Aviation Union of South Africa and Another v South African Airways (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Ngcobo CJ, Moseneke DCJ, Cameron J, Froneman J, Jafta J, Khampepe J, Mogoeng J, Nkabinde J, Van Der Westhuizen J, Yacoob J and Mthiyane AJ
• Judgment Date: 24 November 2011
• Citation: 2012 (1) SA 321 (CC)
• Docket Number: CCT 08/11 [2011] ZACC 31
• Hearing Date: 11 May 2011
• Counsel: JG van der Riet SC (with I de Vos) for the first applicant. S Budlender for the second applicant. GJ Marcus SC (with K Pillay and N Mji) for the first respondent. No appearance for the other respondents.
• Court: Constitutional Court

Aviation Union of South Africa and Another v South African Airways (Pty) Ltd and Others
2012 (1) SA 321 (CC)

2012 (1) SA p321

Citation	2012 (1) SA 321 (CC)
Case No	CCT 08/11; [2011] ZACC 31
Court	Constitutional Court
Judge	Ngcobo CJ, Moseneke DCJ, Cameron J, Froneman J, Jafta J, Khampepe J, Mogoeng J, Nkabinde J, Van Der Westhuizen J, Yacoob J and Mthiyane AJ
Heard	May 11, 2011
Judgment	November 24, 2011
Counsel	JG van der Riet SC (with I de Vos) for the first applicant.; S Budlender for the second applicant.; GJ Marcus SC (with K Pillay and N Mji) for the first respondent.; No appearance for the other respondents.

Flynote : Sleutelwoorde B

Labour law — Transfer of contract of employment — Transfer of business as going concern — Protection of employment — 'Generation' of transaction and whether agreement concerned with outsourcing irrelevant — Only C relevant enquiry being whether there was transfer of business as going concern by old employer to new employer — 'Old employer' and 'new employer' not static terms — Provided 'going concern' transferred, protection of employment extending to reversion of business to outsourcer, or transfer thereof to new provider — Labour Relations Act 66 of 1995, s 197. D

Labour law — Transfer of contract of employment — Transfer of business as going concern — Protection of employment — Remedy — Availability — Dispute justiciable as soon as clear that intended transaction contemplating transfer of business without automatic transfer of employees — Not necessary for transfer of business to have taken place before court proceedings may be instituted — Labour Relations Act 66 of 1995, s 197. E

Headnote : Kopnota

Section 197 of the Labour Relations Act 66 of 1995 protects employees where (1) a business (2) is transferred (3) as a going concern (4) 'by' the 'old employer' to a 'new employer'. It does so by providing for the automatic transfer of employees consequent upon such a transaction. Accordingly, the F protection provided by s 197 becomes relevant only where it is contended that the business is being transferred as a going concern without the concomitant transfer of employees. Although the word 'by' should carry its ordinary meaning, the concepts of 'old employer' and 'new employer' should not be seen as being fixed: the original transferor may become the 'new employer' if the business is transferred back to him, and the transferee may become the 'old employer' if it in turn transfers the business to a third G

2012 (1) SA p322

A party or the original transferor. Provided there is a transfer of a business as a going concern, workers will be protected by s 197 no matter what the 'generation' of the outsourcing is. (Paragraphs [103] – [105], [113] and [124] at 347G – 348D, 350F – H and 353G – H.)

In determining whether a contracting-out amounts merely to an outsourcing of a service or the transfer of a going business operation justifying relief under B s 197, the substance of the transaction — which remains significant during subsequent transfers — has to be analysed. If the outsourcing institution does not from the outset offer the service in question, that service is not part of the business of the transferor, and there is no transfer of the business as a going concern. If, on the other hand, the first outsourcing exercise really is a transfer of part of the business of the outsourcer, then the question C whether the subsequent transfer is a mere transfer of the right to provide the outsourced service or the transfer of the business relative to the delivery of the service would arise. This would require an analysis of the transaction that gave rise to the subsequent event. In general, if the agreement contemplates the transfer of the infrastructure necessary for the conduct of the business with a corresponding obligation to return such infrastructure D upon cancellation of the agreement, there is a transfer of the business operation. (Paragraphs [102], [106] – [108] and [120] – [121] at 347E – F, 348E – 349A and 352I – 353C.)

Since s 197 contemplates a seamless transfer from the old employer to the new one, any dispute about whether employees are to be automatically transferred in terms of the agreement should be determined prior to its E implementation. Such disputes generally arise when the employees contend that the agreement entails the transfer of a business as a going concern, and one of the parties to the transfer maintains that the agreement does not contemplate the transfer of employees. Such a dispute is justiciable and the parties are entitled to have it determined before the agreement is implemented, for to await implementation would perpetuate the very mischief F sought to be avoided in enacting s 197. Relief may, however, only be granted once it is established that the transfer contemplated is indeed that of a business as a going concern. (Paragraphs [82], [102], [115] and [117] at 342B – C, 347E – F, 351C – D and 351G – 352B.)

