Insubordination and insolence

Transcription

1 Volume 24 No. 9 April 2015 Insubordination and insolence When can the difference be critical? Managing Editor: P.A.K. le Roux Hon. Consulting Editor: A.A. Landman Published by by P.A.K. Le Roux W hat constitutes insubordination and how does one distinguish it from insolence? Can an employer justify the dismissal of an employee in CCMA proceedings on the basis of a disciplinary charge put before a disciplinary tribunal but in respect of which the chairman of a disciplinary enquiry did not find the employee guilty? These, and other, questions were considered by the Labour Appeal Court (LAC) in Pallucci Home Depot (Pty) Ltd v Herskowitz & Others (Unreported CA 21/13 12/12/ 2014). The employee in this matter, Joanne Herskowitz (Herskowitz), was employed in a senior managerial position by a family owned business, Pallucci Home Depot (Pallucci). On 1 March 2011 the business was taken over by another company, Tafelberg Inside... Furniture Stores (Pty) Ltd (Tafelberg). Despite the takeover Herskowitz remained in the employment of Palucci in accordance with a fixed-term contract that took effect on 1 March During the following months Tafelberg s management received various complaints from members of staff to the effect that Herskowitz screamed and shouted at them. This issue was the subject of various interactions between management and Herskowitz but it seems to have been peripheral to the two issues that eventually gave rise to her dismissal. The first concerned the use of company cell phones at the Epping warehouse. The warehouse had no fixed line telephones and the company had provided three cell phones for work related purposes. During March 2011 Herskowitz was instructed that the Box Tokai 7966 Tel: ISSN X cll@workplace.co.za Calculating back pay: The costs of reinstatement: p86 Section 197 of the LRA: An update. p89 Page 81

2 cell phones were not to be used by warehouse staff and that they should be returned to her and be kept under her control in her office. This notwithstanding, one of the cell phones was removed from her office and used by warehouse staff. Herskowitz informed senior management of this fact and she was reminded of the instruction to withdraw the cell phones. During October 2011 Pallucci received an account for one of the cell phones amounting to R The human resources director instructed Herskowitz to analyse the account, to identify the employees responsible for making the phone calls and to recover the costs from them. A month later Pallucci received another account for R Herskowitz failed to identify the responsible employees and in November 2011 she was sent an in which she was informed that if she did not identify the culprits she would be held liable for the payment of the account. She then identified two employees who used the cell phone. She was asked to confirm that the two employees were indeed responsible for the phone calls made but she failed to do so. The result was that the amount was deducted from her salary. She raised the issue with the human resources director who told her that if she identified who was responsible for the telephone calls the deduction from her salary would be reversed. The second issue arose from a visit by Tafelberg s chief executive officer (CEO) to a warehouse which fell under the responsibility of the management team of which Herskowitz was a member. He discovered that the warehouse was in a disorganised state. A rescue plan was put in place and senior management visited the warehouse on several occasions. During one of these visits Herskowitz and two other members of the management team requested a meeting to discuss certain operational matters relating to the warehouse. These two issues came to a head on 21 December 2011 at a meeting called to discuss the problems at the warehouse. At this meeting Herskowitz raised the deduction from her salary with the CEO. He refused to deal with it and gave as his reason an alleged investigation into the issue being conducted by the HR Manager. This then resulted in an incident between Herskowitz and the CEO. On 23 December 2011 she was informed that she would face three charges. The first charge was ne of gross insubordination. This arose from the incident on 21 December 2011 and was based on an allegation that she had screamed and shouted at the CEO. The second was formulated as poor work performance/capacity to perform at the required standard of the new owners with reference to but not limited to your job description. The charge then listed some eight instances where it was alleged that Herskowitz had failed to comply with the required standards. The third charge was described as Refusal to carry out reasonable instructions given by a superior or authorised person in a senior capacity Five alleged instances of this misconduct were listed in the charge. The disciplinary enquiry took place on 29 December 2011 and in early January 2012, Herskowitz was found guilty of the first two charges. She then unsuccessfully challenged the fairness of her dismissal in the CCMA. The commissioner found her guilty of all three charges. Herskowitz then launched a review application Page 82

