National Education Health and Allied Workers Union v University of Cape Town and Others

• Jurisdiction: South Africa
• Judge: Chaskalson CJ, Langa DCJ, Goldstone J, Kriegler J, Madala J, Mokgoro J, O'Regan J, Ngcobo J, Sachs J and Yacoob J
• Judgment Date: 06 December 2002
• Docket Number: CCT 2/2002
• Hearing Date: 17 September 2002
• Counsel: M J D Wallis SC (with him A A Gabriel) for the applicant/appellant. W R E Duminy SC (with him R G L Stelzner) for the first respondent. G J Marcus SC (with him A M Breitenbach) for the second respondent.
• Court: Constitutional Court

Ngcobo J: E

Introduction

[1] This is an application for leave to appeal against the judgment and order of the Labour Appeal Court (LAC) [1] dismissing an appeal by National Education, Health and Allied Workers Union (NEHAWU), the applicant, against the judgment and order of the F Labour Court. [2] The central question in this application concerns the meaning of s 197 of the Labour Relations Act 66 of 1995 (LRA). [3] It is whether, in terms of s 197, upon transfer of a business as a going concern, the workers are transferred automatically with the business without a prior agreement to that effect between the transferor and transferee employer. Apart G from this question, the application also raises important questions in relation to appeals from the LAC, namely whether such appeals lie to the SCA, the procedure to be followed in appeals from the LAC to this Court and the circumstances in which this Court will hear such appeals. H

Factual background

[2] This case had its origin in a decision taken by the University of Cape Town (UCT), the first respondent, during 1997 to outsource certain of its non-core activities which were performed by members of NEHAWU. These activities were mainly cleaning, gardening and sports ground maintenance services. UCT appointed four contractors, the second I to

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fifth respondents, to perform these services. Save for Supercare Cleaning (Pty) Ltd (Supercare), the second respondent, none of the A other respondents participated in the proceedings either in the courts below or in this Court.

[3] Since the decision to outsource was bound to result in the loss of employment for members of NEHAWU, UCT held consultations with it on the reasons for outsourcing and the possible dismissal of workers B who were performing the services to be outsourced. Despite these consultations the dispute between UCT and NEHAWU remained unresolved. UCT went ahead with the implementation of outsourcing and retrenchment. It gave notice to some 267 workers of the termination of their employment and stated that retrenchment benefits would be paid. Not C content, the workers tendered to continue their employment with UCT and to commence employment with the contractors when the transfers occurred.

[4] UCT rejected this offer and invited the workers to apply for D employment with the contractors instead. UCT had stipulated in its contracts with the contractors that the latter should consider favourably the employment of the workers. Most of the workers accepted the invitation and a majority of those who applied were accepted. However, many workers did not continue working for the contractors for very long. Apparently, the contractors employed them on conditions less E favourable than those on which they had been employed by UCT. In particular, they were paid far less than UCT had paid them.

[5] NEHAWU subsequently brought an urgent application in the Labour Court seeking declaratory relief. [4] It sought an order declaring that: (a) the outsourcing of the F non-core activities was a transfer of a part of UCT's business, trade or undertaking as a going concern within the meaning of s 197(1)(a) of the LRA; (b) the employment contracts of the affected workers were transferred automatically to the contractors in terms of s 197(2)(a) of the LRA; and (c) the termination of the workers' employment contravened s 197(2)(a) and was of no force and effect. G

The proceedings in the Labour Court

[6] Mlambo J, who heard the matter in the Labour Court, took the view that s 197 does not provide for automatic transfer of contracts of employment in the case of a transfer of a business as a going concern. He expressed the view that the contracts of employment can only be H transferred without the consent of the employees if the seller and purchaser of the business agree that the contracts of employment will be transferred together with the business. Mlambo J disagreed with an earlier decision of the Labour Court in Schutte and Others v PowerPlus Performance (Pty) Ltd and I Another [5] in which Seady AJ had concluded that: (a) s 197 protects the workers against the loss of their jobs in the

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event of a transfer of a business in the circumstances contemplated in s 197(1)(a); and A (b) the contracts of employment are transferred automatically when a business is transferred in the circumstances set out in s 197(1).