Cases Considered

Annotations:

Reported cases G

Aviation Union of South Africa and Others v South African Airways (Pty) Ltd and Others [2008] 1 BLLR 20 (LC): not approved

Aviation Union of South Africa and Others v South African Airways (Pty) Ltd and Others 2010 (4) SA 604 (LAC) ([2010] 1 BLLR 14): approved

Billiton Aluminium SA Ltd t/a Hillside Aluminium v Khanyile and Others 2010 (5) BCLR 422 (CC) ([2010] 5 BLLR 465): referred to H

COSAWU v Zikhethele Trade (Pty) Ltd and Another (2005) 26 ILJ 1056 (LC) ([2005] 9 BLLR 924): approved

Fraser v Naudé and Others 1999 (1) SA 1 (CC) (1998 (11) BCLR 1357): referred to

Hillock and Another v Hilsage Investments (Pty) Ltd 1975 (1) SA 508 (A): referred to I

National Education Health and Allied Workers Union v University of Cape Town and Others 2003 (3) SA 1 (CC) ((2003) 24 ILJ 95; 2003 (2) BCLR 154): applied

National Union of Metalworkers of South Africa and Others v Bader Bop (Pty) Ltd and Another 2003 (3) SA 513 (CC) ((2003) 24 ILJ 305; 2003 (2) BCLR 182; [2003] 2 BLLR 103): J referred to

2012 (1) SA p323

Netherburn Engineering CC t/a Netherburn Ceramics v Mudau NO and Others A 2010 (2) SA 269 (CC) (2009 (8) BCLR 779): referred to

Nokeng Tsa Taemane Local Municipality and Another v Metsweding District Municipality and Others (2003) 24 ILJ 2179 (LC): referred to

SA Municipal Workers Union and Others v Rand Airport Management Co (Pty) Ltd and Others (2005) 26 ILJ 67 (LAC): approved

Shoprite Checkers (Pty) Ltd v CCMA and Others [2009] 7 BLLR 619 (SCA): B referred to

South African Airways (Pty) Ltd v Aviation Union of South Africa and Others 2011 (3) SA 148 (SCA) ([2011] 2 BLLR 112): reversed on appeal

Strategic Liquor Services v Mvumbi NO and Others 2010 (2) SA 92 (CC) (2009 (10) BCLR 1046): referred to.

Statutes Considered

Statutes C

The Labour Relations Act 66 of 1995, s 197: see Juta's Statutes of South Africa 2010/11 vol 4 at 1-164.

Case Information

Application for leave to appeal to the Constitutional Court. D

JG van der Riet SC (with I de Vos) for the first applicant.

S Budlender for the second applicant.

GJ Marcus SC (with K Pillay and N Mji) for the first respondent.

No appearance for the other respondents.

Cur adv vult. E

Postea (November 24).

Judgment

Jafta J (Moseneke DCJ, Mogoeng J, Mthiyane AJ and Nkabinde J concurring): F

Introduction

[1] This is an application for leave to appeal against the judgment of the Supreme Court of Appeal [1] in terms of which an order granted by the Labour Appeal Court [2] was set aside. The case served before the Labour Appeal Court as an appeal against the judgment of the Labour Court [3] G in which an application by Aviation Union of South Africa (Aviation Union) was dismissed.

[2] The key question raised in this matter is whether upon termination of an outsourcing agreement between South African Airways (Pty) Ltd (SAA) H and LGM South Africa Facility Managers and Engineers (Pty) Ltd (LGM), the employees of LGM were transferred together with the business in which they were engaged, to a new employer. The business that forms the subject-matter of these proceedings is the entity that

2012 (1) SA p324

Jafta J (Moseneke DCJ, Mogoeng J, Mthiyane AJ and Nkabinde J concurring)

A provided certain services that were rendered to SAA by LGM. The applicants argue that the continued performance of these services by either SAA or a third party, after the termination of the outsourcing agreement, amounts to a transfer as envisaged in s 197 of the Labour Relations Act (LRA). [4]

The provisions of s 197 B

[3] At common law the acquisition and transfer of a business that was in operation led to termination of contracts of employment. If the new owner wished to continue operating the business with the same workers, C it would have to conclude new employment agreements with them. Section 197 changed this by providing that certain legal consequences would automatically flow from a transfer of a business as a going concern. One of these consequences is the transfer of the workforce engaged in the transferred business.

D [4] It must be mentioned at the outset that the proper interpretation of s 197 is crucial to the determination of the issues raised. It is therefore essential to quote the relevant part of the section. It provides:

'(1) In this section and in s 197A —

(a)

"business" includes the whole or a part of any business, trade, E 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 F 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...