City Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd and Others

City Power, a municipal entity wholly owned by the City of Johannesburg, outsourced the installation and maintenance of prepaid electricity meters in Alexandra Township to Grinpal under service level agreements. When City Power terminated the contracts in 2012, the parties agreed on a full handover of infrastructure, software and databases, and City Power temporarily continued operating the business until a new service provider could be appointed. City Power denied that Grinpal’s employees were transferred with the business. Grinpal and the affected employees contended that the termination and handover constituted a transfer of a business as a going concern under section 197 of the Labour Relations Act (LRA).

Leave to appeal and condonation were granted, but the appeal was dismissed. The Labour Appeal Court’s decision was upheld, with a minor amendment confirming that City Power must give effect to section 197 of the LRA in relation to the affected employees. City Power was ordered to pay costs.

The case confirms that section 197 of the LRA applies to municipal entities and that outsourcing and insourcing by organs of state can trigger automatic transfers of employees. It reinforces the primacy of the LRA in employment matters and extends section 197 jurisprudence to public-sector and municipal contexts, including second-generation transfers.