Judicial Precedent

Schenellecke Logistics Parts and Accessories (Pty) Ltd v Schenker South Africa (Pty) Ltd and Others

CitationNot reportable; Case No: 2025-002629 (LC)

JurisdictionZA

Area of Law

Labour LawEmployment LawTransfer of BusinessCollective Labour Relations

Facts of the Case

Mercedes-Benz South Africa Ltd (MBSA) outsourced the operation of its Parts Logistics Centre (PLC) to Schenellecke Logistics Parts and Accessories (Pty) Ltd from 2017, with successive extensions until 28 February 2025. The PLC operations, including warehousing, inbound and outbound logistics, were conducted at MBSA’s premises using MBSA’s systems, infrastructure, and assets, with Schenellecke providing labour and certain equipment. Over time, the contractual documents (including RFQs and proposals incorporated into the agreements) consistently contemplated that, if Schenellecke lost the contract, employees would transfer in terms of section 197 of the Labour Relations Act (LRA). In 2024 MBSA issued a new RFQ for the period from 1 March 2025, which was awarded to Schenker South Africa (Pty) Ltd. Schenker disputed that section 197 applied, contending that the arrangement constituted a mere change of service provider rather than a transfer of a business. Schenellecke approached the Labour Court for a declaratory order that the changeover constituted a transfer of a business as a going concern under section 197 of the LRA, obliging Schenker to take over the employees.

Judicial Outcome

The Court declared that the cessation of services by Schenellecke and the commencement of services by Schenker at MBSA’s PLC with effect from 1 March 2025 constituted a transfer of a business or part of a business as a going concern in terms of section 197 of the LRA, and directed Schenker to comply with its obligations under section 197, including taking over the affected employees.

Legal Significance

The judgment reinforces the substance-over-form approach to section 197 of the LRA in outsourcing and insourcing arrangements. It confirms that repeated outsourcing of the same operational function, with continuity of activities, infrastructure and purpose, may constitute the transfer of an economic entity rather than a mere change in service provider, thereby strengthening employee protection in competitive tendering contexts.