National Education Health and Allied Workers Union v University of Cape Town and Others

The University of Cape Town (UCT) decided to outsource certain non-core activities (cleaning, gardening, sports ground maintenance) previously performed by NEHAWU members. UCT appointed four contractors to perform these services. UCT held consultations with NEHAWU regarding the outsourcing and possible dismissals, but the dispute remained unresolved. UCT gave notice of termination to approximately 267 workers and offered retrenchment benefits. Workers tendered to continue employment with UCT and then with the contractors. UCT rejected this, instead inviting workers to apply for employment with contractors. Most workers who applied were accepted by contractors, but many did not continue working for long as contractors employed them on less favourable conditions, particularly lower wages. NEHAWU brought an urgent application seeking declaratory relief that the outsourcing constituted a transfer of business as a going concern under section 197 of the LRA, and that employment contracts were automatically transferred to the contractors.

• Whether section 197 of the Labour Relations Act provides for automatic transfer of contracts of employment when a business is transferred as a going concern, or whether such transfer requires prior agreement between the transferor and transferee employers
• The proper interpretation of section 197 of the LRA in light of the constitutional right to fair labour practices under section 23(1) of the Constitution
• Whether appeals from the Labour Appeal Court lie to the Supreme Court of Appeal or directly to the Constitutional Court
• The procedure to be followed in appeals from the Labour Appeal Court to the Constitutional Court
• Whether the Constitutional Court has jurisdiction to hear appeals on the interpretation and application of the LRA
• The circumstances in which the Constitutional Court will hear appeals from the Labour Appeal Court

Leave to appeal granted. Appeal upheld with costs (including two counsel). LAC order dismissing the appeal set aside. UCT and Supercare ordered to pay costs in the LAC (including two counsel). Case remitted to the Labour Appeal Court to deal with the matter in light of the judgment.

Upon the transfer of a business as a going concern as contemplated in section 197(1)(a) of the Labour Relations Act, workers are automatically transferred to the new employer by operation of law, and the new employer is substituted in the place of the old employer in respect of all contracts of employment, regardless of whether the transferor and transferee employers agreed that the workforce would be transferred as part of the transaction. Whether a business has been transferred as a going concern is an objective question of fact to be determined having regard to all the circumstances of each transaction, including transfer of assets, whether workers are taken over, whether customers are transferred, and whether the same business is carried on. The absence of agreement between employers regarding transfer of workers does not prevent a finding that a transfer of business as a going concern has occurred. Section 197 has a dual purpose: to protect workers against loss of employment AND to facilitate the transfer of businesses as going concerns, thereby balancing the interests of workers and employers consistent with the constitutional right to fair labour practices under section 23(1) of the Constitution.

The Court made several important obiter observations: (1) The concept of fair labour practice in section 23(1) is incapable of precise definition and must be given content primarily by the legislature and specialist labour tribunals, with the Constitutional Court exercising supervisory oversight; (2) The Constitutional Court will be slow to hear appeals from the LAC unless they raise important issues of principle, given the LAC's specialized expertise and the need for expeditious resolution of labour disputes; (3) Foreign instruments such as the EU Acquired Rights Directive and UK TUPE Regulations, while different in language and context, provide insight for proper interpretation of section 197; (4) Subsequent legislative amendments may be used to clarify the meaning of earlier provisions where Parliament has clearly shown what it meant; (5) Section 23(1) protects both workers and employers (including juristic persons), not workers alone - fairness must be assessed toward both parties; (6) The right to fair labour practices focuses broadly on the employment relationship and its continuation on terms fair to both parties; (7) In interpreting legislation giving effect to constitutional rights, courts must give full effect to legislative purpose, and legislature and courts act in partnership to give life to constitutional rights; (8) The Constitutional Court has jurisdiction over proper interpretation and application of the LRA as it was enacted to give content to section 23 of the Constitution.

This is a landmark case in South African labour law that definitively establishes the meaning and purpose of section 197 of the LRA. It confirms that workers are automatically transferred with a business when sold as a going concern, providing crucial employment protection. The judgment is significant for: (1) Establishing that proper interpretation of legislation enacted to give effect to constitutional rights is itself a constitutional matter, bringing such interpretive disputes within the Constitutional Court's jurisdiction; (2) Clarifying appellate procedures from the LAC to the Constitutional Court; (3) Recognizing that fair labour practices under section 23(1) of the Constitution protects both workers and employers; (4) Establishing the dual purpose of section 197: worker protection AND facilitation of business transfers; (5) Preventing employers from structuring transactions to avoid section 197's protective provisions; (6) Promoting the constitutional values of social justice and labour peace; (7) Demonstrating the partnership between legislature and courts in giving effect to constitutional rights; (8) Providing guidance on the use of foreign instruments (EU Directive, UK TUPE Regulations) and subsequent legislative amendments in statutory interpretation. The judgment has profound implications for outsourcing, business sales, and employment security in South Africa.