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[2002] ZACC 27
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National Education Health & Allied Workers Union (NEHAWU) v University of Cape Town and Others (CCT2/02) [2002] ZACC 27; 2003 (2) BCLR 154; 2003 (3) SA 1 (CC); (2003) 24 ILJ 95 (CC) (6 December 2002)

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CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 2/02
NATIONAL EDUCATION HEALTH AND ALLIED Applicant
WORKERS
UNION
versus
UNIVERSITY OF CAPE TOWN First
Respondent
SUPERCARE CLEANING (PTY) LTD Second Respondent
METRO
CLEANING SERVICES CC Third Respondent
TURFMECH CC Fourth
Respondent
ECO ENVIRONMENT (PTY) LTD Fifth Respondent
Heard
on : 17 September 2002
Decided on : 6 December 2002
JUDGMENT
NGCOBO J:
Introduction
[1]
This is an application for
leave to appeal against the judgment and order of the Labour Appeal Court
(LAC)
[1]
dismissing an appeal by
National Education, Health and Allied Workers Union (NEHAWU), the applicant,
against the judgment and order
of the Labour
Court.
[2]
The central question in
this application concerns the meaning of section 197 of the Labour Relations
Act, 1995 (LRA)
[3]
. It is whether, in
terms of section 197, upon transfer of a business as a going concern, the
workers are transferred automatically
with the business without a prior
agreement to that effect between the transferor and transferee employer. Apart
from this question,
the application also raises important questions in relation
to appeals from the LAC, namely, whether such appeals lie to the SCA,
the
procedure to be followed in appeals from the LAC to this Court and the
circumstances in which this Court will hear such
appeals.
Factual Background
[2]
This case had its origin in
a decision taken by the University of Cape Town (UCT), the first respondent,
during 1997 to outsource
certain of its non-core activities which were performed
by members of NEHAWU. These activities were mainly cleaning, gardening and
sports ground maintenance services. UCT appointed four contractors, the second
to fifth respondents, to perform these services.
Save for Supercare Cleaning
(Pty) Ltd (Supercare), the second respondent, none of the other respondents
participated in the proceedings
either in the courts below or in this
Court.
[3]
Since the decision to
outsource was bound to result in the loss of employment for members of NEHAWU,
UCT held consultations with it
on the reasons for outsourcing and the possible
dismissal of workers who were performing the services to be outsourced. Despite
these consultations the dispute between UCT and NEHAWU remained unresolved. UCT
went ahead with the implementation of outsourcing
and retrenchment. It gave
notice to some two hundred and sixty-seven workers of the termination of their
employment and stated that
retrenchment benefits would be paid. Not content,
the workers tendered to continue their employment with UCT and to commence
employment
with the contractors when the transfers
occurred.
[4]
UCT rejected this offer and
invited the workers to apply for employment with the contractors instead. UCT
had stipulated in its contracts
with the contractors that the latter should
favourably consider the employment of the workers. Most of the workers accepted
the
invitation and a majority of those who applied were accepted. However, many
workers did not continue working for the contractors
for very long. Apparently,
the contractors employed them on conditions less favourable than those on which
they had been employed
by UCT. In particular, they were paid far less than UCT
had paid them.
[5]
NEHAWU subsequently brought
an urgent application in the Labour Court seeking declaratory
relief.
[4]
It sought an order
declaring that: (a) the outsourcing of the non-core activities was a transfer of
a part of UCT's business, trade
or undertaking as a going concern within the
meaning of section 197(1)(a) of the LRA; (b) the employment contracts of the
affected
workers were transferred automatically to the contractors in terms of
section 197(2)(a) of the LRA; and (c) the termination of the
workers' employment
contravened section 197(2)(a) and was of no force and
effect.
The proceedings in the Labour
Court
[6]
Mlambo J, who heard the
matter in the Labour Court, took the view that section 197 does not provide for
automatic transfer of contracts
of employment in the case of a transfer of a
business as a going concern. He expressed the view that the contracts of
employment
can only be transferred without the consent of the employees if the
seller and purchaser of the business agree that the contracts
of employment will
be transferred together with the business. Mlambo J disagreed with an earlier
decision of the Labour Court in
Schutte and Others v PowerPlus Performance
(Pty) Ltd and another
[5]
in which
Seady AJ had concluded that: (a) section 197 protects the workers against the
loss of their jobs in the event of a transfer
of a business in the circumstances
contemplated in section 197(1)(a); and (b) the contracts of employment are
transferred automatically
when a business is transferred in the circumstances
set out in section 197(1).
[7]
But Mlambo J was confronted
with the decision of the LAC in
Foodgro (A division of Leisurenet Ltd) v
Keil
[6]
where the LAC reached the
same conclusion as Seady AJ both as to the purpose and the meaning of section
197. While expressing the
view that the interpretation of section 197 in
Foodgro
is incorrect, he nevertheless considered himself bound by that
decision.
[7]
However, on the facts he
found that the outsourcing involved in this case did not amount to a transfer of
a going concern as contemplated
in section 197. He dismissed the application
and made no order as to costs.
[8]
NEHAWU appealed to the LAC.
UCT and Supercare cross-appealed only on the issue of
costs.
The proceedings in the LAC
[9]
The majority of the LAC
dismissed the appeal.
[8]
It took as
its starting point the meaning of the phrase “going concern” in
section 197 and held that a business is transferred
as a going concern only if
its assets, including the workforce, are transferred. As the majority put it,
“to say that there
can be a sale of a business as a going concern without
all or most of the employees going over is to equate a bleached skeleton with
a
vibrant horse.”
[9]
The transfer
of a business as a going concern, the majority held, requires a prior agreement
between the transferor employer and
the transferee employer that the workers or
a majority of them “are part and parcel of the
transaction.”
[10]
It
concluded that as there had been no prior agreement between UCT and the
contractors that the workforce would be transferred as
part and parcel of the
transaction, there was no transfer of a business as a going concern as
contemplated in section 197(1)(a).
[10]
It went on to consider the
decision in
Foodgro
. It held that the question whether contracts of
employment are transferred automatically in circumstances set out in section 197
had not been in issue in
Foodgro
and that the remarks of that court in
this regard were
obiter
. It found that the decision in
Foodgro
did not prevent a finding that section 197(1) must be “interpreted so as
to limit its scope to cases where the transfer follows
upon an agreement between
the seller and the purchaser defining the subject matter of the sale as the
business as a going concern
(i.e. employees
included)”.
[11]
In view of
their conclusion on the law, the majority did not consider the facts. It
accordingly dismissed the appeal and awarded
costs both in the Labour Court and
the LAC to UCT and Supercare.
[11]
The minority judgment
reached a contrary result on the law and also found it unnecessary to consider
the facts. It held that the
purpose of section 197 was to protect the
workers
[12]
and that the question
whether a business has been transferred as a going concern is a matter for
objective determination. Each transaction
must be considered on its
merits.
[13]
It concluded that the
contracts of employment are transferred automatically to the transferee employer
regardless of whether the
two employers agreed that the workers would be
transferred as part of the
transaction.
[14]
[12]
The present application for
leave to appeal is a sequel to the proceedings in the LAC. The first question
that arises is whether
this Court has jurisdiction to determine this
application.
Jurisdiction
[13]
NEHAWU contends that the
interpretation of section 197 of the LRA adopted by the majority of the LAC
infringes the rights of the workers
to fair labour practices conferred by
section 23(1) of the Constitution. That is a constitutional issue. So too is
the contention
raised by NEHAWU that the interpretation of section 197 adopted
by the majority of the LAC fails to promote the spirit, purport and
objects of
the Bill of Rights. Section 39(2) of the Constitution provides that
“[w]hen interpreting any legislation . . .
every court, tribunal or forum
must promote the spirit, purport and objects of the Bill of
Rights.”
