The effects of transfer of undertakings on employee rights in labour law and insolvency law : a comparative analysis

Abstract

Common law, basically afforded employees the right to choose their employers. This freedom to contract was normally visible in instances of transfers of undertakings and it, therefore, meant that an employer could not transfer an employee‘s employment contract without the latter‘s consent. When an undertaking went insolvent on the other hand, employment contracts also terminated and the notion of ―advantage to creditors‖ meant that employees were left with little to nothing to show for their years of employment. Consequently, employees found themselves out of jobs and struggling to make ends meet. However, the legislator implemented section 197 of the Labour Relations Act 66 of 1995which was ultimately amended in 2002 to regulate the transfer of a business, trade or undertaking, where such are transferred as a going concern. This therefore meant that employment contracts are transferred automatically upon such transfers. The enactment of section 197A together with the amendment of section 38 of the Insolvency Act meant that the notion of advantage to creditors was dealt away with; hence protection was afforded to employees. The aim of this piece is to examine the effects of transfer of undertakings on employee rights in both labour law and insolvency law. In this field of transfers, South Africa has followed England for some time. This has been evident before the enactment of section 197 of the Labour Relations Act 66 of 1995. In Roshall v Design Three1989 10 ILJ 1127 the court acknowledged the common law position stated in Nokes v Doncaster Amalgamated Collieries Ltd1940 AC 1014 (HL). The court in this case stated that one‘s right to choose an employer is ―the main difference between a servant and a serf‖. This piece will, therefore, compare the position in South Africa with one of England. A further comparison will be made with the European Union law, because problems experienced in South Africa and England were encountered by the European Union (hereafter-EU) as well. The aim of this piece is to draw similarities and differences between South Africa, England and European Union as a whole and establish whether employees do get protection from Labour and Insolvency legislation upon transfer of undertakings that are both insolvent and solvent.