Hi guys and girls. I thought that I want to share this little bit of info with you of a actual matter that came before the CCMA yesterday.
The Seller decided to sell a portion of his business as a going concern to the Purchaser. The agreement was concluded and signed on 13 August 2009. The sales agreement did not make provision for the take-over of the existing service agreements.
A week prior to the conclusion of the sales agreement, the Seller and the Purchaser had a meeting with the staff. The Seller informed the staff that the business is about to be closed due to financial considerations. He also informed them that the Purchaser is interested in buying the business, but in the event of the Purchaser buying the business, he will not take over the staff. The Purchaser then said that he will give all the staff fixed terms contracts, valid for a month at a time for a 3 month period, until he has decided whether he is going to retain the services of all the staff or only some of them.
On the day of conclusion of the sales agreement, the Seller informed the staff that the business is sold, he calculated their severance packages according to the requirements of the law, and paid out the severance packages.
The Purchaser immediately entered into fixed term contracts with the staff. However, the following day the one manager's fixed term contract was terminated on notice, and she received her full pay.
A month later she referred a dispute to the CCMA, and yesterday, during arbitration proceedings, she was awarded compensation equal to 4 month's salary.
The fact is that both the Seller and the Purchaser failed to comply with the procedural requirements of the Labour Relations Act (LRA).
Firstly, the Seller should have followed the procedures set out in Section 189, giving of notices and follow due consultation procedures. Such consultation process take between 4 - 6 weeks.
The other problem was that the sales agreement, no matter how it was worded, constituted the transfer of a business as a going concern. Section 197 is clear, and state that the new employer shall take over the employees on the same terms and conditions.
The changing of a permanent contract into a fixed term contract is regarded as a material change to the terms and conditions of the contract.
The moral of the story is this: Please take care when you are considering selling your business, or are interested in buying a business. Follow the correct procedures, and any subsequent dismissals should then not be regarded as automatically unfair.
Manie Havenga
Havenga & Viljoen Attorneys
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