[7] But Mlambo J was confronted with the decision of the LAC in Foodgro (A Division of Leisurenet Ltd) v Keil [6] where the LAC reached the same B conclusion as Seady AJ both as to the purpose and the meaning of s 197. While expressing the view that the interpretation of s 197 in Foodgro is incorrect, he nevertheless considered himself bound by that decision. [7] However, on the facts he found that the outsourcing involved in this case did not amount to a transfer of a going concern as contemplated in s 197. He dismissed the C application and made no order as to costs.

[8] NEHAWU appealed to the LAC. UCT and Supercare cross-appealed only on the issue of costs. D

The proceedings in the LAC

[9] The majority of the LAC dismissed the appeal. [8] It took as its starting point the meaning of the phrase 'going concern' in s 197 and held that a business is transferred as a going concern only if its assets, including the workforce, are transferred. As the majority put it, 'to E say that there can be a sale of a business as a going concern without all or most of the employees going over is to equate a bleached skeleton with a vibrant horse'. [9] The transfer of a business as a going concern, the majority held, requires a prior agreement between the transferor employer and the transferee employer that the workers or a majority of them 'are part and parcel of the F transaction'. [10] It concluded that as there had been no prior agreement between UCT and the contractors that the workforce would be transferred as part and parcel of the transaction, there was no transfer of a business as a going concern as contemplated in s 197(1)(a). G

[10] It went on to consider the decision in Foodgro. It held that the question whether contracts of employment are transferred automatically in circumstances set out in s 197 had not been in issue in Foodgro and that the remarks of that Court in this regard were obiter. It found that the decision in Foodgro did not prevent a finding that s 197(1) must be 'interpreted so as to limit its scope to cases where the transfer follows upon an agreement between the seller and the purchaser defining H the subject-matter of the sale of the business as a going concern (ie employees included)'. [11] In view of their conclusion on the law, the

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majority did not consider the facts. It accordingly dismissed the appeal and awarded costs both in the A Labour Court and the LAC to UCT and Supercare.

[11] The minority judgment reached a contrary result on the law and also found it unnecessary to consider the facts. It held that the purpose of s 197 was to protect the workers [12] and that the question whether a business has been transferred as a B going concern is a matter for objective determination. Each transaction must be considered on its merits. [13] It concluded that the contracts of employment are transferred automatically to the transferee employer regardless of whether the two employers agreed that the workers would be transferred as part of the transaction. [14] C

[12] The present application for leave to appeal is a sequel to the proceedings in the LAC. The first question that arises is whether this Court has jurisdiction to determine this application.

Jurisdiction D

[13] NEHAWU contends that the interpretation of s 197 of the LRA adopted by the majority of the LAC infringes the rights of the workers to fair labour practices conferred by s 23(1) of the Constitution of the Republic of South Africa Act 107 of 1996. That is a constitutional issue. So too is the contention raised by NEHAWU that the interpretation of s 197 adopted by the majority of the LAC fails to E promote the spirit, purport and objects of the Bill of Rights. Section 39(2) of the Constitution provides that '(w)hen interpreting any legislation . . . every court, tribunal or forum must promote the spirit, purport and objects of the Bill of Rights'. [15] It is not necessary, however, to deal with s 39(2) in this application. F

[14] The LRA was enacted 'to give effect to and regulate the fundamental rights conferred by s 27 of the Constitution'. [16] In doing so the LRA gives content to s 23 of the Constitution and must therefore be construed and applied consistently with that purpose. Section 3(b) of the LRA underscores this by requiring that the provisions of the LRA must be interpreted 'in compliance with the Constitution'. Therefore G the proper interpretation and application of the LRA will raise a constitutional issue. This is because the Legislature is under an obligation to 'respect, protect, promote and fulfil the rights in the Bill of Rights'. [17] In

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many cases, constitutional rights can be honoured effectively only if legislation A is enacted. Such legislation will of course always be subject to constitutional scrutiny to ensure that it is not inconsistent with the Constitution. Where the Legislature enacts legislation in the effort to meet its constitutional obligations, and does so within constitutional limits, courts must give full effect to the legislative purpose. Moreover, the proper interpretation of such legislation will ensure the B protection, promotion and fulfilment of constitutional rights and as such will be a constitutional matter. In this way, the courts and the Legislature act in partnership to give life to constitutional rights.

[15] On behalf of UCT it was contended that where one is dealing...