The Labour Relations Amendment Act (LRAA) 127 of 1998 introduced the concept of Section 197 transfer. This was done to, among others, protect the employment of people in companies which are, for example, being sold or transferred. This article will give you a bit more insight into what your obligations are in terms of this section of the LRAA.
Must-Know Section 197 Transfer Definitions
Before you start worrying about whether or not you, as an employer, will be liable under section 197 of the LRAA, there are two fundamental definitions that you need to know. Most importantly you need to understand them. These are business and transfer:
- A business doesn’t have to be whole when it is transferred. A portion of the business, trade, undertaking or service can be transferred.
- For a business to be successfully transferred, it must be still functioning. In other words, it must be a going concern.
Monitor Employees’ Terms and Conditions
Employees who are being transferred must not be given new terms and conditions of employment that are on the whole less favourable than the previous ones. This means that the terms and conditions you give the employees coming from the transferred entity must be the same as what they had. If not, these T&Cs must be substantially similar to these.
If you are the new employer in the case of a section 197 transfer you will take over the employment relationship from the previous employer lock, stock and barrel. For example, if an employee who is being transferred had lodged a grievance against the former employer, when you take over it will be as if they had lodged the grievance against you.
A lot can be disrupted during a section 197 transfer. However it doesn’t need to be! We, at Global Business Solutions, have developed a specialised system to make sure that these types of transactions take place smoothly. Contact our section 197 specialist, Menet Hamel, for more information on how we can help you.