In a situation where a business is closing or has become insolvent. Section 197 of the Labour Relations Act kicks in. This section specifically grants the affected employees rights in terms of the Labour Relations Act and outlines that they must be transferred on similar terms and conditions recognising the previous service.
In an interesting decision in the Labour Court, Lotz vs Anglo Office Supplies, the business was sold to a new company and all the employees, bar one were transferred. This individual then referred the matter to the Labour Court saying that there was an automatically unfair dismissal and he was entitled to 24 months’ damages. In this particular case, the employee sued the old employer and therein lay the error. The damages are against the purchasing business and not the old employer.
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