Imvula Quality Protection (Pty) Ltd and Others v University of South Africa [2018] 12 BLLR 1151 (LAC); (2019) 40 ILJ 104 (LAC)

Principle:

An arrangement in which the fundamentals of the business - eg equipment, infrastructure, employees etc - are not transferred to a new employer, cannot be said to fall within the meaning of a transfer of a business as a going concern, as contemplated by s197 of the LRA.

Facts:

A distinctive feature of this case was that it involved a university that embarked on a programme of 'insourcing', employing personnel rendering security services at the university's premises and who had previously been employed by two security companies, iMvula and Red Alert. This case is somewhat different from the standard s197 dispute, in which a company is alleged to have purchased or otherwise acquired a business as a going concern from another company.

The dispute focussed on whether UNISA's termination of the service contracts with both security companies, taken together with its decision to employ the majority of those who had previously been employed by those companies, constituted 'a transfer of a business as a going concern' for the purposes of s197 of the LRA.

UNISA, under political pressure to insource, had entered into a shared service agreement in terms of which the obligations of a new independent service provider were to provide equipment and infrastructure, torches, radios, guard tracking and monitoring equipment registers, vehicles and staff uniforms. By contrast, UNISA would employ the human resources required for the security service. The obligation of the new service provider would include the provision to UNISA of managers and supervisors employed by the service provider to ensure the overall management of the security service.

In the Labour Court it was held that s197 of LRA was not applicable. After analysing the relevant agreements, the LC concluded that the true position was that the contract for the provision of services between UNISA and iMvula and Red Alert came to an end, and that no part of the infrastructure for the conducting of the business of providing a security service was to be transferred to UNISA. In those circumstances, UNISA's decision to insource in terms of the shared services model and the offers of employment consequently made to some of iMvula and Red Alert's staff, did not trigger s197.

The Labour Appeal Court dismissed the appeal against the LC judgment, and agreed that the insourcing was not covered by s197. The LAC held that UNISA had taken in a range of people who had previously been employed by iMvula and Red Alert as security guards, and entered into employment contracts with them. At the same time, it did not seek to run a security business, whether in whole or in part - this was the significance of the shared service agreement. The business of providing security at the campuses of UNISA constituted more than simply the existence of a group of guards patrolling the campus without management, equipment or strategy with regard to their responsible deployment. None of these tasks was taken over by UNISA. The LAC concluded that this arrangement could not be said to fall within the meaning of a transfer of a business as a going concern, as contemplated by s197.

This case reminds us that the facts of each case will determine whether s197 applies: an arrangement in which most of the fundamentals of the business - eg assets, equipment, employees etc - are not transferred to a new employer will not be said to fall within the meaning of a transfer of a business as a going concern, as contemplated by s197.

Extract from the judgment:

Davis JA:

[30]   It again needs to be emphasised that, from the jurisprudence which has engaged with the wording of s197, the enquiry is a fact specific one. Two central issues must be borne in mind in the application of s197 to the facts placed before this Court. In the first place, unlike Securitas v ICTS Portugal, supra, this case does not deal with the circumstances where contracting entity A has terminated a contract concluded with an undertaking for the provision of security services at its facilities and then concluded a new contract for the supply of those services with independent entity, B which refuses to take on the employees of entity A. In this case, owing to its particular facts, the respondent was compelled through the intense political protest which it encountered, to directly employ a group of security guards who had previously been employed by first and third appellants. A further issue, of which consideration must be taken, is that even if the court is prepared to interpret the shared services agreement in the manner urged upon us by appellants, the court would still be required to answer the question as to whether what has taken place was, in the express words of s197 "a transfer of a business by one employer to another employer as a going concern". In other words, could it be said that what occurred in respect of respondent's conduct was that it was engaged in the transfer of a business to it by appellants (or at least part of a business) as a going concern?

[31]   In order to determine whether a business is transferred as a going concern, as befits a fact-intensive enquiry, the facts of this case become crucial. The business of both first and third appellants did not simply comprise of a group of security guards who were assigned to safeguard the premises of respondent.

