South Africa is a country filled with vast natural resources, which correlates into a need for labour and as such many employment opportunities. However, with employment opportunities comes many complexities such as the changing forms of work. Due to a vast array of reasons, businesses regularly go through processes such as liquidation, business rescue or the sale thereof. This article aims to outline the options available to employees when the business they work for is sold to another party/employer.
Where a business is sold as a going concern (a business that is assumed will meet its financial obligations when they fall due), said business will be transferred from one employer to another. This would encompass a complete transfer of all the aspects of the business including the transfer of the employees to the new owner/ employer. As a result of this, the employer takes over all the employment contracts of the employees and steps into the same employment conditions as held with the previous employer. However, the terms and conditions must be transferred as a whole and not merely a part thereof. An advantage of this is that the employees are able to transfer their years of service with the previous employer to the new employer. This allows for the benefits due to employees, as a result of their years of service to the previous employer, to remain in place instead of falling away.
Employees, subject to the sale of the business they are employed by, are not required to accept the new employer. They have the option to continue their employment relationship with the business or elect to terminate their employment relationship. Additionally, the employer may decide to restructure the business, which may result in the retrenchment of certain members of staff. However, the employer may not buy the business with the intention of retrenching staff members. Should this occur the advantages of section 197 of the Labour Relations Act will not be available to either party.
Another aspect which should be noted is that the employer has to take over all ongoing or existing disputes between the employees and the previous employer. This would include ongoing negotiations with parties such as trade unions. This is another advantageous aspect as matters would proceed more efficiently instead of starting afresh.
Should you be an employer considering the sale of your business or an employee who is subject to the sale of a business, please do not hesitate to contact us. We are capable of assisting you no matter what side of the sale you are on.