A critical analysis of Section 197 of the Labour Relations Act 66 of 1995 as amended taking into consideration the elements of Section 197, the definition and case law.

Abstract

Section 197 of the Labour Relations Act 66 of 1995 regulates the transfer of a business as a going concern. However, it caused much debate and litigation. Previously, section 197 allowed for the automatic transfers of employees when there was transfer of the whole or part of a business, trade or undertaking. The employees could not refuse to be transferred. There has been much debate and litigation on this issue, mainly on the issue of transfers in the context of outsourcing. This resulted in section 197 of the Labour Relations Act 66 of 1995 being amended in 2002. With the amendments, the new employer is automatically substituted in place of the old employer in respect of all contracts of employment. The section aims to protect employees against loss of employment while facilitating the transfer process. Despite the amendment, there has been much academic and judicial debate on the issue. The Constitutional Court settled this issue in Aviation Union of SA & another v SA Airways (Pty) Ltd & others (2011) 32 ILJ 2861 (CC) wherein it was held that a transfer takes place when there is a termination of a service contract and the award of a new contract to a third party. The Aviation case sets a precedence and is being applied in various cases. For section 197 to apply, there must be a transfer of an identifiable business by the old employer to the old employer as a going concern. Each case must be determined on the facts. The effects and conditions of transfers are further discussed stating the consequences that flow and the remedies available to employees. The conditions of the transferred employees should not on a whole be less unfavorable. This is further examined in the context of transfers within the South African Local Government structures and how the unions failed to utilize their power and collective bargaining to their advantage to ensure that they members were protected during the process.