Transfers as a going concern

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Businesses - or part of a business - are taken over by new concerns, or required services are outsourced. Then the service provider may be replaced by a second service provider. When do these business transfers fall under section 197 of the Labour Relations Act? Ivan Israelstam explains why it is so important to understand what business transfers are defined as transfers as a going concern.  


This week Ivan Israelstam expreses the opinion that the "conflicting court decisions on going concerns mean that we don’t know if we are coming or going".  Read on to see why Ivan holds this opinion. Find our what is a transfer as a going concern, and why this definition is so important to contracting companies. 


What is a "transfer as a going concern" and what are the implications for employees who are part of the transfer? This week Ivan Israelstam explains how the courts have developed the answer to these very complex questions over a period of time. 


A second generation transfer arises when a company first outsources a part of the company to a service provider company, who takes over the employees related to that company department or service. The contract is for a fixed period and the orginal company then re-tenders to a different service provider company to take over the provision of the services. The question arises: does the second service provider company have to take over those employees who were part of the original transfer? The answer has not been clear, and the courts have differed on the correct interpretation of s197 of the Labour Relations Act. This week Ivan Israelstam explains these different interpretations.


Section 197 of the Labour Relations Act (LRA) requires the new employer, in a takeover as a going concern, to take over all the employees of the old employer. A takeover of an enterprise “as a going concern” essentially means that the new employer is carrying on the same business as the old employer after a takeover. This week Ivan Israelstam explains that it is possible to vary the impact of the transfer if all the affected parties - including the employees are consulted and an agreement is reached.

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