Checklist of dos and don’ts for the transfer of employment contracts from one employer to another in South Africa, based on Section 197 of the Labour Relations Act (LRA) and guidance from the CCMA

DOs

Legal & procedural compliance

• Confirm the transfer qualifies as a “going concern” under Section 197 of the LRA.
• Ensure automatic transfer of employment contracts: Employees’ contracts transfer to the new employer without needing their consent.
• Maintain continuity of employment: Employees retain their length of service and accrued benefits.
• Draft a written agreement between the old and new employer detailing:
  • Accrued leave
  • Severance pay (if applicable)
  • Unpaid entitlements
  • Responsibility for payments

Employee communication

• Inform employees of the transfer and its implications.
• Disclose all relevant information about the transfer to employees.
• Consult with employees if any changes to terms and conditions are proposed.

Fair employment practices

• Ensure terms and conditions are not less favourable overall.
• Respect existing collective agreements and arbitration awards.
• Retain all rights and obligations from the old employer, including disciplinary records and pending disputes.

DON’Ts

Legal missteps

• Don’t assume a share sale equals a business transfer: A change in ownership of shares does not trigger Section 197.
• Don’t change employment terms unilaterally: Any changes must be agreed upon with employees.
• Don’t dismiss employees to avoid transfer obligations: This could be deemed unfair dismissal.

Communication failures

• Don’t keep employees in the dark: Lack of transparency can lead to disputes.
• Don’t misrepresent the nature of the transfer: Be clear about what is changing and what is not.

Operational oversights

• Don’t neglect to document the transfer agreement: This is crucial for clarity and legal compliance.
• Don’t ignore accrued liabilities: These must be accounted for and transferred appropriately.

For advice or more information, contact Riona Kalua, head of our Labour and Employment team.