[15]
It is not
necessary, however, to deal with section 39(2) in this
application.
[14]
The LRA was enacted
“to give effect to and regulate the fundamental rights conferred by
section 27 of the
Constitution.”
[16]
In doing
so the LRA gives content to section 23 of the Constitution and must therefore be
construed and applied consistently with
that purpose. Section 3(b) of the LRA
underscores this by requiring that the provisions of the LRA must be interpreted
“in
compliance with the Constitution”. Therefore the proper
interpretation and application of the LRA will raise a constitutional
issue.
This is because the legislature is under an obligation to “respect,
protect, promote and fulfil the rights in the Bill
of
Rights.”
[17]
In many cases,
constitutional rights can only effectively be honoured if legislation is
enacted. Such legislation will of course
always be subject to constitutional
scrutiny to ensure that it is not inconsistent with the Constitution. Where the
legislature
enacts legislation in the effort to meet its constitutional
obligations, and does so within constitutional limits, courts must give
full
effect to the legislative purpose. Moreover, the proper interpretation of such
legislation will ensure the protection, promotion
and fulfilment of
constitutional rights and as such will be a constitutional matter. In this way,
the courts and the legislature
act in partnership to give life to constitutional
rights.
[15]
On behalf of UCT it was
contended that where one is dealing with a statute that gives effect to
fundamental rights guaranteed in the
Constitution, the only constitutional
matter that may arise relates to the constitutionality of its provisions. If it
were not so,
the argument went, then this Court would have jurisdiction in all
labour matters. This contention has no merit. In relation to
a statute a
constitutional matter may arise either because the constitutionality of its
interpretation or its application is in issue
or because the constitutionality
of the statute itself is in issue. A challenge to the manner in which the
statute has been interpreted
or applied does not require the litigant to
challenge the constitutionality of the provision the construction of which is in
issue.
Moreover in the case of a statute such as the one in issue in this
application which has been enacted to give content to a constitutional
right,
the proper interpretation of the statute itself is itself a constitutional
matter.
[16]
What must be stressed here
is the point already made, namely, that we are dealing with a statute which was
enacted to give effect
to section 23 of the Constitution, and as such, it must
be purposively construed. If the effect of this requirement is that this
Court
will have jurisdiction in all labour matters that is a consequence of our
constitutional democracy. The Constitution “.
. . is the supreme law, and
all law, including the common law, derives its force from the Constitution and
is subject to constitutional
control.”
[18]
Our
constitutional democracy envisages the development of a coherent system of law
that is shaped by the Constitution.
[17]
The decision in
NAPTOSA
and Others v Minister of Education, Western Cape, and
Others
[19]
relied upon by UCT is
distinguishable from the present case. That case concerned the appropriateness
or otherwise of granting relief
directly under section 23(1) of the Constitution
without a complaint that the LRA was constitutionally deficient in the remedy it
provides. The court was concerned that granting relief directly under section
23(1) would encourage the development of two parallel
streams of labour law
jurisprudence, one under the LRA and the other under section 23(1). The court
considered this to be “singularly
inappropriate”. It was in this
context that the court remarked that it could not “conceive that it is
permissible for
an applicant, save by attacking the constitutionality of the
LRA, to go beyond the regulatory framework which it
establishes.”
[20]
In this
application, NEHAWU does not require us to go beyond the regulatory framework
established by the LRA. The issues in this
case are different from and nothing
like those in NAPTOSA. The dictum relied upon by UCT has no application here
and there is no
need to express any opinion on the correctness of that
decision.
[18]
I am therefore satisfied
that this Court has jurisdiction to hear this application. This does not mean
that this Court will as a
matter of course hear appeals against decisions of the
LAC dealing with the interpretation and application of the LRA. Considerations
that are relevant to that issue are dealt with later in this judgment. But
first there is a procedural issue that must be
considered.
Procedure to be followed in
appeals from the LAC to this Court
[19]
NEHAWU brought this
application in terms of rule 20 which governs appeals from the Supreme Court of
Appeal (SCA).
[21]
The appeals from
all courts other than the SCA are governed by rule
18.
[22]
The proper procedure for
bringing appeals from the LAC to this Court is a matter of some controversy and
uncertainty. This arises
from the decision of the LAC in
Kem-Lin Fashions v
Brunton and Another
[23]
in which
the court held that no appeal lies from the LAC to the SCA and that rule 18 of
the rules of this Court has no application.
In reaching its conclusion, the
court relied upon section 167(3) of the LRA which gave the LAC a status equal to
that of the SCA.
It is necessary to resolve this issue
now.
[20]
It must be stressed at the
outset that we are concerned here with a constitutional matter, a matter which
is not within the exclusive
jurisdiction of the Labour Court. The provisions of
the LRA which give the LAC a status equal to that of the SCA and constitute
it
as the final court of appeal can have no application in constitutional
matters.
[24]
Those provisions can
apply only to matters that are within the exclusive jurisdiction of the LAC and
the Labour Court (whether these
provisions are constitutional need not be
decided now). The reliance on those provisions for the contention that rule 20
applies
to appeals from the LAC to this Court is therefore
misplaced.
[21]
The starting point is the
Constitution. It recognises two highest courts of appeal and assigns specific
jurisdiction to each. As
was pointed out in
Pharmaceutical Manufacturers
Association of SA and another: in re ex parte President of the RSA and
Others
,
[25]
the
Constitution makes provision for a jurisdictional scheme different to that
provided for in the interim
Constitution.
[26]
The SCA is the
highest court of appeal except in constitutional
matters.
[27]
Its jurisdiction in
constitutional matters is only limited by section 167(4) which reserves certain
matters for the exclusive jurisdiction
of this
Court.
[28]
However, its orders of
invalidity are subject to confirmation by this Court in terms of section
172(2)(a). This Court is the highest
court in respect of all constitutional
matters, and decisions of all other courts on constitutional matters are
accordingly subject
to appeal to this Court.
[22]
It follows that an appeal
from the LAC on a constitutional matter does lie to the SCA. However, there is
nothing which prevents a
litigant from appealing directly to this Court pursuant
to section 167(6)(b) of the Constitution read with
section 16(2)
of the
Constitutional Court Complementary Act, 1995
and
rule 18
of the rules of this
Court.
[23]
Rules of this Court
distinguish between appeals from the SCA and appeals from courts other than the
SCA. Appeals from the SCA are
governed by
rule 20
, while those from other
courts are governed by
rule 18.
Rule 20
therefore cannot be applicable in an
appeal from the LAC to this Court on a constitutional matter. It deals in
specific terms with
appeals against a judgment or order of the SCA. The LAC is
not the SCA. Nor is it the equivalent of the SCA in respect of appeals
on
constitutional matters.
Rule 18
is the appropriate rule. It applies to appeals
from all courts other than the SCA. The LAC is such a court. NEHAWU should
therefore
have followed the procedure laid down in
rule 18
when appealing the
decision of the LAC to this Court. It follows that I do not agree with the
conclusion reached by the LAC in
Kem-Lin Fashions v Brunton and
Another
.
[29]
[24]
It is understandable that
NEHAWU brought this application in terms of
rule 20.
If it had attempted to
invoke
rule 18
, it would have been confronted with the decision of the LAC in
Kem-Lin Fashions
which held that
rule 18
was not applicable. It would
not have obtained the required certificate. In these circumstances, NEHAWU's
application in terms
of
rule 20
should be treated as an application for a direct
appeal in terms of
rule 18
and the failure to comply with
rule 18
should be
condoned.
The interests of justice
[25]
The decision to grant or
refuse leave to appeal is a matter for the discretion of this Court. In
deciding that question, the interests
of justice are crucial. Whether it is in
the interests of justice to grant leave to appeal is the function of a number of
factors.
