When a company is being sold, the people employed by them are always concerned.
Section 197(2) of the Labour Relations Act, states the following: If a transfer of a business takes place
a) The new employer is automatically substituted in the place of the old employer in respect of all contracts of employment in existence immediately before the date of the transfer;
b) All the rights and obligations between the old employer and an employee at the time of the transfer continue in force as if they had been rights and obligations between the new employer and the employee;
c)Anything done before the transfer by or in relation to the old employer, including the dismissal of an employee or the commission of an unfair labour practice or act of unfair discrimination, is considered to have been done by or in relation to the new employer; and
d) The transfer does not interrupt an employee’s continuity of employment, and an employee’s contract of employment continues with the new employer as if with the old employer.
Section 197(1)(a) and (b) of the Labour Relations Act, states that:
“business” includes the whole or a part of any business, trade, undertaking or service; and
“transfer” means the transfer of a business by one employer (the old employer) to another employer (the new employer) as a going concern.
All rights and obligations between the old employer and an employee at the time of the transfer continue in force as if they had been rights and obligations between the new employer and the employee.
The new employer is not allowed to employ the employees on terms and conditions less favorable to the employees than those on which they were employed by the old employer. There is nothing, however, preventing the new employer from offering new terms of employment to the employees that are different to those in the existing employment contract on condition that these new terms are on the whole not less favourable for the employee. The only restriction in this regard is that if an employee does not want to agree to the new terms, the new employer may not terminate that employee’s employment contract.
It is important to note that the Section 197(3)(a) of the Labour Relations Act, refers to the fact that the terms and conditions of employment of the transferred employees may not be “on the whole less favourable”, this means that the terms and conditions of employment may be changed however the changes should be reasonable and can be done by having consultations with the employee.
Section 197(7) of the Labour Relations Act, lists a number of issues that need to be agreed upon by the old and new employer:
The old and new employer need to write a joint written agreement that states the employer is liable for amounts, or in the case of apportionment of liability, the terms of such apportionment.
In the absence of an agreement, the old employer is jointly and severally liable with the new employer to any employee who becomes entitled to receive a payment contemplated in terms of this section, as well as for any claim concerning any term or condition of employment that arose prior to the transfer.
In a Nutshell – Section 197 of the LRA contains provisions which protects the rights of the employees of the old employer when they are transferred to the new employer. The new employer is automatically substituted in the place of the old employer in respect of all contracts of employment (verbal or otherwise) in existence immediately before the transfer.
Remember MISA is just a phone call away!