[32]   The model in which appellants were critical players and, in terms of the agreement entered into, between appellants and respondent, included the following:

'The Services will include, but not be limited to the following:
  1. The Service Provider shall provide the University with high level access control, security and patrol services in order to protect and secure the University's staff, students, visitors, property, assets and reputation.
  2. The Service Provider shall provide a sufficient number of on-site properly pre-trained, efficient and competent employees and supervisors/managers (hereinafter collectively referred to as its "personnel") in order to provide the required Services. The number and qualifications of personnel as well as the time and premises where the Services must be rendered are set out in Annexure "B" attached hereto.'

[33]   Significantly, when Mr Kruger in his founding affidavit on behalf of first appellant described what respondent required when it sought to terminate its agreements with first and third appellants, he stated as follows:

'Each security service provider was asked to provide a breakdown of the pricing associated with the remainder of the Agreement. The breakdown of the pricing included, amongst other things:
  1. Equipment and operational costs, namely machine radios, guard monitoring systems and an amount to take into account the depreciation of equipment;
  2. The salaries of the security officers, including travel allowances;
  3. The costs associated with providing the security officers with vehicles including petrol and fuel;
  4. Administration costs, including, amongst other things, bank charges, insurance and licenses, stationary, rent, telephone; and
  5. The costs associated with managing the live patrols and managing nightshift operation (control room costs).'

[34]   In his founding affidavit, Mr Kruger described the shared service model as follows: 'The insourced security officers will be making use of the same assets which are presently used by iMvula to provide the same services. In this regard, iMvula has placed a sophisticated guard patrol system called "Bloodhound" at UNISA's sites which is monitored by iMvula's National Operations Control Room. To ensure an effective transition of the security services, and in order to maintain the same quality of security services, UNISA will need to make use of "Bloodhound". Hence, the infrastructure that iMvula uses to discharge it obligations will pass to UNISA and/or the shared services service provider.'

[35]   It does not, on these papers, appear to be the case that the costs of infrastructure and administration admit of a description of as de minimis. Mr Kruger attached a copy of an e-mail which had been received by respondent, setting out an estimation of the pricing for the remainder of the agreement which included pricing for assets and administration costs. The value as stated was R 11 040 000.00 per annum. See the e-mail of Mr S Aubrie Deputy Director: Physical Security and Investigation Service of respondent of 18 February 2016.

[36]   Unfortunately, the exact, breakdown of the costs of the entire business of providing security to respondent's campuses was never made clear in the papers or in argument. What emerges however from this e-mail is that the services which have been provided by first appellant and third appellant constituted more than the provision of security guards. What was taken over by respondent was a significant portion of those guards previously employed by the appellants. What respondent then sought to do, pursuant to its shared services model, was described in the answering affidavit deposed to by Dr Marchia Socikwa:

'I reiterate, and wish to state this as clearly as possible, that UNISA does not intend at any stage to take on the service itself, or to provide any part of the service itself. It does intend to offer employment to a suitable number of security staff that will be needed to provide the service, but as is apparent from the terms of which it proposes to appoint a new service provider, all of the necessary business infrastructure, including much of the work necessary to roster and secure the performance of by UNISA staff where necessary, will be provided by the newly appointed service provider. There will be no transfer of business infrastructure from iMvula to UNISA, from UNISA to a new service provider, or from iMvula to a new service provider.'

[37]   In short, what occurred was that following its response to "fees must fall" by way of the recommendations of the multi-stakeholder task team, respondent "took in" a range of people who had previously been employed by the appellants as security guards and entered into employment contracts with them. At the same time, it did not seek to run a security business, whether in whole or in part; hence the significance of the shared service agreement. The business of providing security at the campuses of respondent constituted more than simply the existence of a group of guards patrolling the campus without more; that is without management, equipment or strategy with regard to their responsible deployment. None of these tasks was taken over by respondent.

[38]   It follows that, if the words "transfer of a business as going concern" have to be given justifiable meaning, it cannot, in this case and on these facts, be concluded that the transfer of a significant portion (but not all) of the security guards without more was the transfer of a business as a going concern, so that once the "taking in" of the security guards at the workplace occurred, the business without any outside party operated seamlessly. Apart from equipment, if necessary the outside party which had entered into the shared service agreement would supply more guards. This arrangement cannot be said to fall within the meaning of a transfer of a business as a going concern, as contemplated by s197 of the LRA.

[39]   For these reasons, therefore, the appeal is dismissed with costs.