THE Constitutional Court ruled yesterday that the cancellation of an outsourcing contract between South African Airways (SAA) and cleaning company LGM obliged LGM to transfer the business back to SAA as a going concern.
The judgment means that SAA has to take over the business it had outsourced to LGM in 2000, along with the contracts of staff employed by LGM. The key question in this case was whether upon termination of the outsourcing agreement in 2007, the LGM employees were to be transferred to SAA together with the business they were engaged in.
The judgment guarantees the rights of workers at risk of losing their jobs when the business is sold as a going concern. Section 197 of the Labour Relations Act states that all rights and obligations between the old employer and an employee at the time of transfer remain in force.
The question that had concerned the Labour Court, the Labour Appeal Court and the Supreme Court of Appeal was whether section 197 still applied during a second- generation transfer of a business.
The first transfer happened in March 2000, when SAA concluded an agreement with LGM for the outsourcing of infrastructure, support services and maintenance. Workers’ contracts of employment were transferred to LGM. When SAA terminated the contract in 2007 and signalled its intention to take back the business, the airline contended that the contracts of 64 workers were not guaranteed.
The Aviation Union of SA applied to the Labour Court for an order declaring that the termination of the outsourcing agreement between SAA and LGM constituted a transfer of business. The Labour Court held that the section does not apply to a second or subsequent outsourcing agreement. In turn, the Labour Appeal Court held that the section did apply to a second agreement. SAA appealed from the Labour Appeal Court to the Supreme Court of Appeal, and won.
Yesterday Justice Zak Yacoob said an inquiry whether a transaction fell under section 197 would be misleading if it focused on the generation of the transfer.
“The true inquiry is whether there has been a transfer of a business as a going concern by the old employer to the new employer.”
Source:http://www.businessday.co.za/Articles/Content.aspx?id=159672