3 in the Labour Court. The Labour Court set aside the commissioner s award and made three findings in this regard The evidence did not establish that Herskowitz had been guilty of insubordination i.e. charge one. The Court appears to have found that Herskowitz had screamed and shouted at the CEO but that there was no evidence of her having failed to obey an order. This mean that she had been guilty of insolence rather than insubordination. The commissioner should not have found Herskowitz guilty of failing to carry out instructions, i.e. charge three, because the chairperson of the disciplinary enquiry had not found her guilty of this offence. Even if the evidence established that there had been an instance of poor work performance or incapacity as envisaged in charge two, dismissal was too harsh a sanction because a progressive approach should have been adopted. A final written warning should have been imposed. The Court went on to find that if Herskowitz had sought reinstatement as a remedy she would have been entitled to it. However, because she had only sought a compensation award she was granted an award equal to ten months salary. Pallucci was given leave to appeal to the LAC against this decision. Insubordination The LAC first considered the charge of insubordination and the Labour Court s finding that, because no order or instruction had been given to Herskowitz by the CEO during the course of the incident of 21 December 2011, and because she had therefore not disobeyed an order, she could not be guilty of insubordination. The LAC found that insubordination is not limited to the situation where an employee refuses to obey an instruction. Included within this concept was the situation where the employee poses a deliberate and serious challenge to, or defiance of, the employer s authority. This is evident from the following excerpt - [19] It is clear from this finding that the Labour Court failed to appreciate that the refusal to carry out an instruction is not the only basis upon which to found a charge of insubordination. The offence of insubordination in the workplace has, in this regard, been described by our courts as a wilful and serious refusal by an employee to obey a lawful and reasonable instruction or where the conduct of an employee poses a deliberate (wilful) and serious challenge to the employer s authority. Whereas in some cases defiance of an instruction may indicate a challenge to the authority of the employer, this is not so in every case. Insubordination may also be found to be present where disrespectful conduct poses a deliberate (wilful) and serious challenge to, or defiance of the employer's authority, even where there is no indication of the giving of an instruction or defiance of an instruction. It is, therefore, not essential for an instruction to be given or disobeyed to found a challenge to the employer's authority. [20] The refusal by an employee to carry out an employer's instruction is, therefore, not always required for a finding of insubordination. (Footnotes omitted) After pointing out that there is a fine line between insolence and insubordination, that only serious and deliberate acts of insolence and insubordination will merit dismissal and that dismissal should be reserved for instances of gross insolence and gross insubordination, the LAC went on to apply these principles to the facts of this case. It analysed the evidence and came to the conclusion that Herskowitz was not guilty of insubordination but of insolence. Although Her- Page 83

