Zeda Car Leasing (Pty) Ltd t/a Avis Fleet and Others v Belinda Perlee and Nine Others

The respondents (10 employees) were employed by Avis Fleet in the Car Mall unit responsible for termination and disposal of vehicles at the end of lease terms. Barloworld (parent company) owned Avis Fleet and held a 51% stake in Crownmill t/a DealersOnline. In 2020, during COVID-19 pandemic, Barloworld embarked on restructuring and decided to close Car Mall due to duplication of functions - both Car Mall (using fixed cost structure) and DealersOnline (using variable cost structure) were providing vehicle disposal services. Following section 189A consultation process, all 53 Car Mall employees, including the respondents, were retrenched on 31 July and 31 August 2020. Avis Fleet then contracted DealersOnline to take over the vehicle disposal services previously rendered by Car Mall. DealersOnline employed 6 of the 53 retrenched employees. No tangible or intangible assets were transferred - DealersOnline used its own infrastructure, online Auction Portal, premises and systems. After retrenchment, corporate restructuring occurred: Barloworld disposed of Avis Fleet, and Dealersbid and Rokewood bought Barloworld's stake in Crownmill, renaming it DealersOnline (Pty) Ltd.

• Whether the closure of Car Mall and contracting of DealersOnline constituted a transfer of business as a going concern under section 197 of the Labour Relations Act
• Whether the dismissal of the respondents was automatically unfair under section 187(1)(g) of the LRA due to a transfer of business
• Whether the dismissal was based on operational requirements under section 189A of the LRA
• What was the causa (legal cause) of the dismissal - restructuring or transfer of business
• What was the main, dominant and proximate cause of the dismissal
• Whether DealersOnline was correctly cited as a party and whether DealersOnline (Pty) Ltd should be joined as intervening party
• Whether new evidence should be admitted on appeal

1. Application for DealersOnline (Pty) Ltd to intervene as fourth appellant and lead further evidence granted. 2. Appeal upheld. 3. Labour Court order set aside and substituted with: "The applicants' claim is dismissed with no order as to costs." 4. Appellants to pay respondents' wasted costs occasioned by the postponement on 15 August 2024, jointly and severally.

1. The causa (legal cause) determines the parameters of the factual enquiry when determining whether section 197 applies - the causa must be identified and the enquiry conducted within that context. 2. A transfer of business as a going concern under section 197 requires transfer of a discrete business unit (not merely a service or activity), which is discernible by a grouping of workers set about a common objective, transferred as a going concern with intrinsic productive capacity, and recognizable as that going concern in the hands of the new owner. 3. The test is holistic and considers multiple factors including transfer of tangible/intangible assets, employees, customers, and whether the same business continues - no single factor is decisive and the substance (not form) of the transaction is determinative. 4. Where a function or service is outsourced but no discrete business unit (with its assets, infrastructure, and economic identity) is transferred, section 197 does not apply - this is so even if the same activity continues to be performed under different hands. 5. When both section 197 transfer and section 189 operational requirements scenarios are alleged, the court must determine the main, dominant and proximate cause of the dismissal. 6. Where dismissals occur in the context of a genuine restructuring for operational requirements affecting multiple employees across a business, and no discrete business unit is transferred, the operational requirements constitute the dominant cause of dismissal, not section 197 transfer.

The Court observed that even if employees cannot invoke section 197 protections, they are not without remedy - they remain protected by retrenchment provisions in section 189 of the LRA; the issue is which employer should be responsible for affected workers. The Court noted that the dictum in Cold Chain regarding outsourcing should not be interpreted as creating an inflexible principle that every outsourcing transaction automatically triggers section 197, regardless of prevailing factual circumstances. The Court also commented that treating a mere unit of employees within a company as an independent business entity for section 197 purposes is erroneous - Car Mall was not a business entity independent from Avis Fleet but rather a unit comprised of Avis Fleet employees. The Court expressed sympathy for the respondents' position but noted they had "nailed their colours on the mast" of section 187(1)(g) without pleading an alternative claim under section 189.

This judgment provides important clarification on the application of section 197 of the LRA concerning transfer of business as a going concern. It distinguishes between transfer of a business (which triggers section 197 protections) and transfer of a service or activity (which does not). The judgment emphasizes that the causa (legal cause) of a transaction determines the parameters of the factual enquiry. It confirms that outsourcing does not automatically constitute a section 197 transfer - the court must undertake a holistic assessment of all circumstances including transfer of assets (tangible and intangible), employees, customers, and whether the same business continues. The judgment also reinforces the requirement to determine the main, dominant and proximate cause of dismissal when both operational requirements and potential transfer scenarios exist. It demonstrates the distinction between retrenchment for operational requirements (section 189/189A) and dismissals due to transfer of business (section 187(1)(g)), clarifying that different protections apply. The case is significant for employers restructuring operations and deciding whether to outsource functions previously performed in-house.