One such factor is the prospects of success. The applicant must show
that there are reasonable prospects that this Court “will
reverse or
materially alter the judgment if permission to bring the appeal is
given.”
[30]
However, as was
pointed out in
S v
Boesak
,
[31]
the prospects of
success, though important, are not decisive.
[26]
That said, an important
factor in considering the prospects of success in this application is the fact
that members of the LAC and
the Labour Court are divided on the proper
construction of
section 197.
[32]
This factor alone suggests, at least
prima facie
, that there are
prospects of success. It is true that the LAC, like all courts, is bound by the
doctrine of precedent, and should
not depart from its own decisions unless it is
satisfied that they are clearly wrong. Nevertheless, given the clear division
amongst
the labour judges, it is desirable for this Court to consider the
issue.
[27]
It is also true that
section 197
has since been amended, but the purpose of the amendment is to
clarify the section. Nevertheless, there are further considerations
that weigh
in favour of the application being heard.
[28]
In the first place, this is
the first occasion on which this Court has had to consider and define the
approach it will take to the
interpretation of a provision which is part of
legislation aimed at giving effect to a constitutional right. We have held in
this
judgment that the correct approach is one in which the legislature and the
courts have a tandem duty to give full effect to the Constitution.
And it is
necessary for this Court to apply this approach in the present matter.
Secondly, the application affects some two hundred
and sixty-seven workers who
have lost their employment. And thirdly, the application also raises important
questions in relation
to appeals from the LAC, in particular, whether such
appeals lie to the SCA, the procedure to be followed from the LAC to this Court,
and the circumstances when this Court will hear such
appeals.
[29]
Before considering the
merits of the appeal it is necessary to consider the circumstances when this
Court will hear appeals from the
LAC that are within its
jurisdiction.
The hearing of appeals from the
LAC
[30]
The jurisdiction of this
Court to hear appeals from the decisions of the LAC dealing with the
interpretation and application of the
LRA raises the question whether this Court
should hear such appeals as a matter of course. The LAC is a specialised court
which
functions in a specialised area of law. The LAC and the Labour Court were
specifically established by Parliament in order to administer
the LRA. They are
charged with the responsibility for overseeing the ongoing interpretation and
application of the LRA and development
of labour relations policy and precedent.
Through their skills and experience, judges of the LAC and the Labour Court
accumulate
the expertise which enables them to resolve labour disputes
speedily.
[31]
By their very nature labour
disputes must be resolved expeditiously and be brought to finality so that the
parties can organise their
affairs accordingly. They affect our economy and
labour peace. It is in the public interest that labour disputes be resolved
speedily
by experts appointed for that purpose. This Court will therefore be
slow to hear appeals from the LAC unless they raise important
issues of
principle. The present application raises such
issues.
[32]
In these circumstances, I
am satisfied that this Court should hear this
appeal.
Section 23(1) of the
Constitution
[33]
The relevant constitutional
provision is section 23(1) which provides that:
“Everyone has the right to fair labour
practices.”
Our Constitution is unique in
constitutionalising the right to fair labour practice. But the concept is not
defined in the Constitution.
The concept of fair labour practice is incapable
of precise definition. This problem is compounded by the tension between the
interests
of the workers and the interests of the employers that is inherent in
labour relations. Indeed, what is fair depends upon the circumstances
of a
particular case and essentially involves a value judgment. It is therefore
neither necessary nor desirable to define this concept.
[34]
The concept of fair labour
practice must be given content by the legislature and thereafter left to gather
meaning, in the first instance,
from the decisions of the specialist tribunals
including the LAC and the Labour Court. These courts and tribunals are
responsible
for overseeing the interpretation and application of the LRA, a
statute which was enacted to give effect to section 23(1). In giving
content to
this concept the courts and tribunals will have to seek guidance from domestic
and international experience. Domestic
experience is reflected both in the
equity-based jurisprudence generated by the unfair labour practice provision of
the 1956 LRA
as well as the codification of unfair labour practice in the LRA.
International experience is reflected in the Conventions and Recommendations
of
the International Labour
Organisation.
[33]
Of course other
comparable foreign instruments such as the European Social Charter 1961 as
revised may provide
guidance.
[34]
[35]
That is not to say that
this Court has no role in the determination of fair labour practices. Indeed,
it has a crucial role in ensuring
that the rights guaranteed in section 23(1)
are honoured. In the
First Certification
Judgment
[35]
this Court remarked
in relation to section 23 in general:
“The primary development of this law will, in all probability, take place
in labour courts in the light of labour legislation.
That legislation will
always be subject to constitutional scrutiny to ensure that the rights of
workers and employers as entrenched
in NT 23 are
honoured.”
[36]
Although
these remarks were made in the context of collective bargaining, they apply no
less to section 23(1). This Court also has
an important supervisory role to
ensure that legislation giving effect to constitutional rights is properly
interpreted and applied.
[36]
Counsel for NEHAWU
contended that the rights guaranteed in section 23(1) are guaranteed to the
workers only and not the employers.
He relied upon the word
“everyone” in section 23(1) which he submitted refers to human
beings and not to juristic persons
and upon the pre-constitutional labour law
jurisprudence which he submitted demonstrates that the concept of unfair labour
practice
was applied to workers only. This contention cannot be
upheld.
[37]
The entitlement to
constitutional rights depends upon the nature of the rights and the nature of
the juristic person.
[37]
In the
First Certification Judgment
, this Court rejected the contention that
“everyone” in Constitutional Principle II refers only to natural
persons. It
held that “many universally accepted fundamental rights will
be fully recognised only if afforded to juristic persons as well
as natural
persons”.
[38]
The crucial
question is whether the right to fair labour practices is available to employers
who are juristic persons. There is
nothing in the nature of the right to fair
labour practices to suggest that employers are not entitled to that
right.
[38]
Fairness is not confined to
workers only. In
National Union of Metalworkers of SA v Vetsak Co-operative
Ltd and Others
[39]
Smalberger JA
held that:
“Fairness comprehends that regard must be had not only to the position and
interests of the workers, but also those of the
employer, in order to make a
balanced and equitable
assessment.”
[40]
Nienaber
JA, who wrote the majority judgment expressed a similar view and held
that:
“The fairness required in the determination of an unfair labour practice
must be fairness towards both employer and employee.
Fairness to both means the
absence of bias in favour of either. In the eyes of the LRA of 1956, contrary
to what counsel for the
appellant suggested, there are no
underdogs.”
[41]
[39]
Nor is there anything,
either in the language of section 23(1) or the context in which that section
occurs, which supports the narrow
construction contended for by counsel. On the
contrary, the context suggests that the word refers to every person and it
includes
both natural and juristic persons. Where the rights in the section are
guaranteed to workers
[42]
or
employers
[43]
or trade unions or
employers' organisations,
[44]
as the
case may be, the Constitution says so explicitly. If the rights in section
23(1) were to be guaranteed to workers only, the
Constitution would have said
so. The basic flaw in the applicant’s submission is that it assumes that
all employers are juristic
persons. That is not so. In addition, section 23(1)
must either apply to all employers or none. It should make no difference
whether
they are natural or juristic persons.
[40]
In my view the focus of
section 23(1) is, broadly speaking, the relationship between the worker and the
employer and the continuation
of that relationship on terms that are fair to
both. In giving content to that right, it is important to bear in mind the
tension
between the interests of the workers and the interests of the employers
which is inherent in labour relations. Care must therefore
be taken to
accommodate, where possible, these interests so as to arrive at the balance
required by the concept of fair labour practices.
It is in this context that
the LRA must be construed.
The
Labour
Relations Act
[41
]
The declared purpose of the
LRA “is to advance economic development, social justice, labour peace and
the democratization of
the
workplace.”