4 skowitz s conduct could have been described as insolent, impudent, disrespectful and rude it had not constituted insubordination which required a persistent, wilful and serious challenge to the employer s authority. She had also been provoked by the employer in two ways. Firstly, there had been the unlawful deduction of monies from her salary. Secondly there was the condescending manner in which the CEO had treated her, - he had turned his back on her when she tried to discuss the issue of the deduction. Her shouting and screaming was a knee jerk reaction in the heat of the moment. The question of provocation is addressed by the LAC in the following excerpt [33] Whether misconduct amounts to insubordination depends on a number of factors including the wilfulness of the employee s defiance, the reasonableness of the order that was defied and the actions of the employer prior to the purported act of insubordination. Provocation by an employer prior to the act of insubordination by an employee, is thus an important factor that must be considered in assessing its gravity. The same principle in my view would apply to the act of insolence or gross insolence. If the employee was provoked into insolence or insubordination, it may have a considerable mitigating effect on the seriousness of the offence and may render the dismissal inappropriate. (Footnote omitted) Finally, the Court pointed out that Pallucci s own disciplinary code recommended the sanction of a warning for a first instance of insolence, a final written warning for a second instance and dismissal for the third instance thereof. It came to the conclusion that the commissioner had committed a reviewable irregularity by upholding the dismissal on this ground. Going beyond the findings of the disciplinary enquiry As indicated above, the commissioner found Herskovitz guilty of charge three, namely the failure to comply with various instructions this despite the fact that the chairperson of the disciplinary enquiry did not find Herskowitz guilty of this defence. The LAC also found that this constituted a reviewable irregularity. In coming to this decision the LAC referred to its earlier decision in Fidelity Cash Management Services v CCMA & others [2008] 3 BLLR 197 (LAC) and the following excerpt from the decision. It is an elementary principle of not only our labour law in this country, but also of labour law in many other countries that the fairness or otherwise of the dismissal of an employee must be determined on the basis of the reasons for the dismissal which the employer gave at the time of the dismissal. The exception to this general rule is where, at the time of the dismissal, the employer gave a particular reason as the reason for the dismissal in order to hide the true reason such as union membership. In such a case, the court or tribunal dealing with the matter can decide the fairness or validity of the dismissal not on the basis of the reason that an employer gave for the dismissal but on the basis of the true reason for the dismissal. (At par 32) Incapacity/poor work performance The LAC found that the commissioner had erred in finding Herskowitz guilty of the charge of incapacity/poor work performance. This was because the commissioner had failed to take into account that Pallucci had failed to comply with items 8 and 9 of the Code of Good Practice: Dismissal dealing with dismissal on the grounds of incapacity. There was no evidence to show that Herskowitz had been informed of the performance standards she was required to Page 84

5 meet and there had been no proper evaluation of her performance. Furthermore, there had been no investigation to establish the reasons for the poor work performance, no instruction training guidance or counselling had been given, and no opportunity to improve work performance provided. The LAC accepted that in certain circumstances a member of senior management with knowledge and experience should be able to judge for herself whether she is meeting the required standard. However, it went on to state that this will only apply where the senior employee knows of the standard that should be met. In this case Tafelberg had not indicated what these standards should be. The Court went on to hold that even if it was mistaken in this respect, a senior manager would still be entitled to a warning that these standards had not been met and to be given an opportunity to improve. The LAC therefore upheld the decision of the Labour Court to set aside the decision of the commissioner and its finding that Herskowitz was entitled to ten months salary as compensation. Comment This decision does appear to widen the concept of insubordination as described in previous decisions but its reasoning in this regard cannot really be criticised. There is, however, one aspect of the decision that is perhaps debatable. This is the way in which the Court dealt with the issue of senior managers and the circumstances in which the requirements of the Code of Good Practice: Dismissal dealing with poor work performance must be met. The following passage of the LAC decision in Somyo v Ross Poultry Breeders (Pty) Ltd [1997] 7 BLLR 862 (LAC) and the English decisions it refers to are the basis for the principle that a senior manager may not be entitled to the protection of Item 8 and 9.. An employer who is concerned about the poor performance of an employee is normally required to appraise the employee s work performance; to warn the employee that if his work performance does not improve, he might be dismissed; and to allow the employee a reasonable opportunity to improve his performance: Craig v Rubdec (Pty) Ltd t/a Guys and Girls (1992) 1 LCD 29 (IC); James v Waltham Holy Cross UDC [1973] IRLR 202. Those requirements may not apply in two cases which are relevant to this matter. The first is the manager or senior employee whose knowledge and experience qualify him to judge for himself whether he is meeting the standards set by the employer: Stevenson v Sterns Jewellers (Pty) Ltd (1986) 7 ILJ 318 (IC) at 324F G; Blue Circle Materials Ltd v Haskins (1992) 1 LCD 6 (LAC). The second is where...the degree of professional skill which must be required is so high, and the potential consequences of the smallest departure from that high standard are so serious, that one failure to perform in accordance with those standards is enough to justify dismissal. Taylor v Alidair Ltd [1978] IRLR 82. It is submitted that the Herskowitz decision unduly narrows the principle formulated in the Ross Poultry Breeders decision. The Ross Poultry Breeders decision does not limit the application of the general principle, in the case of senior managers, to certain requirements only. Surely, in the right (albeit exceptional) circumstances, an employee ought to know what standards she must meet and that it will not be necessary to inform her of these standards and to give her an opportunity to improve if she does not meet these standards. That being said, it seems clear that Herskowitz did not fall within this category. PAK le Roux Page 85

