Executive Case Summary
When a commercial enterprise, dealership, or division changes hands, when does Section 197 of the Labour Relations Act automatically transfer employees to the new business owner?
Navigating Commercial Restructuring & Section 197 of the LRA
Commercial sales of businesses, franchises, and motor dealerships frequently trigger complex disputes over whether the transaction constitutes a “transfer of a business as a going concern” under section 197 of the Labour Relations Act 66 of 1995 (LRA).
In Motor Industry Staff Association & Another v Eastvaal Motors (Pty) Ltd (2024 ILJ 2349 (LC)), Dr. Gerrie Ebersöhn acted for the applicants before the Labour Court in examining the substance-over-form test applied to commercial takeovers.
Substance Over Legal Labels
Our courts consistently emphasize that parties cannot contract out of section 197 merely by labelling a transaction an “asset sale” or “new franchise appointment.” The Labour Court evaluates the objective commercial reality:
Did the core operational assets, premises, customer base, or service infrastructure pass from the old employer to the new employer?
Did the same or substantially similar economic activity resume after the transaction?
Were dismissals effected because of the transfer or a reason related to the transfer (rendering them automatically unfair under section 187(1)(g))?
Strategic Litigation & Transactional Advisory
Whether you are a corporate entity structuring an acquisition or an employee facing retrenchment during a business takeover, early intervention by a specialist litigation attorney is decisive in protecting your statutory and commercial rights.
Section 197 & Commercial Restructuring
Structuring a business sale or facing a Section 197 dispute?
Consult directly with Dr. Gerrie Ebersöhn’s Labour & Commercial Litigation team.