The effects envisaged in section 197(2) transpire only if a business is transferred from one employer to another as a going concern. ‘Business’ includes ‘the whole or part of any business trade, undertaking or service’. The term business therefore includes every conceivable form of activity in which employers engage, whether for profit or otherwise, and whether in the private or public sector.
Effects of transfer
According to section 197, the transfer of the whole or part of an employer’s business results in the ‘automatic’ substitution of the ‘new employer’ (i.e. the transferee) for the ‘old employer’ (i.e. the transferor). This substitution has three practical consequences for the employers and the employees concerned: The first is that ‘all the rights and obligations between the old employer and an employee at the time of the transfer continue in force as if they had been rights and obligations between the new employer and the employee’. The second is that ‘anything done before the transfer by or in relation to the old employer, including the dismissal an employee or the commission of an unfair labour practice or act of unfair discrimination, is considered to have been done by or in relation to the new employer’. The third is that the ‘continuity of employment’ is not interrupted. The fourth is that the transferred employee’s contract of employment ‘continues with the new employer as if with the old employer’.
Collective agreements and awards
The new employer is also bound any arbitration award or collective agreement that was binding on the old employer before the transfer.
Obligations on the employers after the transfer
For 12 months after the transfer, the old employer is jointly and severally liable with the new employer to any employee who becomes entitled to receive a payment as a result of the employee’s dismissal for a reason relating to the employer’s operational requirements or the employer’s liquidation or sequestration, unless the old employer is able to show that it has complied with the provisions of section197. Furthermore, the old and new employer are jointly and severally liable in respect of any claim concerning any term or condition of employment that arose prior to the transfer.
Transfers in circumstances of insolvency
Transfers of insolvent business are now regulated by section 197A. In these circumstances, the employees of the old employer are also transferred automatically to the new employer. The only difference is that anything done before the transfer by the old employer in respect of each employee is considered to have been done by the old employer, and the new and old employer are not jointly and severally liable for employee’s claims against the old employer that arose before the transfer. Also, an employer facing winding up or sequestration must inform its employees or their union of that fact,