Authors: Lavery Modise – Consultant, Nombulelo Myeni – Associate & Clinton Mphahlele – Candidate Attorney
The implications of section 197 of the Labour Relations Act on the transfer of status of football clubs.
Introduction
In recent years the sale and/or transfer of the status of football clubs affiliated to the Premier Soccer League (PSL) to other football clubs has become a common feature of South African professional football.
Distant to the minds of many professional footballers and followers is the notion that these transactions fall squarely within the ambit of section 197 of the Labour Relations Act 66 of 1995 (LRA). This notion found application in the National Soccer League Dispute Resolution Chamber in Dhlamini and Dynamos and was reaffirmed in the arbitration between Sofiadelis & Another and AmaZulu Football Club.
Section 197 of the LRA is triggered where there is a transfer of a business as a going concern, i.e. where an operational business that is transferred remains the same but in different hands. In this article we discuss and consider the implications of section 197 regarding the transfer of football clubs.
Implications of the transfer of a business in terms of section 197 of the LRA
Under the common law, the transfer of a business resulted in the termination of the employment contracts of employees of the transferred business. Section 197 was enacted to improve the common law position by regulating the effects of a transfer of a business on the employment contracts of affected employees and, in particular, to provide for the automatic transfer of employment contracts from the transferring employer (old employer) to the acquiring employer (new employer).
The most recently publicised transaction conducted under the auspices of the PSL was the sale of Bidvest Wits FC to Tshakhuma Tsha Madzivhandila FC (TTM). Under common law this transaction would have resulted in the unexpected and sudden termination of the employment contracts of Bidvest Wits employees, i.e. the players and the technical and administrative staff. However, this transaction was regulated by section 197 which required TTM to effectively step into the shoes of Bidvest Wits as the new employer.
An entity or a professional football club contemplating to transfer and/or sell its status as a going concern may, however, avoid the consequences of section 197(2), by concluding an agreement with the employee(s) or their trade union, or a workplace forum or an intermediary (in the case of football clubs) in compliance with the provisions of section 197(6) of the LRA. In the absence of such an agreement, employees will be automatically transferred to the new owner because the obligation to take on the employees of the old employer is not a voluntary one.
Section 197(6) read with sub-section (2) and (7) of the LRA give the new and old employer scope to enter into a termination agreement with the existing employees. This process must follow the form contemplated under section 189 of the LRA, including that the affected employee(s) must be notified in writing of the process to be followed and must be invited to consult with the new and/or old employer.
Relocation of Football clubs
In most cases when the status of a football club is transferred, the football club is invariably renamed and relocated to a different city or province from where it was previously located. It is an accepted principle of employment law that an employer cannot unilaterally vary the terms of employment contracts unless the employer has reserved such right in the contract. The place of employment is often a fundamental term of the employment contract.
Section 197 offers an exception to this principle where there is a transfer of a business as a going concern. Section 197(3)(a) allows the new employer to employ the transferred employees on different terms and conditions of employment from those that were offered by the old employer, on condition that the “new” terms and conditions of employment are not on the whole less favourable than what was offered by the old employer.
To determine the extent to which the new employer may amend the terms and conditions of employment of transferred employees, John Grogan says that “the changes contemplated by section 197(3)(a) must fall short of variations of fundamental terms of the employee’s contract” (author’s emphasis).
In terms of section 29(1)(c) of the Basic Condition of Employment Act, the place of employment is often a fundamental term of the employment contract and is one of the particulars that an employer is required to provide to an employee in writing at the commencement of employment. Accordingly, in circumstances where the old employer did not contractually reserve the right to vary terms such as the place of employment, the new employer (football club) should be alive to the limitations imposed by section 197 on unilaterally varying fundamental terms of the employees’ contracts.
Conclusion
Section 187(1)(g) of the LRA provides that dismissals for reasons related to a transfer of a business are automatically unfair and, in the circumstances, it follows that those professional footballers and other employees employed by the football club transferred to another owner will have legal recourse should they be dismissed for reasons related to the transfer.
Section 186(1)(f) of the LRA provides further protection to employees by making it possible for employees to terminate their employment contracts in circumstances where the new employer, after a transfer has taken place, subjects an employee to conditions that are substantially less favourable than those provided by the old employer. Such termination will constitute an unfair dismissal.
Football clubs who are affiliated to the PSL may also endeavour to reach an agreement with their employees and/or their duly appointed representatives in terms of section 197(6) to avoid contraventions of the LRA and to ensure that the terms and conditions of the employees’ employment either remain the same or are not less favourable than before.
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