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Employee Rights When an Undertaking is Transferred in South Africa

1. Employees’ Rights

If a transfer of a business as a going concern takes place, unless otherwise agreed, the new employer is automatically substituted in place of the old employer in respect of all employment contracts in existence immediately before the date of transfer and all rights and obligations between the old employer and an employee at the time of the transfer continue to be in force, as if they had been rights and obligations between the new employer and the employee.

The buyer of the transferred business (the new employer) must provide employees with terms and conditions that are generally not less favourable than those that applied before the transfer. However, the buyer can transfer employees to different retirement plans or similar schemes. Employees cannot be dismissed due to the transfer of a business or any reason related to the transfer. A dismissal that breaches this provision is automatically unfair.

2. Requirements for Predecessor and Successor Parties

Unless otherwise agreed, the acquiring employer is automatically substituted in the place of the selling employer with respect to all contracts of employment in existence immediately before the date of transfer. All rights and obligations between the selling employer and an employee at the time of the transfer continue in force as if they had been rights and obligations between the acquiring employer and the employee. The acquiring employer thus automatically becomes the employer of all the employees employed in the transferring business.

The law requires that employees transfer either on the same terms and conditions of employment or on terms and conditions of employment that are (different but) on the whole not less favourable. This does not prevent the acquiring employer from transferring employees to a different pension, provident or similar fund, provided the provisions of section 14(1)(c) of the Pension Funds Act, 25 of 1956 are complied with. The Pension Funds Registrar must be satisfied that any scheme to amalgamate or transfer funds is reasonable and equitable, and accords full recognition to the rights and reasonable benefit expectations of the persons concerned in terms of the pension fund rules, and to the additional benefits which have become established practice.

Where the employees’ conditions of employment are determined by a collective agreement, the acquiring employer must comply with the conditions of employment in the collective agreement, that is, the acquiring employer does not have the flexibility to offer different but ‘on the whole lot less favourable terms and conditions.

For more information, please contact L&E Global.
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