[45]
This is to be
achieved by fulfilling its primary objects which includes giving effect to
section 23 of the Constitution. It lays
down the parameters of its
interpretation by enjoining those responsible for its application to interpret
it in compliance with the
Constitution and South Africa’s international
obligations.
[46]
The LRA must
therefore be purposively construed in order to give effect to the Constitution.
This is the approach that has been
adopted by the LAC and the Labour Court in
construing the
LRA.
[47]
[42]
Security of employment is a
core value of the LRA and is dealt with in Chapter VIII. The chapter is headed
“Unfair Dismissals”.
The opening section, section 185, provides
that “[e]very employee has the right not to be unfairly dismissed.”
This
right is essential to the constitutional right to fair labour practices.
As pointed out above, it seeks to ensure the continuation
of the relationship
between the worker and the employer on terms that are fair to both. Section 185
is “a foundation upon
which the ensuing sections are
erected.”
[48]
[43]
It is against this
background that section 197, which forms part of the chapter on unfair
dismissals, must be understood and
construed.
Section 197
[44]
Section 197
provides:
“(1) A contract of employment may not be transferred from one employer
(referred to as ‘the old employer’) to
another employer (referred
to as ‘the new employer’) without the employee’s consent,
unless –
(a) the whole or any part of a business, trade or undertaking is transferred
by the old employer as a going concern; or
(b) the whole or a part of a business, trade or undertaking is transferred as
a going concern –
(i) if the old employer is insolvent and being wound up or is being
sequestrated; or
(ii) because a scheme of arrangement or compromise is being entered into to
avoid winding-up or sequestration for reasons
of insolvency.
(2) (a) If a business, trade or undertaking is transferred in the circumstances
referred to in subsection (1)(a), unless otherwise
agreed, all the rights
and obligations between the old employer and each employee at the time of
the transfer continue in force
as if they had been rights and obligations
between the new employer and each employee and, anything done before the
transfer
by or in relation to the old employer will be considered to have
been done by or in relation to the new employer.
(b) If a business is transferred in the circumstances envisaged by
subsection (1)(b), unless otherwise agreed, the contracts
of all employees
that were in existence immediately before the old employer’s winding-up
or sequestration transfer automatically
to the new employer, but all the
rights and obligations between the old employer and each employee at the time
of the transfer
remain rights and obligations between the old employer and
each employee and anything done before the transfer by the old employer
in
respect of each employee will be considered to have been done by the old
employer.
(3) An agreement contemplated in subsection (2) must be concluded with the
appropriate person or body referred to in section 189(1).
(4) A transfer referred to in subsection (1) does not interrupt the
employee’s continuity of employment. That employment
continues with the
new employer as if with the old employer.
(5) The provisions of this section do not transfer or otherwise affect the
liability of any person to be prosecuted for, convicted
of, and sentenced for,
any offence.”
The purpose of section 197
[45]
There is divergence of
opinion among the members of the LAC and the Labour Court on the purpose of
section 197. The one view, represented
by the majority judgment of the LAC in
this case is that its primary purpose is to facilitate the transfer of
businesses.
[49]
The other view,
represented by the minority judgment in the LAC in this case, maintains that the
primary purpose of section 197
is the protection of workers in the event of the
transfer of the business.
[50]
The
latter view seeks support in comparable foreign instruments and cases construing
such instruments.
[46]
It seems to me that the
answer lies somewhere in between. That an important purpose of section 197 is
to protect the workers against
the loss of employment in the event of a transfer
of a business cannot be gainsaid. This conclusion is fortified not only by the
effect of the section, but also by the very fact that the section was inserted
in a chapter that deals with unfair dismissal. As
pointed out earlier, at the
core of this chapter is the right of the workers not to be dismissed unfairly.
In addition, further
support for this view can be found in comparable foreign
instruments and foreign case law construing these
instruments.
[47]
The comparable foreign
instruments I have in mind are those that have been considered in the context of
section 197, namely, the Acquired
Rights Directive 77/187 EEC adopted by the
European Commission in 1977
[51]
and
the British Transfer of Undertakings (Protection of Employment) Regulation,
1981/1794 (TUPE) which was enacted pursuant to the
Directive.
[52]
While there are
differences in language and context in which these instruments are applied, they
nevertheless “provide some
insight for proper interpretation and
application of section
197.”
[53]
[48]
Directive 77/187 of the
Council of the European Communities in substance provides that upon a transfer
of an undertaking, business
or part thereof to another employer by reason of a
measure or legal transfer, the rights and obligations arising from a contract
of
employment shall be transferred to the new
employer.
[54]
Its Preamble
declares, amongst other things:
“Whereas it is necessary to provide for the protection of employees in the
event of a change of employer, in particular, to
ensure that their rights are
safeguarded;”.
[49]
Foreign case law that has
construed Directive 77/187 has held that the purpose of the Directive was to
protect the workers against
the loss of employment in the event of the transfer
of a business. In the case of
Landsorganisatioen i Danmark for
Tjenerforbundet i Danmark v Ny Molle
Kro
[55]
, the European Court of
Justice held that:
“It follows from the preamble and from those provisions that the purpose
of the directive is to ensure, as far as possible,
that the rights of employees
are safeguarded in the event of a change of employer by enabling them to remain
in employment with the
new employer on the terms and conditions agreed with the
transferor.”
[56]
[50]
The title of the
Regulations that were promulgated by the United Kingdom pursuant to this
Directive, namely, “Transfer of Undertakings
(Protection of Employment)
Regulation”, 1981, evidences an intention to protect the workers. The
effect of these regulations
is to protect workers against unfair dismissals in
the event of the sale of a
business.
[57]
[51]
These foreign instruments
are aimed primarily at the protection of workers. The similar language employed
in section 197 and its
inclusion in a chapter dealing with unfair dismissal,
fortifies the view that central to its purposes is the protection of workers.

Section 197, however, does more than protecting workers against job
losses.
[52]
What lies at the heart of
disputes on transfers of businesses is a clash between, on the one hand, the
employer’s interest in
the profitability, efficiency or survival of the
business, or if need be its effective disposal of it, and the worker’s
interest
in job security and the right to freely choose an employer on the other
hand. The common law provided little protection to workers
in these situations.
Under common law the sale of a business, whether as a going concern or not,
often resulted in the loss of employment.
The new owner was under no obligation
to employ the workers. The Industrial Court, acting under the unfair labour
practice provisions
of the 1956 LRA, did however, attempt to remedy the
situation.
[58]
Van Dijkhorst AJA
also recognised that under the common law “the employees were the worst
off.” They were confronted
with a take-over and lost their
employment.”
[59]
Later the
transferring employer incurred the statutory obligation to pay severance
benefits. This obligation no doubt had an impact
on the cost of the sale of
businesses. In short, the situation led to the retrenchment of workers, the
payment of severance benefits
and escalated costs in a way that inhibited
commercial transactions.
[60]
On the
whole, the situation had potential to impact negatively on economic development
and the promotion of labour peace.
[53]
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 a businesses
and impact negatively on economic development
and labour peace. In this sense,
section 197 has a dual purpose, it facilitates the commercial transactions while
at the same time
protecting the workers against unfair job
losses.
The meaning of section
197
(a) The reasoning of the majority
[54]
Central to the reasoning in
the majority judgment is the finding that in the context of section 197 the
transfer of a business “as
a going concern” only occurs where the
workers are transferred as part of the transaction. According to the majority
where
the two employers agree to sell a business as a going concern, “the
necessary implication is that they agree that the employees
or a material part
thereof are part and parcel of the
transaction.”
[61]
It
reasoned, as previously noted, that to say that there can be a transfer of a
business as a going concern without the transfer
of all or most of the workers
“is to equate a bleached skeleton with a vibrant
horse.”
