Road Traffic Management Corporation v Tasima (Pty) Limited; Tasima (Pty) Limited v Road Traffic Management Corporation

The Road Traffic Management Corporation (RTMC), a schedule 3A public entity under the PFMA, took over the electronic National Traffic Information System (eNaTIS) and related services from Tasima (Pty) Limited, a private company, on 5 April 2017. This followed an order by the Constitutional Court in Tasima I directing the handover within 30 days. Tasima had operated the eNaTIS since 2001 under a Turnkey Agreement with the Department of Transport, which was extended unlawfully and subsequently declared invalid. After the RTMC took control of the eNaTIS, Tasima sought a declaration that its employees' contracts of employment automatically transferred to the RTMC under section 197 of the LRA. The RTMC contested this, arguing that the Turnkey Agreement was a specific-works contract and that its regulatory nature excluded it from section 197's application.

• Whether section 197 of the Labour Relations Act applies to the transfer of the eNaTIS and related services from Tasima to the RTMC
• What is the legal causa for the transfer and its relevance to section 197 analysis
• Whether there was a transfer of a 'business' as a 'going concern' within the meaning of section 197
• Whether the RTMC, as a regulatory public entity, is excluded from section 197's application
• What is the effective date of the section 197 transfer
• What is the effect of a declaratory order under section 197 and whether consequential relief automatically follows

The RTMC's application for leave to appeal was granted but the appeal was dismissed. Tasima's cross-appeal on the effective date of transfer was upheld. The Labour Appeal Court's order was set aside and replaced with an order dismissing the appeal against the Labour Court's finding that the effective date of transfer was 5 April 2017. Tasima's application for leave to appeal in the section 18(3) matter (CCT 86/19) was dismissed as moot. No order as to costs in either matter.

Section 197 of the LRA applies where there is a transfer of a business as a going concern, determined by examining the substance rather than form of the transaction. The legal causa for the transfer determines what is to be transferred and establishes the parameters for the factual inquiry. Where a court order directs transfer of a system and services as they currently exist, not as they existed under an expired contract, that order is the legal causa. The effective date of transfer is ordinarily determined by the legal causa, but in exceptional circumstances may be the date of actual physical transfer to avoid inequitable results where the transferor has not yet relinquished control. The regulatory or public character of the transferee does not exclude it from section 197; what matters is whether it is an employer capable of receiving a business. A business is transferred as a going concern where the economic entity retains its identity after transfer, continuing the same operations with the same assets, premises and workforce, just under different management.

The Court noted that organs of state should make provision for section 197 eventualities when entering contracts with service providers. The Court also observed that non-payment of wages pending appeal cannot ordinarily constitute exceptional circumstances for interim enforcement under section 18(3) of the Superior Courts Act without bringing almost every labour matter within that section's ambit. The majority commented that both parties had dealt "less than admirably" with the employees and engaged in protracted litigation to avoid obligations to employees. The Court emphasized the importance of respecting court orders, noting that disregard for orders "sullies the authority of the courts and detracts from the rule of law." The minority judgment cautioned against unduly overburdening new employers with existing employees in circumstances where facts do not truly amount to a transfer of a business as a going concern.

This judgment provides important clarification on the application of section 197 of the LRA to state entities and outsourcing arrangements. It confirms that: (1) Section 197 applies to public entities regardless of their regulatory functions or schedule classification under the PFMA. (2) The legal causa (basis) for a transfer determines the parameters of the section 197 inquiry, but in exceptional circumstances the effective date of transfer may differ from the date determined by the legal causa to avoid inequitable results. (3) Courts must look at the substance of what was actually transferred, not just the form of the original contractual arrangement. (4) A specific-works contract can evolve into a business transfer where the scope of services expands and the contractor operates a discrete economic entity. (5) State entities must make provision for section 197 eventualities when entering outsourcing contracts. The case illustrates the dual purpose of section 197 in protecting employees while facilitating business transfers.