Dimension Data (Pty) Ltd and Others v GWB Technologies CC and Others

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Andre Van Niekerk J
• Judgment Date: 09 May 2022
• Docket Number: J 478/2022
• Hearing Date: 06 May 2022
• Court: Labour Court
• Citation: 2022 JDR 2077 (LC)

Van Niekerk J:

Introduction:

[1]

This case concerns the employment-related consequences of a change in service provider. The applicants seek a declaratory order to the effect that the termination of a service agreement between them and the second respondent (City), and the award of a tender by the City to the first respondent (GWB) to provide the same services, constitutes the transfer of a business as contemplated by section 197 of the Labour Relations Act [1] (LRA).

[2] The City abides by the decision of the Court; the third to fiftieth respondents (employees) do not oppose the application. The application is opposed only by GWB. In essence, GWB contends that its successful tender for the services (referred to as end-user computing services or 'EUC services') has had the consequence of no more than the termination of one service level agreement and the commencement of another. Put another way, GWB disputes that its conclusion of an agreement to provide the EUC services to the City triggers section 197, and that it has any obligation in law to employ any of the applicants' employees on not less favourable conditions of employment, or at all.

[3]

Although the issue of urgency was contested in the papers, it was not pursued when the application was argued. Applications such as the present are inherently

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urgent. In the present instance, the transaction that forms the subject of these proceedings took effect on 1 May 2022. It is in the interests of all parties (and in particular the employees) that the status of the employees is determined without further delay. Insofar as GWB suggests that any urgency was self-created, it is not in dispute that GWB appeared initially to accept that section 197 applied to the change in service provider. It was only in late March 2022 that GWB adopted the stance that section 197 did not apply, a position communicated to all of the applicants only by 1 April 2022. What followed was a series of discussions between the parties aimed at a resolution to the impasse that had developed. These discussions, which were followed by an exchange of proposals that continued until 22 April 2022, regrettably did not bear fruit, and the present application was filed on the same date. I am satisfied that the applicants acted with due diligence in the circumstances, and that the application is urgent.

Brief factual background:

[4]

In 2016, the first applicant (Didata) secured the contract to provide EUC services to the City. The second applicant (Vanity) is a subcontractor appointed by Didata to deliver EUC services to the City. It employs 16 employees who, together with the employees of Didata and the third applicant (Yaetsho), provide EUC services to the City. Yaetsho is similarly a subcontractor appointed by Didata to provide EUC services to the City; it employs 16 employees who together with the employees of Didata and Vanity, deliver EUC services to the City. All of the employees who are party to this application are engaged in the provision of EUC services.

[5]

It is not disputed that the EUC service providers must support, service, maintain and repair the City's IT infrastructure. EUC services, previously referred to as 'desktop support', are wide ranging. They encompass IT-related assistance to end- users (in the present instance, City employees) on a day-to-day basis. EUC services are provided in real time and at any location, as needed. In order to provide the EUC services, Didata utilised the City's infrastructural assets, including

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its Information Technology Service Management (ITSM) tool, networking and Microsoft software, and the City's Outlook email addresses and Microsoft patching tool. The applicants' employees were stationed at the City's premises, and provided services using their own laptops, handheld devices, power supply units, and the like.

[6]

The initial outsourcing of the EUC services by the City occurred in 2000, when a nearly identical tender was awarded to IBM South Africa. After that date, there have been a number of other service providers appointed on nearly identical terms, Didata's immediate predecessor being EOH Mthombo (Pty) Ltd.

[7]

The employees are divided into three teams, with no regard to their particular employer and no division of roles, with some employees serving more senior levels of the City's management and some providing services on a standby basis, 24 hours a day, seven days a week. There is a dispute as to whether the teams are replaceable – GWB contends that its employees are capable of providing the same service without interruption. What is not disputed is that the EUC services are delivered in what is colloquially referred to as a 'tower', meaning that the employees engaged in providing the services are dedicated to that function and are not engaged in other more broadly IT-related services provided by Didata to the City.

[8]

The service level agreement in terms of which Didata delivers EUC services to the City has terminated. As I have indicated, with effect from 1 May 2022, GWB has been appointed to provide the EUC services after a successful tender.

[9]

The bid document makes specific reference to section 197. The request for proposals states that the successful bidder "may be required to comply with the provisions of section 197 of the Labour Relations Act". The bid document goes on to provide, in the next sentence, that "[t]he successful bidder will be required to employ the transferred employees on terms and conditions that are overall not less favourable to the employees than those on which they were employed by the old employer".

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[10]

From mid-December 2021, when it was notified by the City that it had been awarded the tender to provide EUC services until mid-March 2022, GWB appears to have accepted that section 197 applied to any change in service provider in its favour. Specifically, GWB's chief executive officer, Mr. E Mabasa (Mabasa), approved a draft communication which Didata intended to send to its employees, and which specifically referred to a section 197 transfer. After his approval, the communication was circulated by Didata to the affected employees. As early as 11 February 2022, Mabasa requested meetings to discuss the section 197 transfer. Two meetings were held in the presence of GWB's labour consultant. On 7 February 2022, a draft agreement was prepared and sent to GWB, expressly addressing the application of section 197 to the pending change in service provider. Furthermore, GWB concluded a non-disclosure agreement with the applicants which expressly acknowledges that the outsourcing of EUC services to GWB triggers section 197. Notably, it was only after receiving the confidential information contemplated by the non-disclosure agreement that GWB's stance on the application of section 197 changed. In a communication addressed to the City and forwarded to Didata on 17 March 2022, Mabasa advised that because it would be rendering the services on a 24/7 basis, section 197 would not be triggered, GWB would consider offering only 17 of the 48 affected employees contracts of employment on GWB's terms and conditions.

[11]

Mabasa's averments that the negotiations conducted between the parties were concerned with the question of whether section 197 applied (as opposed to the terms on which it might be implemented), and that all of the communications and terms of the non-disclosure agreement were agreed on the assumption that the application of section 197 had yet finally to be established, are wholly implausible. GWB's submission in these proceedings is that section 197 applies or does not apply as a matter of law. This position is incongruent with GWB's averment that during February and March 2022, the parties were negotiating the application of section 197. The terms of the discussions between the parties and their communications were such that it is most improbable that the parties were discussing whether section 197 applied. It is more probable than not that Mabasa

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believed that section 197 applied and commenced negotiations on an agreement to provide for the terms of its implementation. It was only after the non-disclosure agreement was signed and the terms and conditions of the applicants' employees were provided to GWB that the backpedalling exercise recorded in the founding affidavits commenced.

[12]

Despite further discussions between the parties and their legal representatives, no agreement could be reached on whether section 197 applied to the change in the provision of the EUC services, and the present proceedings were instituted.

[13]

GWB does not dispute that the City has requested that it employ the same employees who are currently engaged to provide the EUC services, nor that it offered, at a meeting on 13 April 2022, to employ 20 of these persons. GWB also does not dispute that it has made four offers of employment to the current cohort of employees, three of whom have accepted. GWB does not seriously dispute that in a meeting between the parties (including the City) held on 13 April 2022, the City expressed the view that it wished the same employees to continue servicing the EUC services contract, without interruption, and that it envisaged only a change in the service provider.

Legal principles:

[14]

The principles that regulate the transfer of a business and its employment-related consequences are well-established. Section 197 of the LRA is intended to vary the common law by protecting employees' security of employment on transfer (provided certain conditions are met), and oblige the employer acquiring the business to take over a business bundle that includes the employment contracts concluded between the transferor employer and its employees. The substitution of the transferee employer...