[62]
This finding
forces the majority to conclude that section 197 must be interpreted “so
as to limit its scope to cases where
the transfer follows upon an agreement
between the seller and the purchaser defining the subject matter of the sale as
. . . a going
concern (ie with the employees
included).”
[63]
[55]
There are two difficulties
with this construction. The first has to do with the meaning of a transfer of a
business as a going concern
and the second relates to the failure by the
majority to take sufficient account of the fact that of section 197 has the
important
purpose of protecting workers against loss of employment in the event
of the transfer of business. I will deal with each in
turn.
“Going concern”
[56]
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.”
[64]
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.
[65]
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.
[57]
There is nothing either in
the context or the language of section 197 to suggest that the phrase
“going concern” must
be given the meaning assigned to it by the
majority. On the contrary, the purpose of the section and the context in which
that phrase
occurs suggests otherwise.
[58]
The fact that the seller
and the purchaser of the business have not agreed on the transfer of the
workforce as part of the transaction
does not disqualify the transaction from
being a transfer of a business as a going concern within the meaning of section
197. Each
transaction must be considered on its own merit regard being had to
the circumstances of the transaction in question. Only then
can a determination
be made as to whether the transaction constitutes the transfer of a business as
a going concern. In this regard
I agree with Zondo JP.
[66]
The
Protection of Workers
[59]
In the second place, the
construction adopted by the majority does not take sufficient account of the
important interest that workers
have in job
protection.
[60]
The majority judgment makes
the application of section 197 conditional upon whether the two employers agree
on whether the workers
will be part and parcel of the transfer of business.
This requirement offers the transferor and transferee some scope to structure
their agreement so as to avoid the impact of section 197. They would be
entitled but not obliged to make provision for the transfer
of workers as part
of the transaction and the workers would be bound by that agreement. Parties to
such a transaction would no doubt
take that fact into account should they wish
to transfer the business without the workforce.
[67]
[61]
This approach renders
section 197 in many cases a voluntary obligation. If the new employer does not
wish to be obliged to take on
the workers of the old employer on their existing
terms and conditions, it will simply refrain from agreeing to take over the
workers.
The majority decision therefore has the potential to deny to the
workers protection against job losses and leaves their protection
solely in the
hands of the employers.
(b) The true meaning
of section 197
[62]
The proper approach to the
construction of section 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”.
[63]
Subsection (2) tells us the
consequences that flow from a transfer of a business as a going concern as
contemplated in subsection
(1). It refers back to subsection (1) which
envisages two categories of transfer: one from a solvent employer and the other,
broadly
speaking, from an insolvent employer. In both instances, the transfer
of the business as a going concern results in the transfer
of the workers to the
new business. The section makes a distinction between contracts of employment,
on the one hand, and rights
and obligations that flow from such contracts on the
other. “All the rights and obligations” must include all the terms
and conditions of the contracts of employment. It therefore does not matter,
from a practical point of view, that subsection (2)(a)
does not explicitly
provide for the transfer of contracts of employment. The section is premised on
the continuity of employment
of the workers which is not interrupted by the
transfer contemplated in subsection (1). “That employment”,
subsection
(4) says, “continues with the new employer as if with the old
employer.”
[64]
Reading the section as a
whole, and, in particular, having regard to the fact that all the rights and
obligations flowing from employment
with the transferring employer are
transferred to the new employer in the case of a solvent business; that in the
case of an insolvent
business the contracts of employment are transferred; that
the transfer of business does not interrupt the workers’ continuity
of
employment; the inference that the transferee employer takes over the workers
and that the transferee employer is, by operation
of law, substituted in the
place of the transferor employer is irresistible. It follows by necessary
implication.
[65]
If there is any doubt on
this score, the recent amendment to section 197 puts matters beyond doubt by
providing that “the new
employer is automatically substituted in the place
of the old employer in respect of all contracts of
employment”.
[68]
Indeed its
declared purpose is “. . . the clarification of the transfer of contracts
of employment in the case of transfers
of a business, trade or undertaking as a
going
concern”.
[69]
[66]
It is permissible to refer
to a subsequent statute if it throws light on the meaning of a provision in an
earlier statute. In a separate
concurring judgment, in
Patel v Minister of
the Interior and Another,
[70]
Schreiner JA said the following:
“There is authority for the view that Acts of Parliament, without having
been passed for the express purpose of explaining
previous Acts, may
nevertheless be used as “legislative declarations” or
“Parliamentary expositions” of the
meaning of such Acts . . . . It
is not surprising that Court's are cautious in the use of this aid to
interpretation, since it is
usual for later legislation to amend rather than to
declare the meaning of earlier statutes on the same topic. It is, of course,
the function of the Courts to expound the true interpretation of the law,
including statute law, but where Parliament has clearly
shown in a later Act
what it meant by an earlier one it seems to me to be not only helpful but even
proper to have regard to the
later Act in interpreting the earlier. Where a
suitable occasion arises for the use of the principle of Parliamentary
exposition
a Court should not hesitate to use it because of any apparent
awkwardness arising out of the notion of an Act's bearing one meaning
or being
of doubtful meaning before the passing of a later Act, and having a different or
an unquestionable meaning after the later
Act has come into force. If there
were an express declaration by Parliament of the meaning of the earlier Act the
position would
be clear.”
[67]
The categories of transfers
that were dealt with in section 197(1)(a) and 2(a) are now dealt with in the new
section 197. The categories
of the transfers that were dealt with in section
197(1)(b) and (2)(b) are now dealt with in section 197A. Although the new
section
197 uses different language, its effect is the same as the old section
197. It provides that “the new employer is automatically
substituted in
the place of the old employer in respect of all contracts of
employment”
[71]
; that the
rights and obligations between the old employer and the worker are transferred
to the new owner;
[72]
that the
transfer does not interrupt the continuity of employment; and that the
employment contract “continues with the new
employer as if with the old
employer.”
[73]
In all the
circumstances, the recent amendment fortifies the conclusion that upon the
transfer of a business contemplated in section
197, workers are transferred to
the new owner of the business.
[68]
In contending that the
workers are not automatically transferred in the circumstances described in
section 197(1)(a), reliance was
placed upon the draft
Bill
[74]
that preceded the LRA as
well as the recent amendment to section
197
[75]
. It was submitted that
these two show that section 197 did not contemplate that the contracts of
employment will be transferred
automatically in the circumstances described in
section 197(1)(a). In view of the conclusion I have reached as to the
clarificatory
effect of the recent amendment on section 197, the argument based
on the new section must be rejected.
[69]
In relation to the original
draft LRA Bill much is made of the fact that section 92(2) expressly provided
that in the event of the
transfer of a business as a going concern, the
contracts of employment “shall automatically be transferred to the
transferee.”
As pointed out earlier, the absence of an express reference
in section 197(2)(a) to the effect that the contracts of employment
are
transferred automatically, is of no consequence. The effect of the section is
that the new employer takes over the workers and
all the rights and obligations
flowing from their contracts of employment. By operation of law, the new
employer is substituted
in the place of the old employer in respect of all
contracts of employment.
[70]
The majority of the LAC
took the view that the purpose of the section is to facilitate the sale of
businesses as a going concern by
enabling the parties to the transaction to take
over employees as well as other assets. Based on this finding, the judgment
concluded
that there cannot be a transfer within the meaning of section 197
unless the two employers agree that the workers will be transferred
as part of
the transaction. In doing so it looks only at that aspect of the legislative
purpose which concerns the interests of
employers. But the purpose of the
legislature involves protecting the interests of both the employers and workers.
Employers are
at risk as far as severance pay is concerned. Workers are at risk
in relation to their jobs. Properly construed section 197 is
for the benefit of
both employers and workers. It facilitates the transfer of businesses while at
the same time protecting the workers
against unfair job losses. That is a
balance consistent with fair labour
practices.
