I received an e-mail from a reader who has been working in a bookshop as an accountant for the past 15 years.

She says her current boss is in the process of selling the business as a going concern. Her employer’s decision to sell the business, according to her, is related to the poor state of the economy.

He has reassured the staff that none of them will be retrenched and that they will continue to work for the new owner.

Our reader now wants to know whether her years of unbroken service will be recognised or whether she will be classified as a “new” employee at a “new” company.

She would also like to know whether her new employer has to grant her the leave that she accrued over this time and whether she will have to sign a new contract of employment.

In a staff meeting, the future employer said they (the staff) would have to join a new pension fund and our reader wants to know if this is legal.

The new section 197 of the Labour Relations Act (LRA) regulates the transfer of a business as a going concern and, by implication, the transfer of the contracts of employment from one employer to another.

In the event of a business being transferred as a going concern – unless otherwise agreed – the old employer is automatically substituted by the new one with respect to all contracts of employment that existed before the date of transfer.

The transfer does not interrupt the continuity of the employment of the relevant employees. Therefore our reader will simply continue with her service years as if she is still working for the same employer.

In Foodgro (a division of Leisurenet Ltd) vs Keil, the Labour Appeal Court held that the transfer of employment contracts followed automatically upon the transfer of a business as a going concern.

This interpretation was confirmed by the Constitutional Court in Nehawu vs the University of Cape Town and has been endorsed by subsequent amendments to the act.

Our reader will therefore not have to enter into a new contract of employment with her new employer.

Employees may be transferred to another pension, provident, retirement or similar fund upon the transfer of the business, provided that the benefits of the new fund(s) are reasonable and equitable.

A written agreement – stating who is liable – must be in place between the original and new employer regarding the issues of accrued leave, severance and other payments still owed to the employee(s).

When a business is transferred as a going concern, the LRA also requires that the original employer discloses the terms of a written agreement to the employees.

Where staff belong to a trade union, the new employer is bound by the collective agreements that bound the original employer.

All rights and obligations between the original employer and an employee at the time of transfer remain in force as if they were rights and obligations between the new employer and employee.

The new employer may however, by agreement, change employees’ conditions of employment.

Should any retrenchments take place within 12 months from the transfer of the business, both (original and new) employers will be jointly and severally liable for any monies payable to employees.

Send your labour and other workplace related questions to coetzee@fullstopcom.com.

Booysen & Rossouw Attorneys in Port Elizabeth specialises in labour related legislation. The firm also handles injury on duty cases as well as all other aspects of the law.

Issued by:

Full Stop Communications

Coetzee Gouws
041 368 4992
082 575 7991

On behalf of:

Booysen & Rossouw Attorneys