Employment law update

June 1st, 2016
Talita Laubscher BIur LLB (UFS) LLM (Emory University USA) is an attorney at Bowman Gilfillan in Johannesburg.

Talita Laubscher BIur LLB (UFS) LLM (Emory University USA) is an attorney at Bowman Gilfillan in Johannesburg.

Monique Jefferson BA (Wits) LLB (Rhodes) is an attorney at Bowman Gilfillan in Johannesburg.

Monique Jefferson BA (Wits) LLB (Rhodes) is an attorney at Bowman Gilfillan in Johannesburg.










Timing of s 197 transfers of employment

In Senne and Others v Fleet Africa (Pty) Ltd (LC) (unreported case no J2888/14, 12-2-2016) (Boyce AJ), voluntary retrenchment agreements were entered into prior to the expiry of a second generation outsourcing agreement. Fleet Africa attempted to resile from the agreements on the basis that it was not the employer of the employees when the agreements were concluded. The applicants sought a declaratory order that the voluntary retrenchment agreements are valid and binding. The main issue which the Labour Court (LC) was required to determine was when the new employer steps into the shoes of the old employer in accordance with s 197(2) of the Labour Relations Act 66 of 1995 (the LRA).

The applicants were employed by Fleet Africa and were primarily involved in the maintenance and servicing of vehicles for the City of Johannesburg (the city). When this arrangement expired the city continued to service and maintain its own vehicles. The city and Fleet Africa could not reach agreement as to whether or not s 197 of the LRA was triggered by the expiry of the outsourcing arrangement and the matter was accordingly referred by agreement to arbitration.

The outcome of the arbitration was that it was declared that the transfer of Fleet Africa’s assets, rights and obligations to the city on expiry of the outsourcing agreement was a transfer of a business as a going concern in terms of s 197. The date of the transfer was declared to be 1 March 2012 and the city was ordered to comply with its obligations in respect of the employees in accordance with s 197.

The city appealed the arbitrator’s decision but the appeal was dismissed. In this regard, it was found that the maintaining and servicing of the city’s vehicles was an ‘identifiable economic entity’ and that the employees who were involved with the servicing and maintenance of the vehicles were automatically transferred in accordance with s 197.

The four applicants had concluded voluntary retrenchment agreements with Fleet Africa in May 2012 but Fleet Africa failed to comply with the terms of these agreements. The voluntary retrenchment agreements provided that they were concluded in full and final settlement of any entitlement to transfer to the city in accordance with s 197. Fleet Africa argued that the voluntary retrenchment agreements were not valid and binding as they had been concluded after the applicants’ employment transferred to the city and thus Fleet Africa was no longer the employer of the applicants at the time that the agreements were concluded. It was further argued that the agreements were not enforceable because the applicants waived and/or abandoned their rights to enforce the agreements by accepting the transfer of their employment to the city.

As regards Fleet Africa’s argument that it was not the employer when the voluntary retrenchment agreements were concluded, the LC per Boyce AJ found that the existence of an employment relationship is a factual question that must be determined with reference to the evidence and not whether or not there has been a transfer in accordance with s 197. Boyce AJ held the view that while it is trite law that in terms of s 197 the new employer is automatically substituted in the place of the old employer, this does not mean that there is always a simultaneous substitution of the new employer in the place of the old employer. In this regard, it was held that s 197(2)(a) does not expressly state that substitution occurs simultaneously with the transfer although this is often the case. An example of when it does not occur simultaneously is when the new employer and the affected employees agree that the affected employees will continue rendering services for the old employer for a period of time after the transfer. Another example is when the old employer and the new employer are not in agreement as to whether s 197 applies.

The court held that in this case the old employer and new employer were not in agreement as to whether s 197 applied and thus the old employer continued to be the employer of the employees after the transfer occurred. This argument was supported by the fact that the applicants continued working for Fleet Africa for a period of time after the transfer date of 1 March 2012, namely, until September 2012. It was accordingly held that the applicants were employees of Fleet Africa when they concluded the retrenchment agreements and such agreements were therefore valid and binding.

As regards the argument that the applicants waived and/or abandoned their rights to enforce the retrenchment agreements when their employment transferred to the city, the court found that the applicants did not exercise an ‘election’ for their employment to continue with the city but rather it was an automatic consequence of s 197. Thus, there was no waiver of their rights under the retrenchment agreements. This was despite the fact that the retrenchment agreements expressly provided that the agreements were in full and final settlement of any entitlement for their employment to transfer to the city.

It was held that the applicants were entitled to enforce the retrenchment agreements. Boyce AJ recorded his dissatisfaction that Fleet Africa tried to avoid complying with the retrenchment agreements when they should have been aware at the time of concluding the agreements that there was a chance that the expiry of the agreement would be found to constitute a s 197 transfer. Fleet Africa was ordered to pay the costs.



Moksha Naidoo BA (Wits) LLB (UKZN) is an advocate at the Johannesburg Bar.

Moksha Naidoo BA (Wits) LLB (UKZN) is an advocate at the Johannesburg Bar.










