Employment law update – Section 197 transfer

March 1st, 2018

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

In Fraser Alexander (Pty) Ltd v Tswelopele Beneficiation Operation (Pty) Ltd and Others [2017] 12 BLLR 1251 (LC), the applicant had been contracted to perform maintenance and management work on a dam in terms of an agreement which expired. Prior to the expiry of the agreement the respondent put the work out to tender, but did not appoint another contractor. Instead, the respondent performed limited maintenance work itself and then appointed another contractor to perform remedial work, as the applicant’s performance under the contract had not been up to standard. The applicant alleged that the remedial work formed part of the general maintenance work and, therefore, fell within the scope of the agreement that it had had with the respondent. Accordingly, the applicant alleged that the agreement between the respondent and the new contractor constituted a transfer of a business as a going concern in terms of s 197 of the Labour Relations Act 66 of 1995.

The respondent’s evidence was that the contractor had been appointed for a limited duration to simply perform remedial work and not the normal management and maintenance work, after which another contractor would be appointed.

Whitcher J considered the facts and found that none of the applicant’s tools, machinery or assets transferred to the respondent or the new contractor. Furthermore, no employees were transferred to the respondent or the new contractor by the applicant. The new contractor used 25 of its own employees to perform the remedial work whereas the applicant sought to transfer 65 of its employees to perform this work. Furthermore, the work performed by the new contractor was substantially different and was of a short term duration albeit that there were some similarities. In this regard, while the applicant may have performed some remedial work, this remedial work was incidental to its main business. On the other hand, the essence and totality of the new contractor’s business was remedial work. The purpose of the applicant’s work was to prevent defects from occurring whereas the purpose of the new contractor’s work was to repair defects that had occurred.

Whitcher J commented that there cannot be a transfer of a business as a going concern when a contract is terminated for non-performance like it was in this case as it would not be possible for the service to continue seamlessly. In this case, extensive remedial work had to be done first as the dam had become inoperable. Whitcher J also remarked on the impracticalities of s 197 applying to these set of facts as the employees would have to transfer to the respondent for a week, then to the interim contractor for three months and then to a new service provider, once appointed. The application was dismissed.

Dismissal for operational requirements

In South African Breweries (Pty) Ltd v Louw [2018] 1 BLLR 26 (LAC), the applicant restructured its business in the Eastern Cape. The respondent’s role of sales manager was proposed to be made redundant and the functions that he performed would be subsumed into a new role of area manager. This new role had greater responsibilities than the sales role as it encompassed management functions and operations, as well as the sales functions. It was also at a higher management level than his current role. The respondent was not successful in applying for the area manager role and was retrenched. The Labour Court (LC) found that the dismissal was unfair and ordered reinstatement. The applicant took the matter on appeal alleging that this decision was based on findings of fact that were not pleaded or recorded in the pre-trial minute and were not supported by the evidence.

The LC found that the dismissal was unfair as the respondent could have been given an alternative position in another town. Furthermore, the LC found that fair selection criteria had not been applied as performance ratings of the candidates interviewed had been considered when making the appointment for the new area manager role. This was not recorded in the pre-trial minute but the LC found that the alternative position and selection criteria could be read into the pre-trial minute from the pleadings.

This was held by the Labour Appeal Court (LAC) to be incorrect. In this regard, the LAC stated that in order for there to be a fair trial each side needs to know the case that they are required to meet. A court cannot tolerate a party making up the case as they go along as this would result in disorderly litigation. The purpose of a pre-trial minute is to narrow down the issues. Thus, a litigant cannot go back to the broader pleadings unless an amendment to the pre-trial minute is agreed. In practice, a pre-trial minute often contradicts the pleadings as issues are narrowed down. It is thus essential to give careful consideration to what is included in a pre-trial minute as the court cannot undo what the parties have confined themselves to in the pre-trial minute. In this case, the alternative position in another town was not recorded in the pre-trial minute. Furthermore, the applicant never applied for this alternative position despite being invited to do so.

It was held by the LAC that it was appropriate for the applicant to invite the respondent to apply for the new role. Performance was not used as a selection criterion as alleged by the respondent but rather the fact that the role was being made redundant and he was the incumbent of the role was the selection criterion. The respondent’s past performance was not the selection criterion but became relevant in determining the employee’s suitability for the new role. It was held by the LAC that being required to compete for a new role is not a method of selection for retrenchment but is a legitimate method for seeking to avoid the retrenchment of a displaced employee. The respondent had also not objected to the selection process at the time. The appeal was upheld with costs.

This article was first published in De Rebus in 2018 (March) DR 42.

De Rebus