Conclusion
[71]
I conclude that upon the
transfer of a business as a going concern as contemplated in section 197(1)(a),
workers are transferred to
the new owner. The fact that there was no agreement
to transfer the workforce or part of it between UCT and the contractors did
not,
as a matter of law, prevent a finding that the outsourcing was a transfer of a
business as a going concern. Whether the outsourcing
constituted the transfer
of one or more businesses as a going concern is a question that has yet to be
determined.
[72]
It follows therefore that
NEHAWU is entitled to leave to appeal and, in the event, the appeal must be
upheld. As the LAC did not
reach the facts, this case must be sent back to the
LAC for consideration in the light of this
judgment.
Costs
[73]
Parties were all agreed
that the costs in these proceedings must follow the result. Nothing suggests
otherwise. UCT and Supercare
must bear the costs of the appeal in this Court,
jointly and severally, and on the basis of the employment of two counsel. The
LAC
ordered NEHAWU to pay the costs of the appeal. All the parties in these
proceedings are private institutions. Each supported an
interpretation of the
statutory provision that was to its advantage or to the advantage of its
constituency. NEHAWU succeeded.
It is therefore just and equitable that UCT
and Supercare should be ordered to pay the costs of the abortive proceedings in
the LAC
jointly and severally and on the basis of the employment of two
counsel.
Order
[74]
In the result the following
order is made:
(a) NEHAWU is granted leave to
appeal.
(b) The appeal is upheld with costs, such costs to include costs consequent
upon the employment of two counsel.
(c) The order of the Labour Appeal Court dismissing the appeal by NEHAWU with
costs is set aside.
(d) UCT and Supercare are ordered to pay the costs in the Labour Appeal Court,
such costs to include costs consequent upon the employment
of two counsel.
(e) The case is sent back to the Labour Appeal Court for it to deal with the
matter in the light of this judgment.
Chaskalson CJ, Langa DCJ, Goldstone J, Kriegler J, Madala J,
Mokgoro J, O’Regan J, Sachs J and Yacoob J concur in the judgment
of
Ngcobo J.
For the applicant: M.J.D Wallis SC and A.A Gabriel instructed by Cheadle
Thompson and Haysom Inc., Cape Town.
For the first respondent: W.R.E Duminy SC and R.G.L Stelzner instructed by
Deneys Reitz Inc., Cape Town.
For the second respondent: G.J Marcus SC and A.M Breitenbach instructed by
Bowman Gilfillan Inc., Johannesburg.
[1]
NEHAWU v University of Cape
Town and Others
2002 (4) BLLR 311
(LAC).
[2]
NEHAWU v University of Cape
Town and Others
2000 (7) BLLR 803
(LC).
[3]
Quoted in para 44.
[4]
Other relief not relevant to
these proceedings was also claimed.
[5]
1999 (2) BLLR 169
(LC); 1999
(20) ILJ 655 (LC).
[6]
1999 (9) BLLR 875
(LAC).
[7]
NEHAWU v University of Cape
Town and Others
above n 2 at para 23.
[8]
Van Dijkhorst AJA wrote the
judgment of the majority (with Comrie AJA concurring). Zondo JP dissented.
[9]
NEHAWU v University of Cape
Town and Others
above n 1 at para 104.
[10]
Id at para 105.
[11]
Id at para 117.
[12]
Id at para 68.
[13]
Id at para 65.
[14]
Id at para 94.
[15]
See also
S v Boesak
[2000] ZACC 25
;
2001 (1) SA 912
(CC);
2001 (1) BCLR 36
(CC) at para 14;
Carmichele
v
Minister of Safety and Security and Another (Centre for Applied Legal Studies
Intervening)
[2001] ZACC 22
;
2001 (4) SA 938
(CC);
2001 (10) BCLR 995
(CC) at para 4;
Fredericks and Others v
MEC for Education and Training, Eastern Cape
and Others
[2001] ZACC 6
;
2002 (2) BCLR 113
(CC) at para 10.
[16]
Section 1(a) of the LRA.
The reference to section 27 must now be taken as a reference to section 23 of
the Constitution.
[17]
Section 7(2) of the
Constitution provides:
“The state must respect, protect, promote and fulfil the rights in the
Bill of
Rights.”
[18]
Pharmaceutical Manufacturers Association of SA and Others; in re: Ex parte
application of President of the RSA and Others
[2000] ZACC 1
;
2000 (2) SA 674
(CC);
2000
(3) BCLR 241
(CC) at para 44.
[19]
2001 (2) SA 112
(C).
[20]
Id at 123I–J.
[21]
Rule 20(1) states that:
“An appeal to the Court on a constitutional matter against a judgment or
order of the Supreme Court of Appeal shall be granted
only with the special
leave of the Court on application made to
it.”
[22]
Rule
18(1) states that:
“The procedure set out in this rule shall be followed in an application
for leave to appeal directly to the Constitutional
Court where a decision on a
constitutional matter, other than an order of constitutional invalidity under
section 172 (2) (a) of
the Constitution, has been given by any court other than
the Supreme Court of Appeal irrespective of whether the Chief Justice has
refused leave or special leave to appeal.”
[23]
2002 (7) BLLR
597
(LAC) at paras 3 - 5.
[24]
In support of the contention
that an appeal from the LAC lies to this Court and that rule 20 is the
appropriate rule, reliance was
placed on the following provisions of the
LRA:
• Section 167(2) of the LRA which provides that:
“The Labour Appeal Court is the final court of appeal in respect of all
judgments and orders made by the Labour Court in respect
of the matters within
its exclusive jurisdiction.”
• Section 167(3) of the LRA which provides:
“The Labour Appeal Court is a superior court that has authority, inherent
powers and standing, in relation to matters under
its jurisdiction, equal to
that which the Appellate Division of the Supreme Court has in relation to
matters under its jurisdiction.”
• Section 173(1) of the LRA provides:
“Subject to the Constitution and despite any other law, the Labour Appeal
Court has exclusive jurisdiction - (a) to hear and
determine appeals against the
final judgments and the final orders of the Labour Court; and (b) to decide any
question of law reserved
in terms of section 158(4)”.
• Section 183 of the LRA which provides that:
“Subject to the Constitution and despite any other law, no appeal lies
against any decision, judgment or order given by the
Labour Appeal Court in
respect of - (a) any appeal in terms of section 173(1)(a); its decision on any
question of law in terms of
section 173(1)(b); or (c) any judgment or order made
in terms of section
175.”
[25]
[2000] ZACC 1
;
2000
(2) SA 674
(CC);
2000 (3) BCLR 241
(CC).
[26]
Id at para 28.
[27]
Section 168(3) of the
Constitution.
[28]
Section 167(4) of the
Constitution.
[29]
Above n 23.
[30]
Rule 18(6)(a)(iii).
[31]
Above n. 15 at para 12.
[32]
At least five members of the
specialist court hold a view that is different to that held by the majority in
this case. As pointed
out earlier, the Labour Court in
Schutte and Others v
Powerplus Performance (Pty) Ltd
and another above n 5, the LAC in
Foodgro
(A division of Leisurenet Ltd) v Keil
above n 6 and Zondo JP in this case
found that section 197(1)(a) provides for the automatic transfer of a contract
of employment
upon the transfer of a business in the circumstances set out in
the subsection. By contrast, Mlambo J in the Labour Court and the
majority of
the LAC in this case held that the transfer of contracts of employment is
dependent upon a prior agreement between the
seller and the purchaser that the
contracts of employment will be transferred as part of the transaction -
NEHAWU v UCT and Others
above n 1 at para 20.
