Avoid Amalgamation Ambiguity

Outsourcing does constitute the takeover of a business.

- Ivan Israelstam

Where an undertaking (or part thereof) of any kind is transferred to another undertaking as a going concern, Section 197 of the Labour Relations Act (LRA) comes into effect. This forces the new entity to take over all the obligations of the old undertaking. However, not all transfers qualify under this legislation because not all are transfers ‘as going concerns’.

Unfortunately, the LRA does not define what a transfer ‘as a going concern’ is. This causes confusion and sparks disputes between employers and employees and trade unions. Takeovers often cause loss of jobs, and employees are often desperate to stay with the new enterprise. However, the new entity often already has its own staff and wants to avoid the expense of taking on additional employees.

Contradictory suggestions