Negligence or gross negligence

Robor (Pty) Ltd v Metal and Engineering Industries Bargaining Council and Others (LC) (unreported case no JR 463/2016, 8-4-2016) (Lagrange J).

Subsequent to finding the third respondent (employee) guilty of negligence, which resulted in the applicant (employer) suffering a financial loss of approximaetly R 42 000 and being in gross violation of his employer’s information technology (IT) e-mail policy, the second respondent (arbitrator) was not persuaded that dismissal was an appropriate sanction and reinstated the employee without any back pay.

The financial loss incurred by the employer was occasioned by the employee having failed in his daily duties to ‘pick up’ the fact that his subordinates were being paid for work they had already been remunerated for. Prior to being charged for violating the employer’s IT e-mail policy the employee had been reprimanded for the same offence sometime in 2012.

In his award the arbitrator rejected the argument that the employee’s misconduct was gross in nature and, as a result thereof, held that the sanction of dismissal was too harsh. On this finding the arbitrator concluded that the employee’s dismissal was substantively unfair and as stated awarded the employee reinstatement.

The arbitrator’s reasoning was primarily premised on his understanding that gross negligence meant that the employee is accused of ‘a complete neglect to do things correctly’. Having regard to the fact that the employee receive a high performance rating and that the machinery he was responsible for was running at an efficiency rated at 94,7% and 95%, the arbitrator held that the employee’s actions could not be categorised as ‘gross’ as his misconduct was merely confined to his failure to analyse the employer’s cost allocations.

In justifying his award the arbitrator held the following:

Despite causing his employer a loss of about R 42 000 the employee’s 30 year length of service mitigated against the sanction of dismissal.

The offences were not as serious as argued by the employer and the trust relationship between the parties had not irretrievably broken down.

Dismissal was too harsh a sanction in light of the fact that this was the first time the employee had been found guilty of negligence and only the second time he was found guilty of violating the employer’s IT policy.

In an unopposed review application the employer argued that the arbitrator failed to take into account the evidence it led as to why it was of the view the trust relationship between itself and the employee had broken down and the reasons therefore.

With regard to the employee violating the IT policy, the employer argued that having found the employee guilty of this charge the arbitrator accepted that the employee sent 3 495 private e-mails with 12 645 attachments. Despite accepting this fact the arbitrator nevertheless found the employee’s conduct was not serious in nature, thus there was a disjoint between the evidence the arbitrator accepted and the conclusion he arrived at. Furthermore, the employee had in the past admitted his wrongdoing when he was disciplined for violating the IT e-mail policy, yet continued to act in the same manner thereafter.

As to the arbitrator’s definition of what constitutes gross negligence, the employer argued that the former applied the incorrect test. The correct test, according to the employer was to assess the consequences of an employee’s conduct when determining whether their negligence was gross or not.

With reference to various authorities the court first began to set out the test the Labour Court must adopt when hearing an application to review an award. Among these authorities the court quoted the following from the recent Labour Appeal Court judgment in Head of the Department of Education v Mofokeng and Others [2015] 1 BLLR 50 (LAC):

‘Mere errors of fact or law may not be enough to vitiate the award. Something more is required. To repeat: flaws in the reasoning of the arbitrator, evidenced in the failure to apply the mind, reliance on irrelevant considerations or the ignoring of material factors etc must be assessed with the purpose of establishing whether the arbitrator has undertaken the wrong enquiry, undertaken the enquiry in the wrong manner or arrived at an unreasonable result. Lapses in lawfulness, latent or patent irregularities and instances of dialectical unreasonableness should be of such an order (singularly or cumulatively) as to result in a misconceived inquiry or a decision which no reasonable decision-maker could reach on all the material that was before him or her.’

In approaching the application on this basis the court per Lagrange J agreed that the arbitrator simply downplayed the seriousness of the charges without any or proper justification, especially under circumstances where the employee failed to take responsibility for his conduct and where he failed to refute the employer’s argument at arbitration that the trust relationship between the parties had irretrievably broken down.

Addressing the arbitrator’s findings in respect of the loss suffered by the employer considered against the employee’s length of service, the court found:

‘There is no basis on which the arbitrator could say that a loss of R 40, 000 was not significant. The implicit reasoning of the arbitrator to the effect that this amount was not significant when compared to 30 years of service is simply illogical.’

Turing to what constitutes gross negligence the court held:

‘What is at issue once it is established that an employee was negligent in a respect, is how serious that negligence was. In this case, the negligence relating to the avoidable costs was a result of a course of conduct over a few months on the part of the applicant and the loss was significant. It is difficult to see how anyone could not construe such negligence as gross. As a result of the arbitrator misconstruing the approach, he diminished the seriousness of this charge. Had he not done so he would have found it very difficult to avoid the conclusion that Singh’s conduct in relation to the incurrence of maintenance costs was an act of gross negligence.’

In its conclusion the court found that the arbitrator’s findings was not a reasonable conclusion given all the evidence before him and as such, set aside the award with no order as to costs.

This article was first published in De Rebus in 2016 (June) DR 51.