[33]
The ILO Conventions that
come to mind are the so-called Fundamental ILO Conventions. These are
Conventions that have been identified
by the ILO Governing Body as being
fundamental to the rights of human beings at work irrespective of levels of
development of individual
member States. These rights are a precondition for
all the others in that they provide for the necessary implements to strive
freely
for the improvement of individual and collective conditions of work.
They are: Freedom of Association and Protection of the Right
to Organize
Convention, 87 of 1948 ratified by South Africa on 19 February 1996; Right to
Organize and Collective Bargaining Convention,
98 of 1949 ratified on 19
February 1996; Forced Labour Convention, 29 of 1930 ratified on 5 March 1997;
Abolition of Forced Labour
Convention, 105 of 1997 ratified on 5 March 1997;
Discrimination (Employment and Occupation) Convention, 111 of 1958 ratified on
5
March 1997; Equal Remuneration Convention, 100 of 1951 ratified on 30 March
2000; Minimum Age Convention, 138 of 1973 ratified
on 30 March 2000; and Worst
Forms of Child Labour Convention, 182 of 1999 ratified on 7 June 2000.
[34]
The European Social Charter,
1961 guarantees amongst other things the right to just conditions of work
(Article 2); the right to
a fair remuneration (Article 4); the right to equal
opportunities and equal treatment in matters of employment and occupation
without
discrimination on the grounds of sex (Article 20); the right to
protection in cases of termination of employment (Article 24); and
the right to
dignity at work (Article 26).
[35]
In re Certification of
the Constitution of the Republic of South Africa
[1996] ZACC 26
; ,
1996
1996 (4) SA 744
(CC);
1996 (10) BCLR 1253
(CC).
[36]
Id at para 67.
[37]
Section 8(4) states
that:
“A juristic person is entitled to the rights in the Bill of Rights to the
extent required by the nature of the rights and the
nature of that juristic
person.”
[38]
First Certification Judgment above
n 35 at para 57.
[39]
[1996] ZASCA 69
;
1996 (4) SA 577
(A).
[40]
At 589 C–D.
[41]
At 593G–H.
[42]
Section 23(2) which provides
that:
“Every worker has the right –
(a) to form and join a trade union;
(b) to participate in the activities and programmes of a trade union; and
(c) to
strike.”
[43]
Section 23(3) which provides that:
“Every employer has the right to –
(a) to form and join an employers' organisation; and
(b) to participate in the activities and programmes of an employers'
organisation.”
[44]
Section 23(4)
which provides that:
“Every trade union and every employers' organisation has the right to
–
(a) to determine its own administration, programmes and activities;
(b) to organise; and
(c) to form and join a
federation.”
[45]
Section 1 of the LRA provides that:
“The purpose of this Act is to advance economic development, social
justice, labour peace and the democratisation of the work-place
by fulfilling
the primary objects of this Act, which are—
(a) to give effect to and regulate the fundamental rights conferred by section
27 of the Constitution;
(b) to give effect to obligations incurred by the Republic as a member state of
the International Labour Organisation;
(c) to provide a framework within which employees and their trade unions,
employers and employers’ organisations can—
(i) collectively bargain to determine wages, terms and conditions of
employment and other matters of mutual interest; and
(ii) formulate industrial policy; and
(d) to promote—
(i) orderly collective bargaining;
(ii) collective bargaining at sectoral level;
(iii) employee participation in decision-making in the work-place; and
(iv) the effective resolution of labour
disputes.”
[46]
Section 3 of the LRA provides:
“Any person applying
this Act
must interpret its provisions—
(a) to give effect to its primary objects;
(b) in compliance with the Constitution; and
(c) in compliance with the public international law obligations of the
Republic
.”
These obligations flow from international
instruments such as the Conventions of the ILO that have been ratified by South
Africa and
other relevant international instruments that are binding on South
Africa.
[47]
Schutte and Others v
Powerplus Performance (Pty) Ltd and Another
, above n. 5 at paras 24 –
25;
South African National Security Employers Association v TGWU & Others
(1)
1998 (4) BLLR 364
(LAC) at para 21;
Johnson & Johnson (Pty) Ltd v
Chemical Workers Industrial Union
(1999) 20 ILJ 89 (LAC) at paras 22 –
23.
[48]
Brassey: “Commentary
on the
Labour Relations Act” (1999
) Vol 3 (Juta, Cape Town) at A8: 1.
[49]
NEHAWU v UCT and
Others
above n 2 per Mlambo J and
NEHAWU v UCT and Others
above n 1
per Van Dijkhorst AJA.
[50]
Zondo JP in the present case
in the LAC; Froneman DJP in the
Foodgro case
above n 6 and Seady AJ in
the
Schutte
case
above n 5.
[51]
The relevant provision of
the Council Directive provide:
Article 1(1):
“This Directive shall apply to transfer of an undertaking, business or
part of a business to another employer as a result of
a legal transfer or
merger.”;
Article 3:
“1. The transferor’s rights and obligations arising from a contract
of employment or from an employment relationship
existing on the date of a
transfer within the meaning of Article 1(1) shall, by reason of such transfer,
be transferred to the transferee.
Member States may provide that, after the date of transfer within the meaning
of Article 1(1) and, in addition to the transferee,
the transferor shall
continue to be liable in respect of obligations which arose from contract of
employment or an employment relationship.
2. Following the transfer within the meaning of Article 1(1), the transferee
shall continue to observe the terms and conditions
agreed in any collective
agreement on the same terms applicable to the transferor under that agreement,
until the date of termination
or expiry of the collective agreement or the
entry into force or application of another collective agreement.
Member States may limit the period for observing such terms and conditions,
with the proviso that it shall not be less than one
year.
3. Paragraphs 1 and 2 shall not cover employees’ rights to old-age,
invalidity or survivors’ benefits under supplementary
company or
inter-company pension schemes outside the statutory social security schemes in
Member States.
Member States shall adopt the measure necessary to protect the interests of
employees and of persons no longer employed in the
transferor’s business
at the time of the transfer within the meaning of Article 1(1) in respect of
rights conferring on them
immediate or prospective entitlement to old age
benefits, including survivors’ benefits, under supplementary schemes
referred
to in the first subparagraphs.”
Article 4:
“1. The transfer of an undertaking, business or part of a business shall
not in itself constitute grounds for dismissal by
the transferor or the
transferee. The provision shall not stand in the way of dismissals that may
take place for economic, technical
or organisational reasons entailing changes
in the workforce.
Member States may provide that the first subparagraph shall not apply to
certain specific categories of employees who are not covered
by the laws or
practice of the Member States in respect of protection against
dismissal.”
2. If the contract of employment or the employment relationship is terminated
because the transfer within the meaning of Article
1(1) involves a substantial
change in working conditions to the detriment of the employees, the employer
shall be regarded as having
been responsible for termination of contract of
employment or of the employment relationship.”
[52]
Regulation 5
under the heading
“Effect of relevant transfer on contracts of employment, etc.”
provides as follows:
“(1) Except where objection is made under paragraph (4A), a relevant
transfer shall not operate so as to terminate the contract
of employment of any
person by the transferor in the undertaking or part transferred but any such
contract which would otherwise
have been terminated by the transfer shall have
effect after the transfer as if originally made between the person so employed
and the transferee.
(2) Without prejudice to paragraph (1) above [but subject to paragraph (4A)
below], on the completion of a relevant transfer –
(a) all the transferor’s rights, powers, duties and liabilities under or
in connection with any such contract, shall be
transferred by virtue of this
Regulation to the transferee; and
(b) anything done before the transfer is completed by or in relation to the
transferor in respect of that contract or a person
employed in that
undertaking or part shall be deemed to have been done by or in relation to
the transferee.
(3) Any reference in paragraph (1) or (2) above to a person employed in an
undertaking or part of one transferred by a relevant
transfer is a reference to
a person so employed immediately before the transfer, including, where the
transfer is effected by a
series of two or more transactions, a person so
employed immediately before any of those transactions.
