WHEN A BUSINESS IS SOLD AND THE BUYING COMPANY UNILATERALLY
WANTS THE STAFF TO SIGN UNDERTAKINGS
1. THE BASIC ISSUE
1.1 A multinational company bought the business of Darrolls Attorneys' clients. The multinational then now required the staff of the purchased business to sign certain undertakings.
1.2 The questions that arise are the following:
1.2.1 is the staff obliged to sign such undertakings ? If so,
1.2.2 are the undertakings reasonable ?
2. UNILATERAL CHANGES TO TERMS OF EMPLOYMENT
2.1 The situation with regard to unilateral changes of terms of employment under the current Labour Relations Act 66 of 1995 ("LRA") is uncertain. Unilateral changes are only mentioned once in the Act, and then only in the context of the right to strike. It seems, therefore, that unlike the common law, the LRA itself places no limitation on the employer's right to vary their employees' terms and conditions of employment.
2.2 The precise nature of a unilateral change to terms and conditions of service has also received relatively little judicial attention. A court has held that employees 'do not have a vested right to preserve their working conditions completely unchanged as from the moment they first begin to work'. It is only if the changes are 'so dramatic as to amount to a requirement that the employees undertake to do an entirely different job' that they could refuse an instruction to abide by the new working rules or claim that the employer has breached their contracts by introducing the new working practice.
2.3 The law therefore clearly permits change in the workplace. It assumes that companies have to adapt to changing circumstances and that employees must be prepared to accept change within certain parameters, ie:
2.3.1 consultation. The relevant provisions of the LRA should be adhered to in this regard, ie management needs to inform staff about its intentions, provide reasons and other relevant information justifying the change, invite representations from staff and listen to and respond to staff members input;
2.3.2 agreed terms of employment, unlike non-drastic working practice changes, cannot be altered unilaterally by the employer without sound commercial reasons. This means that management has to negotiate and agree with employees before previously agreed terms can be changed.
2.4 Failing agreement, management has some powerful means available to try and enforce consent, including locking out employees who resist or retrenching those who refuse to agree. The latter option requires great caution on the part of the employer because of certain relevant legal constraints.
2.5 If the change does not involve agreed terms of employment but instead practices or rules that management had previously introduced unilaterally (eg no-smoking rules or performance standards) management does not require employees' consent to implement and enforce the change, but is required to consult with affected staff first.
2.6 Section 64(4) of the LRA suggests that the only remedy available to employees when there is a dispute over a unilateral variation of terms, is to strike. However a unilateral variation of employment terms is nevertheless a breach of contract under the common law. Employees therefore retain their right to accept the employer's 'repudiation' of their contract and sue for damages or alternatively to hold the employer to the original contract.
2.7 The case law provides no clear answer to the question as to whether an employer may dismiss employees who refuse to comply with changes to their employment contract. This is partly because the answer depends on the facts of each particular case. It is therefore difficult for the legal adviser to indicate any one course of action with confidence. That being so it might well be that employees should seek to agree to as much as they consider to be reasonable and provided that the employer consults and motivates the changes first.
2.8 It needs to be said that if employees play too hardball with an employer who has a genuine 'commercial rationale' for the variations, they run the risk (depending on the court's view of the facts) of retrenchment, alternatively being dismissed on the basis of misconduct (insubordination). Care should therefore be taken that, while remaining firm on their rights, employees do not expose themselves to the point where the employer considers that it would be justified in trying to dismiss them.
3. LABOUR LAW PROVISIONS REGARDING TRANSFERS OF BUSINESSES
3.1 Section 197(2) of the LRA provides that, if a transfer of a business takes place, the new employer is automatically substituted in the place of the old in respect of all employment contracts and the rights between the old employer and an employee at the time of the transfer continue as if they had been rights between the new employer and that employee.
3.2 Section 197(3) of the LRA goes on to say that the new employer complies with subsection (2) if it employs transferred employees on terms and conditions that are on the whole not less favourable to the employees than those on which they were employed by the old employer.
4. ARE THE UNDERTAKINGS IN THIS CASE CHANGES IN TERMS OR MERELY BUSINESS PRACTICES AND ARE THEY REASONABLE ?
On the assumption that, because of the grey area in the law as to the rights of employees in the face of an employer's unilateral change in their terms and conditions of service, the employees do decide to sign certain undertakings where they had not been required to do so before, the question then arises as to whether they should sign all or only certain of the undertakings. In order to decide this one will have to look at each undertaking in turn.
5. CONCLUSION – SUGGESTED PROCEDURE
5.1 In the first place, the employees should meet among themselves in order to establish a common policy towards the documents.
5.2 Then, employees should insist that the new Employer call a meeting to consult with them and motivate the reasons why they should sign these two documents.
5.3 Thereafter new documentation should be drawn up along the lines agreed, so that it is in a form that the employees can sign.
5.4 By following the above procedure, the employees will be able to protect themselves as far as changes to their terms of employment are concerned (which they can refuse to accept, unless there is a 'commercial rationale') and changes to working practices (which they will have to accept unless they are unreasonable).
5.5 In this way employees will obtain the best possible deal while exposing their jobs to minimum risk.
Newlands, Wednesday, 20 June 2007