Telkom SA Limited and Others v Blom and Others

The eight respondents were employees of Telkom SA Limited and members of the Telkom Pension Fund. Telkom sold its Iuvatek Electronics Services division to Molapo Technology (Pty) Ltd as a going concern with effect from 31 March 2000. In terms of s 197 of the Labour Relations Act 66 of 1995 (as it then stood), the respondents’ contracts of employment were transferred automatically to Molapo without their consent. Following the transfer, the respondents claimed that their employment with Telkom had been terminated due to the abolition of their posts and a reorganisation of Telkom’s business, entitling them to payment of pension benefits under clauses 4.7 and 5.7 of the Telkom Pension Fund rules. The Transvaal Provincial Division ordered Telkom and the Fund to pay those benefits. Telkom and the Fund appealed.

The appeal was dismissed with costs, and the order compelling Telkom and the Telkom Pension Fund to pay the respondents their pension benefits was upheld.

The case is significant for clarifying the interaction between s 197 of the Labour Relations Act and pension fund rules. It establishes that although s 197 preserves continuity of employment with the new employer, it can nonetheless trigger termination of employment with the old employer for purposes of pension entitlement. The judgment highlights a lacuna in labour legislation concerning pension rights on transfer of businesses.