Must employees transfer to the new service provider?

transfer of an undertaking as a going concern. This is according to the provisions of section 197.

In these circumstances SVA Security (Pty) Limited employees would transfer to Fidelity Security Services with all their pay and conditions of service in place.

Note that for section 197 to be applicable, there are three conditions that must be met: ● A transfer, ● Of a business (the transfer must be of the whole or part of a business), as a ● Going concern. The basis for alleging that a transfer took place was that Fidelity would be providing an identical service for Makro in accordance with the same services that it previously provided at the same premises, such as managing staff and providing the required security.

There was no transfer of any equipment, intellectual property or assets from it to Fidelity to enable the latter to service the contract. There was therefore a mere cancellation of the contract of service with Makro.

What was taken over by Fidelity was the service and not a “business”.

It is important to note that the termination of a service contract and the subsequent appointment of a new service provider does not constitute a section 197 transfer.

Only the servicing of a contract was taken and not the employer’s business.

The employer is at liberty to continue with its business by providing similar services to other potential clients.

The fact that some of the employees were taken over because of Makro’s intervention, in this case, cannot be indicative of a transfer.

Any finding to the contrary would mean that every time a mere contract of service is taken over by a new service provider, the latter would be required to take over all the employees from the old service provider on the basis that a section 197 had taken place.

In the Makro case, the application was dismissed with costs.

Jonathan Goldberg is CEO of Global Business Solutions

In this weekly column labour lawyer Jonathan Goldberg looks at various aspects of labour law.