudence developed by the European
Court of Justice in applying EU Directives
on the Transfer of
Undertakings, and adopted the concept of an ‘economic entity’,
defined as an organised grouping
of persons and assets the exercise
of an economic activity which pursues a specific objective’.”
[26]
But Van Niekerk J didn’t stop there in
Harsco.
He
continued:
“
Useful
as these authorities are, in South Africa, in relation to the
definition of a ‘business’ for the purposes of
s 197,
the judgment of the Labour Appeal Court in
SAMWU v Rand Airport
Management Co Ltd
remains the authority by which I am
bound. In that case, the court concluded that the outsourcing of
gardening and security
functions at an airport management by the
employer were businesses capable of being transferred in terms of s
197, despite that
fact that it did not appear that any assets,
goodwill, operational resources or workforce were to be
transferred. No distinction
was drawn between a business that
is largely employee-reliant, as opposed to an asset-reliant
business. Nor was it suggested
that in the former, greater weight
ought to be attached to the number of employees transferring as
opposed to the latter instance,
in which the number of assets
transferring might attract greater weight. If, as in that case, a
grouping of relatively unskilled
employees and the work they
perform, with no assets appearing to be the subject of any transfer,
comprises a ‘business’
for the purposes of s 197, then
it is difficult to conceive, in the context of an outsourcing
transaction, of an economic entity
that would not be capable of
transfer in terms of the section.”
[27]
Mr
Redding
’s
reliance on the English and European jurisprudence must be evaluated
in the light of those remarks of Van Niekerk J.
Like him, I am bound
by
Rand Airport
and, more recently, by the
Constitutional Court in
Rural Maintenance.
And in
that case, Froneman J once again cautioned against “the
wholesale and uncritical adoption of jurisprudence under
the
Acquired Rights Directive adopted by the European Commission
or the British TUPE Regulations.””
[16]
At
paragraphs 23 – 25, where it was held;
“
The
term “service provision change” was introduced into the
British Transfer of Undertakings (Protection of Employment)
Regulations (TUPE Regulations) in 2006. It is not a term used in
section 197 of the LRA. Section 197(1)(a) defines “business”
as including “the whole or part of any business, trade,
undertaking
or service
”.
The
use of terms or concepts not found in the wording of section 197 to
determine whether a transaction falls under the terms
of section
197(1) and (2) may be misleading and has the potential to bring
about an incorrect result. As Yacoob J remarked in
Aviation
Union,
the evaluation of whether there has been a transfer
of business as a going concern under section 197 “is complex
enough
without it being burdened with questions about the
‘generation’ of outsourcing”. The same can be said
about
service provision changes.
In
NEHAWU
support
was found for the Court’s reasoning on the purpose of section
197 in “comparable foreign instruments
and foreign case law
construing these instruments.” But this was done with
acknowledgment of possible differences
in language and context. This
Court has on many occasions warned that the use of comparative law
should be treated with due regard
to different contexts and
language.
NEHAWU
is no authority for the wholesale and
uncritical adoption of jurisprudence under the Acquired Rights
Directive adopted by
the European Commission or the British
TUPE Regulations.
[17]
Plascon-Evan
Paints Ltd v Van Riebeeck (Pty) Ltd
1984
(3) SA 632
(A)