Chemco Holdings v  Tendere and 24 Others (SC 14/17)

“Quite clearly the respondents were transferred, with the undertaking, to another employer.  Their employment was not terminated.  In terms of the contract and also by operation of s 16 of the Act, the respondents were transferred to Rutimba on terms not less favourable than they enjoyed in the employ of the appellant.   At the very least, they were transferred on the same terms.”

Introduction

This case also involved a transfer of an undertaking. It outlines the effect of the failure to consult the employees before an undertaking is transferred to a new owner. It also discusses the recourse for employees who are aggrieved by a completed transfer of an undertaking.

The Facts

L Tendere and 24 Others were former employees of Chemco Holdings (Private) Limited. Chemco Holdings (Private) Limited sold its timber building supplies division, T S Timbers, to Rutimba Housing (Pvt) Ltd as a going concern.  The Respondents registered a complaint with the labour inspectorate of the Ministry of Public Service Labour and Social Welfare,

alleging a case of ‘alleged unlawful transfer of undertaking’. This happened 10 months after the transfer. The arbitrator and the Labour Court concluded that the transfer had not been done correctly by virtue of the employer having failed to consult the employees concerned.

The Law

In dealing with this dispute the Supreme Court noted that Section 16 of the Labour Act only requires the employer to consult the employees. There is no mandate to accept what they propose. It added:

“The provision requires the employer intending to transfer ownership to afford, to members of the works council representing the workers committee, an opportunity to make representations and advance alternative proposals. The employer is placed under no obligation to accept the proposals. He simply has to give reasons for disagreeing with them. No power of veto is given by the statutory provision to the works council or to the employees”.

It was therefore wrong for the arbitrator to find that the failure to consult the employees resulted in the transfer becoming a nullity.

On assessing the award of terminal benefits to the respondents the court also realised that the Arbitrator had erred. Since the employees had been transferred together with the business, it was not competent for the former employer to be compelled to pay terminal benefits. The court realised that if the employees had any grievances, such were supposed to be addressed to the new employer, Rutimba. It buttressed the effects of the transfer of the undertaking in the following terms:

“Once the respondents moved from one employer to the other the latter, in terms of both the contract and s 16 of the Act, assumed all responsibility for the respondents. Rutimba, being the new employer, was obligated by s 16 to ensure that the conditions of service enjoyed by the respondents were no less favourable than those they enjoyed with their former employer, the appellant. The respondents’ cause of action, if any, lay against Rutimba, not against the appellant.”

What was clear in the eyes of the court was that the grievance had arisen after the transfer had taken place. Whilst section 16 allows the affected employees to proceed against the former employer this option is not available when the transfer is completed.

Conclusion

The court upheld the appeal and dismissed the award by the arbitrator.

Own Comment

This case is commendable. A works council is not clothed with the power to veto a sale of a business. The employer retains the right to consult the employees whereupon consider the options put on the table. Consideration, in this case, does not mean that the employer may end up stopping a transfer based on the options presented by the works council.

Once a transfer is completed there is no reason for holding a former employer accountable for the actions of the new employer. What is also apparent was the fact that the award of terminal benefits against the former employer was misplaced because the employees had already been transferred.


[1]           Chemco Holdings (Private) Limited v L Tendere and 24 Others SC 14 – 17.

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