In an evolving economy, it is common for businesses to change hands—through mergers, acquisitions, sales, or restructurings. Section 16 of Zimbabwe’s Labour Act [Chapter 28:01] plays a critical role in safeguarding the rights of employees when such transfers occur. This provision ensures that workers are not unfairly disadvantaged or dismissed simply because their employer has changed.
1. What Does “Transfer of Undertaking” Mean?
A transfer of undertaking refers to the sale, lease, cession, or any other change in ownership or control of a business, entity, or organisation in which people are employed.
✅ Example:
If Company A sells its retail chain to Company B, all employees working in that chain are considered to have been transferred along with the business—this is a transfer of undertaking.
2. Employment Is Deemed to Continue Uninterrupted
Section 16(1) provides that when an undertaking is transferred:
- The employment contracts do not terminate.
- Employees are deemed to have transferred to the new employer automatically.
- All existing terms and conditions of employment (wages, leave entitlements, job position, benefits) must be preserved.
- The continuity of employment is protected as though no transfer occurred.
✅ Example:
Mutsa has worked for 8 years at a bakery owned by Mr. Chari. When Mr. Chari sells the bakery to Ms. Zhou, Mutsa’s employment does not restart. Her 8 years of service continue to count under the new owner.
3. More or Less Favourable Terms—What Is Allowed?
Section 16(2) allows for flexibility in post-transfer arrangements, but with safeguards.
- (a) Employees can receive better terms after the transfer (e.g., higher salary or more leave days).
- (b) Employees may agree to less favourable terms, but only if the new contract is otherwise lawful and:
- No social security, pension, gratuity, or retirement benefit can be reduced without the Minister’s written consent.
✅ Example (more favourable terms):
After the transfer, the new owner offers all employees a 10% salary increase. This is allowed under Section 16(2)(a).
❌ Example (less favourable terms requiring Minister’s consent):
If the new owner proposes reducing retirement benefits in the pension scheme, this cannot be done unless the Minister of Labour consents in writing under Section 16(2)(b).
4. Existing Rights Remain Enforceable
Even after a transfer, employees retain the right to:
- Pursue claims against the former employer, the new employer, or both;
- Claim unpaid wages, leave pay, bonuses, or any contractual breach that occurred before the transfer.
✅ Example:
Before the sale of the company, employees were owed overtime payments by the previous employer. They can still claim this money from either the old or new employer, or both.
5. Protection in Cases of Insolvency
Section 16(2)(d) clarifies that nothing in the transfer of undertaking may derogate from employee protections under insolvency laws. This means employees retain all rights to terminal benefits, severance packages, or preferential claims in liquidation scenarios, even during or after a transfer.
6. Evasion Is Prohibited: It Is an Unfair Labour Practice
Section 16(3) makes it an unfair labour practice to:
- Violate the rights outlined in Section 16,
- Attempt to evade responsibilities during or after a transfer.
This gives employees legal standing to approach the Labour Court or NEC if their rights are undermined.
❌ Example of a Violation:
If the new owner tries to make employees sign new contracts that:
- Strip away years of service,
- Reduce benefits without consent,
- Or dismiss workers to avoid liabilities,
This constitutes an unfair labour practice under Section 16(3) and can be challenged legally.
Conclusion
Section 16 of the Labour Act ensures that employees are not treated as disposable assets in corporate transactions. Whether a company is sold, merged, or transferred in any form, the law preserves employee rights, continuity of service, and accrued benefits. It also makes it unlawful to circumvent these protections under the guise of restructuring.
Business owners, legal representatives, and employees alike must understand this provision to avoid costly labour disputes and ensure lawful business transitions.
nice explanation