When an outsourcing agreement terminates any employees
transferred in terms of the agreement are not automatically
transferred back to the old employer or to any new service
In South Africa Airways v Aviation Union of South
Africa, handed down on 11 January 2011, SAA outsourced its
infrastructure and support service department to an entity called
LGM. These workers previously employed by SAA in this department
were automatically transferred to LGM in terms of Section 197 of
the Labour Relations Act. In 2007 SAA gave LGM notice of
termination of the outsourcing agreement and indicated that it did
not intend employing those workers who had previously been
transferred to LGM. AUSA launched an urgent application to the
Labour Court for a finding that the workers either transferred
automatically back to SAA or to the new service provider engaged by
The Labour Court was required to consider the definition of
"a transfer" in Section 197(1)(b) of the LRA being
"the transfer of a business by one employer ('the old
employer") to another employer ("the new employer")
as a going concern". The Labour Court concluded that the word
"by" in the literal context denoted that the transfer
must be effected by the old employer (in that case SAA) and not the
new employer (being the outsourced entity). Since the transfer
would be by LGM, the Labour Court held that there was no automatic
transfer of the employees from the outsourced entity back to SAA or
to another service provider.
On appeal, the LAC found that a purposive approach, as opposed
to a literal approach, was preferable in order to protect workers
against job losses. On this basis the word "by" in
Section 197(1)(b) should be read as "from" one employer
to another, and therefore second generation transfers would be
covered by Section 197.
The Supreme Court of Appeal found that Section 39(2) of the
Constitution, which requires an interpretation of the law in
accordance with the spirit and purport of the Bill of Rights, only
applies where the meaning of the provision is not clear. The LAC
had erred in adopting a purposive approach to the interpretation of
Section 197 because this was at odds with the ordinary meaning of
the words chosen by the legislature. More specifically, by
interpreting the word "by" to mean "from", the
LAC had "impermissibly distorted the meaning of the
The LAC had also erred in accepting that the evidence
established that there was a transfer of a business activity as a
going concern. The SCA said:
"Where parties wish to enter into an outsourcing
agreement, and then for the business to revert to the outsourcer,
or to be transferred to another provider, there must be a clear
re-transfer, demonstrated through written contracts or conduct, of
all assets and obligations of the business, including the transfer
of workforce rights and obligations so that no difficulty arises in
invoking the protection afforded by s197 to affected employees who
have been involved in carrying out the services provided for in the
initial outsourcing agreement."
These remarks should be borne in mind when drafting an
outsourcing agreement one way or the other.
The decision of the SCA does not resolve the employers'
current dilemma concerning whether Section 197 of the LRA applies
to second generation outsourcing. A proposed amendment to Section
197 seeks to legislate for the LAC approach in the case of second
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Employees must understand the notice periods stipulated by law. When an employee gives notice of their resignation to an employer, they is advising the employer that they will cease to work for the employer from a certain date.
Nigeria is a federal constitutional republic located on the west coast of Africa. Modern Nigeria has its origins as a British colony through the 19th and 20th century until it achieved independence in 1960.
The jurisprudential basis is pithily expressed as staying in sync with the global position on employment relationship, easily summed up as "International Labour Standard" and "International Best Practice".
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