AST Holdings (Pty) Ltd v Roos (2007) 28 ILJ 1988 (LAC)
Under s 197(2)(a) the relevant parties may alter the terms of the transferred contract, but they cannot escape the fact of its existence. Because an employee's continuity of employment is not a right or obligation, or a term of the employment contract, express provision was made in s 197(4) that the transfer of the employment contract would not interrupt that continuity. There is no provision in it, similar to s 197(2), which allows the parties to alter an employee's continuity of employment by agreement.
The employee referred his dismissal by the employer to the Labour Court, challenging the fairness of the dismissal. It was common cause that the employee had been entitled to severance pay, but the parties were in dispute about the length of service for which severance pay was payable. The Labour Court found the dismissal to have been substantively fair but procedurally unfair, and ordered that the employer pay compensation. It also made a declaratory order regarding the amount of severance pay to which the employee was entitled. The appeal was noted solely against the order regarding severance pay. In the Labour Appeal Court it was held that the dispute regarding the employee's length of service arose from the transfer of his contract of employment. The court rejected an agreement relied upon by the employer, the effect of which was that the employee's continuity of service would be negatively affected. The appeal was accordingly dismissed.
Extract from the judgment:
 I agree that there is nothing in section 197 of the Act which would preclude the employers from offering an employee the choice of transferring to the new employer or staying with the old employer and that the giving of such a choice to an employee would not detract from the purpose of section 197. Indeed, the reference in section 197(1) to the employee's consent contemplates that the employee may be consulted regarding the transfer of his contract of employment from one employer to another although, as observed by Damant AJ in Fourie in paragraph [8.14], Iscor could have compelled the employees to transfer against their consent in cases falling within section 197(1)(a), that is to say in the case of a transfer of the business as a going concern.
 There is also nothing in section 197, which would preclude the new employer and the employee from agreeing to a variation or alteration of the employee's rights and obligations under his contract of employment with the old employer when the transfer takes place. The words "unless otherwise agreed" in section 197(2)(a) contemplate such an agreement. That does not mean, however, that the new employer and the employee may agree that, upon transfer of the contract of employment, the employee will forfeit his/her period of service with the old employer. That issue was dealt with in Foodgro. In that case Froneman DJP said, in paragraph :
"Under s 197(2)(a) the relevant parties may alter the terms of the transferred contract, but they cannot escape the fact of its existence. Because an employee's continuity of employment is not a right or obligation, or a term of the employment contract, express provision was made in s 197(4) that the transfer of the employment contract would not interrupt that continuity. There is no provision in it, similar to s 197(2), which allows the parties to alter an employee's continuity of employment by agreement."
 In the same case Conradie JA said, in paragraph :
"S 197(2)(a) permits the employee and the new employer to modify the terms of the existing employment contract. They may, as I read the section, do this by renegotiating its terms regulating their future relationship and also by adjusting rights and obligations, which had at the time of transfer already accrued. Although the old contract may suffer so many modifications that it survives only in skeletal form, its survival is not unimportant. It provides the continuity of employment of which sub-s (4) speaks. Some incidents of the old contract would be unalterable. One of them is the date of its commencement. That is a historical fact, which cannot be altered by agreement. Any benefits, which the law attaches to that commencement date, could similarly not be changed. One of the benefits which the law attaches to the commencement of an employment contract is, of course, severance benefits upon retrenchment (s 196 of the Act)." I see no reason to distinguish Foodgro or to disagree with the Court's finding therein that the date of commencement of the contract of employment may not, upon a transfer in terms of section 197 of the Act, be altered by agreement. Accordingly, if the appellant sought to obtain the respondent's agreement to the forfeiture by him of his period of service with Iscor within the context of the transfer of the respondent's contract of employment in terms of section 197 of the Act, an agreement resulting from that attempt would be unlawful and contrary to the express provisions of section 197(4) regarding continuity of employment.
 The probabilities are that the respondent was misled into signing his acceptance of the transfer and of the new conditions of employment. Even if he did agree to the transfer of his contract of employment on the basis that he was entering into a new contract, he did so acting under the mistaken belief, induced by the representation of Van Zyl in the memorandum of 10 October 1998, that his years of service had terminated as a result of the sale of ITI to the appellant. I accordingly agree with the submission by counsel for the respondent that, quite apart from the legal effect of section 197(4) of the Act, the respondent ought not to forfeit his years of service with Iscor on the basis that he agreed to do so, or that he waived his right to continuity of service in terms of section 197(4) of the Act.