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What happens to collective agreements when a business transfers?

by , 18 October 2013
If a business (or a part of a business) is transferred as a going concern, then Section 197 of the Labour Relations Act applies to the transfer. This means, certain consequences will follow automatically. One of these consequences relates to collective agreements. Read on to discover what happens in these cases...

When a business is transferred as a going concern, collective agreements are affected. And it's crucial you handle this in a legal manner.

How to deal with collective agreements when a business transfers

According to the Labour Law for Managers Loose Leaf Service, when a business transfers, collective agreements transfer with the business.

This means as the new employer you're bound by any collective agreement that the old employer entered into with a registered trade union.

It's important to note that this rule applies also to arbitration awards. If an award was made against the old employer by the CCMA, a bargaining council or a private arbitrator, employees can enforce the award against you as the new employer.

Do you need to consult about a business transfer?

Transfers under Section 197 happen automatically by operation of the law.

They allow for employees to transfer with a business without the parties getting the employees' agreement to the deal or their contracts being transferred to the buyer.

This means you don't need to consult with employees about a business transfer.

While this may be the case, the Loose Leaf Service says it makes good business and industrial relations sense to communicate properly with your employees about an impending sale of the business.

If you overlook this, your employees will hear rumours and worry about what the sale will mean for them and their jobs.

Keeping employees in the dark isn't a good idea and can lead to unhappiness or even labour unrest.

So let your employees know what's happening and what it means for them.

Well there you have it. When a business transfers, collective agreements transfer with the business.

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