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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


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