Case Notes: Franchise agreements: The transfer of a business (franchise) as a going concern. PE Pack 4100CC v Sanders and Others

• Jurisdiction: South Africa
• Published date: 04 September 2019
• Date: 04 September 2019
• Pages: 533-541
• Author: Christiaan Swart
• Citation: (2014) 26 SA Merc LJ 533

FRANCHISE AGREEMENTS: THE TRANSFER

OF A BUSINESS (FRANCHISE) AS A GOING

CONCERN. PE PACK 4100CC v SANDERS

AND OTHERS

CHRISTIAAN SWART

Senior Lecturer, University of South Africa

WILHELMINA GERMISHUYS

Lecturer, University of South Africa

I INTRODUCTION

Section 197 of the Labour Relations Act 66 of 1995 (‘the Act’) has

received considerable attention from the highest courts in the country

(Aviation Union of South Africa and Another v South African Airways

(Pty) Ltd and Others 2012 (1) SA 321 (CC) (‘the Aviation Union case’);

NEHAWU v University of Cape Town and Others 2003 (3) SA 1 (CC)

(‘the UCT case’); SAMWU and Others v Rand Airport Management

Company (Pty) Ltd and Others [2005] 3 BLLR 241 (LAC); and Ponties

Panel Beaters Partnership v NUMSA and Others [2009] 2 BLLR 99 (LAC)

(‘the Ponties Panel Beaters case’)). The Constitutional Court in the UCT

case conf‌irmed that section 197 of the Act applies to outsourcing

agreements. In the Aviation Union case (supra), the Constitutional

Court held in its most recent judgment dealing with section 197 that

section 197 also applies to so-called second-generation outsourcing

agreements.

On 22 January 2013, the Labour Appeal Court delivered judgment in

PE Pack 4100CC v Sanders and Others [2013] 4 BLLR 348 (LAC) (‘the PE

Pack case’). The court had to consider the application of section 197 of

the Act in the context of franchises as a business model. The business

community, particularly franchisors, franchisees and their employees,

have awaited the judgment with great anticipation. It was hoped that this

judgment would provide clarity on the legal position of employees of a

franchise when a franchise agreement is terminated and subsequently

awarded to a new franchisee. The decision in the PE Pack case (supra) is

noteworthy as the f‌irst decision on the application of section 197 of the

Act to franchise agreements. In this case note, the PE Pack case will be

critically analysed and discussed in the light of the Constitutional Court

judgments that preceded it.

533

(2014) 26 SA Merc LJ 533

© Juta and Company (Pty) Ltd