POWER TO THE EMPLOYEES
These employees had, on behalf of Grinpal, rendered the services under the agreements exclusively.
When City Power refused to acknowledge that section 197 of the LRA applied to the termination and handover of the services and, by operation of law, the transfer of the employees of Grinpal, Grinpal brought an urgent application for declaratory relief (ie that section 197 did apply to the current circumstances) in the Labour Court. This was opposed by City Power.
The Labour Court held that the transfer did in fact constitute a transfer as contemplated in section 197 resulting in the transfer of the employees by operation of law. This was so because all the infrastructure required to render the prepaid electricity services now fell exclusively within the hands of City Power, and was no longer held by Grinpal.
City Power appealed to the Labour Appeal Court which agreed that the transfer did take place and, consequently, that the employees transferred to City Power.
In concluding as it did, the Labour Appeal Court (per Judge Davis) expressed concern regarding other scenarios that may arise in which a municipality outsources business services. In particular, this concern cen- tred around the financial burden that may be imposed on municipalities having to absorb the employees from the initial service provider on cancellation of an agreement or tender. City Power then sought leave to appeal to the Constitutional Court against the judgement of the Labour Appeal Court.
The matter was heard on November 18 2014.
City Power contended that due to the fact that it is a municipal entity governed by the Municipal Systems Act, No 32 of 2000, it is exempt from the application of section 197 of the LRA, especially the provision regarding the transfer of employees. This argument was advanced on the basis that, in terms of section 66 of the Municipal Systems Act, it has its own recruitment and selection policy and procedure governing employment of the staff.
Grinpal opposed this contention arguing that City Power was not, in fact, a municipality but a private company, wholly owned by the City of Johannesburg, and therefore fell within the realm of section 197.
In any event, it was argued that the provisions of section 197 were not in conflict with the provisions of the Municipal Systems Act, or the Constitution. Section 210 of the LRA specifically states that where a conflict arises between the LRA and the provisions of any other law (save the Constitution or any act expressly amending the LRA), if the matter is dealt with in the LRA, the provisions of the LRA will prevail.
On April 20 2015 Judge Tshiqi, in a unanimous judgment, accepted that City Power is a municipal entity. Despite this, it was held that section 197 is applicable to municipal entities unless such municipalities specifically exclude its operation through relying on the mechanisms provided to all employers in section 197(6) of the LRA. On the facts, the court held that
Grinpal contended that the handover process triggered the application of section 197 of the LRA, resulting in the transfer of 41 Grinpal employees to City Power This judgment confirms that municipal entities (and other organs of state for that matter) cannot seek to rely on obligations imposed on them by statutes