Fleet Africa (Pty) Ltd v Erica Nijs

The respondent was originally employed by the City of Johannesburg from 6 November 1993 to 31 March 2001. She was transferred to Super Fleet Power Plus Performance (later taken over by the appellant) on 1 April 2001 in terms of s197 of the LRA when the City outsourced its fleet management function. After 11 years, the City notified the appellant that the contract would terminate on 29 February 2012. A dispute arose as to whether the appellant's employees would transfer back to the City under s197, which was referred to private arbitration. While awaiting the arbitration outcome, the appellant embarked on a retrenchment process under s189A of the LRA. The appellant conditionally included employees in the retrenchment consultation process pending the arbitration outcome. The respondent signed a voluntary retrenchment settlement agreement on 18 May 2012 for R215,145.49. The appellant signed on 21 May 2012. On the same day, the Chief Executive Officer announced that the arbitrator found s197 applied, transferring employees back to the City retrospectively from 1 March 2012. The appellant repudiated the settlement agreement on the basis that the respondent had been transferred to the City. The respondent sought to enforce the agreement, and the Labour Court made it an order of court.

• Whether the settlement agreement met the requirements of section 158(1)(c) read with section 158(1A) of the LRA to be made an order of court
• Whether the Labour Court had jurisdiction to make the settlement agreement an order of court
• Whether there was a valid employment dispute between the appellant and respondent capable of settlement after the s197 transfer took effect
• Whether the appellant had contractual capacity to conclude the settlement agreement after the retrospective transfer of employment to the City on 1 March 2012
• Whether the settlement agreement was conditional on the outcome of the arbitration award

The appeal was upheld. The order of the Labour Court making the settlement agreement an order of court was set aside and substituted with an order dismissing the application. The appeal was reinstated and condonation for the late filing of the appellant's power of attorneys was granted.

Once an arbitrator determines that a s197 transfer has occurred, the transfer takes effect automatically and retrospectively from the date specified. From that date, the new employer takes the place of the old employer in the employment relationship. A settlement agreement concluded after the retrospective transfer date cannot constitute a settlement of an employment dispute between the employee and the former employer, as no employment relationship exists between them from the transfer date. For a settlement agreement to be made an order of court under s158(1)(c) read with s158(1A) of the LRA, it must: (a) be in writing; (b) be in settlement of a dispute or alleged dispute; and (c) the dispute must be one that either party has a right to refer to arbitration or the Labour Court. Where no employment dispute exists between the parties, the Labour Court lacks jurisdiction to make a purported settlement agreement an order of court.

The court noted that the appellant took a cautious approach in conditionally including employees in the s189 consultation process because it could not initially determine with absolute accuracy which employees would be transferred to the City. This was to avoid the eventuality of an employee being left out who could not be transferred, or in case the arbitrator found s197 inapplicable. The court also noted (without deciding the point) that the Labour Court had found the settlement agreements concluded in the context of anticipated s197 transfers were agreements concluded with the purpose of the LRA in the foreground, namely to advance economic development, social justice, labour peace and democratisation of the workplace. The court apologized for the delay in handing down judgment, which was caused by the illness and subsequent passing of Ndlovu JA who had undertaken to write the judgment.

This case clarifies the requirements for making settlement agreements orders of court under s158(1)(c) of the LRA. It establishes that for a settlement agreement to be enforceable as an order of court, there must be an actual employment dispute between the parties at the time the agreement is concluded. The case demonstrates the retrospective effect of s197 transfers - once an arbitrator determines that a s197 transfer occurred, the new employer automatically takes the place of the old employer from the date of transfer. Settlement agreements concluded after that transfer date relating to employment with the old employer cannot be enforced as there is no longer an employment relationship. The judgment emphasizes the importance of correctly identifying which employees are subject to s197 transfers before concluding retrenchment settlement agreements. It also illustrates the conditional nature of retrenchment processes conducted pending resolution of s197 transfer disputes.