DOES IMMEDIATE OUTSOURCING OF CORE FUNCTION FALL UNDER SECTION 197 OF LRA?
Company A is registered as a Pty Ltd entity and sets up a head office in Pretoria to provide the administration for a small power stations to be built in Limpopo. Co.A builds the power station which becomes one of its major assets; and, on completion of said construction, immediately contracts company B to manage the operations and maintenance of the power station. Company A does not transfer ownership of any assets to company B. From day 1 co. B manages the power station by recruiting staff from scratch, training them and managing their operation of the entire facility. Co.A continues to provide the administration functions from its Pretoria head office.
Two years later Company A terminates its contract with co. B and itself takes over the management of the power facility. Is co. A required to take over the employees of co. B in terms of Section 197 of the LRA?
In essence, the entire business of Company B is taken over by Company A. The reality is that although this is not a traditional 197, I believe that the Courts would respect the spirit of the law in that the entire function and the management of the operation has moved across to Company A. Company A will be needing to start their operation on exactly the same basis as Company B. My understanding of the spirit of the law is that Company A would have to take over the employees of Company B.