New owners or business transfer: Employees’ rights matter
by Michael Bagraim
As the economy tries to regain some jobs and rescue some businesses, many workers find that they risk either losing their jobs or being offered employment with the new owners for lesser terms and conditions of employment. I am daily bombarded by these circumstances.
Many employers have taken over businesses from competitors leaving the staff in a rather tenuous situation. The Labour Relations Act (LRA) No 66 of 1995 (as amended) comes to the rescue of the staff whose rights are protected. In essence a new employer taking over a “going concern” must offer the same or similar terms of conditions of employment and must recognise previous history in terms of Section 197 of the LRA.
Our employment law recognises the value of employees and very carefully outlines employees’ rights and duties.
Likewise, employers must fully understand their duties with regard to implementation of the legislation.
Although there is freedom of contract, both the trade unions and the employees should understand their rights before accepting lesser terms and conditions of employment. We all understand that in South Africa today there is an enormous gap between employer and employee and these inequalities need to be externally structured to a degree.
Unlike many wealthier jurisdictions our Constitution and the various pieces of labour legislation recognise the historic fallibility of employees’ rights and goes a long way to enforcing a more equal structure at the work place.
While everyone understands that job security is uppermost in our mind, we must also understand that the employment conditions should be fair and functional.
When business transfers take place and employees find that they are working for new employers, they need to be assured that they cannot just find the working environment to be unilaterally changed to the workers detriment.
Obviously, many employers don’t want the regulatory interference and want to be given as much leeway as possible in order to make a profit and ensure that the new business is successful.
Like any other trading regulations, employers should be well-advised to be fully appraised of the Labour Relations Act – in particular the consequences of taking staff over from the previous business.
The contract of employment of the previous business is deemed to be transferred to the new concern.
The new owners will take over the workers recognising and respecting those terms and conditions and will, over a period of time, structure those employees taken over into the new environment.
It might mean, at a later stage, that the new employer might undergo a retrenchment exercise in terms of Section 189 of the LRA but the employees from the old business will have the benefit of length of service from when they first started at the old business.
When a change of ownership takes place or there is a transfer of shares the employees and or their trade union have a right to be consulted as this new ownership might have all sorts of consequences in terms of the employment contracts.
There are issues such as pension, provident fund, medical aid, outstanding leave and a plethora of other rights that need to be discussed and transferred.
For instance, employees with the old employer might have had the benefit of extra long leave after they have completed ten years of service. This right needs to be passed on to the new employer which could cause a problem as the new employer might have employees of their own who don’t have that right.
Issues such as these need to be properly debated and subject to a full consultation process. Our courts have been through thousands of these difficult situations and have developed structures to be followed.
Any employee faced with a new regime should at least know that there are rights attached to their transfer of employment relationship and these rights need to be only understood, carefully guarded and enforced.
Often ignorance and sometimes fear stops an employee from enforcing their terms and conditions just because the employer has been substituted for another.
Our labour law has evolved quite rapidly over the last 20 years and employees will find that many of their unanswered questions about the future of their job with the new employer has already been adjudicated upon.
* Michael Bagraim is a labour lawyer. He can be contacted at [email protected]
** The views expressed here are not necessarily those of Independent Media.
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