(4) Paragraph (2) above shall not transfer or otherwise affect the liability of
any person to be prosecuted for, convicted of and
sentenced for any offence.
(4a) Paragraphs (1) and (2) above shall not operate to transfer his contract of
employment and the rights, powers, duties and liabilities
under or in
connection with it if the employee informs the transferor or the transferee
that he objects to becoming employed by
the transferee.
(4b) Where an employee so objects the transfer of the undertaking or part in
which he is employed shall operate so as to terminate
his contract of
employment with the transferor but he shall not be treated, for any purpose, as
having been dismissed by the transferor.
(5) [Paragraphs (1) and (4a) above are] without prejudice to any right of an
employee arising apart from these Regulations to terminate
his contract of
employment without notice if a substantial change is made in his working
conditions to his detriment; but no such
right shall arise by reason only that,
under that paragraph, the identity of his employer changes unless the employee
shows that,
in all the circumstances, the change is a significant change and is
to his
detriment.”
[53]
Foodgro
above n 6 at para 18.
[54]
The Preamble to the
Directive provides that:
“Whereas economic trends are bringing in their wake, at both national and
Community level, changes in the structure of undertakings,
through transfers of
undertakings, businesses or parts of businesses to other employers as a result
of legal transfers or mergers;
Whereas it is necessary to provide for the protection of employees in the event
of a change of employer, in particular, to ensure
that their rights are
safeguarded;”.
[55]
[1987] ECR
5465.
[56]
Id at para 12.
[57]
Betts and Others v
Brintel Helicopters Ltd and Another
[1997] IRLR 361
at para 17. See also
Steven D. Anderman ‘Labour Law: Management Decision and Workers’
Rights’ (1988) 3rd ed (Butterworths)
at 200.
[58]
See for example
Kebeni
and Others v Cementile Products (Ciskei) (Pty) Ltd and Another
(1987) 8 ILJ
442 (IC) at 449.
[59]
NEHAWU v UCT and
Others
above n 1 at para 106.
[60]
The Explanatory Memorandum
to the draft Labour Relations Bill, GG No 16259 of 10 February 1995, said in
relation to the transfer
of undertakings:
“The draft Bill explicitly deals with the employer’s rights and
obligations in the event of a transfer of an undertaking.
This resolves the
common law requirement that existing contracts must be terminated and new ones
entered into, which leads to the
retrenching of employees, the paying of
severance benefits etc and escalates costs in a way that inhibits these
commercial
transactions.”
[61]
NEHAWU v UCT and Others
above n 1 at para 109.
[62]
Id at para 104.
[63]
Id at para 117.
[64]
Lloyd v Brassey
[1969] 1 All ER 382
at 384H, a decision cited with approval by the House of
Lords in
Melon and others v Hector Powe Ltd
[1981] 1 All ER 313
at 314c;
Manning v Metro Nissan – A Division of Venture Motor Holdings Ltd and
another
(1998) 19 ILJ 1181 (LC) at para 42; See also
General Motors SA
(Pty) Ltd v Bester Auto Component Manufacturing (Pty) Ltd and another
1982
(2) SA 653
(SE) at 657H.
[65]
A review of the case law
construing comparable instruments, the Council Directive 77/187/EEC of 14
February 1977 and Transfer of
Undertakings (Protection of Employment)
Regulations, 1981, demonstrates that the question whether there has been a
transfer of an
undertaking within the meaning of the instrument is a question of
fact which must be determined, regard being had to all the circumstances
of the
transaction. It is particularly significant, however, that even though the
instruments themselves do not use the term “going
concern”, yet, the
case law construing them interpret the transfer of a business within the meaning
of these instruments in
the context of a transfer of a business as a going
concern. Thus in
Kenmir, Ltd v Frizzell and Others
[1968] 1 All ER 414
at 418E – G, Widgery J said the following of and concerning the question
whether a transaction amounted to a transfer of a
business within the meaning of
the United Kingdom's Transfer of Undertakings (Protection of Employment)
Regulations 1981: “In
deciding whether a transaction amounted to the
transfer of a business, regard must be had to its substance rather than its
form,
and consideration must be given to the whole of the circumstances,
weighing the factors which point in one direction against those
which point in
another. In the end, the vital consideration is whether the effect of the
transaction was to put the transferee in
possession of a going concern, the
activities of which he could carry on without interruption.” In
Spijkers v Gebroeders Benedik Abbatoir v Alfred Benedik en Zonen
[1986] 2
CMLR 296
at paras 11, 12 & 15, the European Court of Justice in considering
whether a transfer within the meaning of the Directive 77/187
has occurred held
that: “the decisive criterion for establishing the existence of a transfer
within the meaning of the directive
is whether the entity in question retains
its identity.” And went on to hold that “It should be made clear,
however,
that each of these factors is only a part of the overall assessment
which is required and therefore they cannot be examined independently
of each
other.”. . . “In order to establish whether or not such a transfer
has taken place in a case such as that before
the national court, it is
necessary to consider whether, having regard to all the facts characterising the
transaction, the business
was disposed of as a going concern, as would be
indicated inter alia by the fact that its operation was actually continued or
resumed
by the new employer, with the same or similar activities.”
[66]
NEHAWU v UCT and
Other
s above n 1 at para 65.
[67]
For a criticism of an
asset-based test to determine whether a transfer as a going concern has taken
place, see generally Paul Davies:
“Taken to the Cleaners? Contracting Out
of Services Yet Again” (1997) 26 Industrial Law Journal (UK) 193 at
196.
[68]
Section 197(2)(a).
[69]
See Preamble to the
Amendment.
[70]
1955 (2) SA 485
(A) at 493A
- D; see also
Kantor v Macintyre, NO and Another
1958 (1) SA 45
(FC) at
48C-E;
Ormond Investment Company v Betts
1928 AC 143
(HL) at 156.
[71]
Section 197(2)(a).
[72]
Section 197(2)(b).
[73]
Section 197(2)(d).
[74]
The draft Labour Relations
Bill is contained in GN 97 of 1995 dated 10 February 1995. The relevant
provision, section 92 provides
under the heading “Transfer of Contract of
Employment”:
“(1) Save as provided by subsection (2), no contract of employment shall
be transferred from one employer to another without
the consent of the
employee.
(2) Where a trade, business or undertaking is transferred as a going concern,
either in whole or in part, the contracts of employment
of all employees
employed at the date of the transfer shall automatically be transferred to the
transferee.
(3) All the rights and obligations between each employee and the transferor at
the date of the transfer shall continue to apply
as if they had been rights and
obligations between the employee and the transferee, and anything done before
the transfer by or
in relation to the transferor in respect of each employee
shall be deemed to have been done by or in relation to the transferee.
(4) Where a trade, business or undertaking is transferred, either in whole or in
part, in circumstances where the trade, business
or undertaking is being wound
up for reasons of insolvency, the contracts of all employees employed at the
date of the transfer
shall automatically be transferred to the transferee, but
all rights and obligations between each employee and the transferor at
that
date shall remain rights and obligations between each employee and the
transferor, and anything done before the transfer by
the transferor in respect
of each employee shall be deemed to have been done by the transferor.
(5) A transfer such as is referred to in subsection (2) or (4) shall not
interrupt the employee's continuity of employment, and
such continuity shall
continue with the transferee as if with the transferor.
(6) The provisions of this section shall not transfer or otherwise affect the
liability of any person to be prosecuted for, convicted
of and sentenced for
any offence.”
[75]
The relevant
portion of the new Section 197 provides under the heading “Transfer of
contract employment” as follows:
“(1) In this section and in section 197A -
(a) ‘business' includes the whole or 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.
(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.”