6 Calculating back pay: The consequences of reinstatement by P.AK. le Roux T he applicant employee in David Themba v Mintroad Sawmills (Pty) Ltd [2015] 2BLLR 174(LC) had challenged the fairness of his dismissal in the CCMA. The CCMA found that the dismissal was substantively unfair. The commissioner, in an award dated 28 December 2009, ordered his reinstatement but not with retrospective effect. The employer then launched review proceedings. The application to review the award was dismissed by the Labour Court on 24 May The effect of this ruling was that the award had been upheld and that the employee remained entitled to enforce it. He reported for work but his tender to work was initially refused. Correspondence between the employee s trade union and the employer s attorneys ensued. The outcome of the correspondence was that the employee was required to report for work on 8 June The employee did so and continued to work for the employer. But this was not the end of the matter. The launching of the review application had not had the effect of suspending or staying the award and the employee should have been reinstated in The employee argued that he was entitled to salary and other benefits for the period calculated from the date of the award until his date of reinstatement. When he reported for work the employee was required to sign a new contract of employment. One of the headings in the contract contained the single word commencement. The contract also stated the amount to be paid to the employee as his weekly wage. The employee challenged the use of the word commencement as well as the wage that was due to him. He nevertheless signed the agreement as evidence that he accepted his return to work but indicated that this was done without prejudice. The payslips he received indicated that the starting date of his employment was 8 June The employee then applied to the Labour Court for the award to be made an order of court and for an order quantifying what remuneration and other benefits were payable to him in respect of the period referred to above. In dispute were the employee s entitlement to wage increases granted to other employees during the period that the employee had not been reinstated as well as the payment of certain bonuses. These issues were considered in the abovementioned judgment. Reinstatement The starting point for the Court was the question of what was meant when it was ordered that an employee be reinstated? It referred to the following excerpt from the decision of the Constitutional Court in Equity Aviation Services (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration & others (2008) 29 ILJ 2507 (CC) The ordinary meaning of the word 'reinstate' is to put the employee back into the same job or position he or she occupied before the dismissal, on the same terms and conditions.. It is aimed at placing an employee in the position he or she would have been but for the unfair dismissal. It safeguards workers' employment by restoring the employment contract. Differently put, if employees are reinstated they resume employment on the same terms and conditions that prevailed at the time of their dismissal. As the language of s 193(1)(a) indicates, the extent of retrospectivity is dependent Page 86

7 upon the exercise of a discretion by the court or arbitrator. The only limitation in this regard is that the reinstatement cannot be fixed at a date earlier than the actual date of the dismissal. The court or arbitrator may thus decide the date from which the reinstatement will run, but may not order reinstatement from a date earlier than the date of dismissal. The ordinary meaning of the word 'reinstate' means that the reinstatement will not run from a date after the arbitration award. Ordinarily then, if a commissioner of the CCMA orders the reinstatement of an employee that reinstatement will operate from the date of the award of the CCMA, unless the commissioner decides to render the reinstatement retrospective. From this decision and other decisions it referred to (e.g Nel v Oudtshoorn Municipality & another (2013) 34 ILJ 1737 (SCA), Mediterranean Textile Mills (Pty) Ltd v SA Clothing & Textile Workers Union & others (2012) 33 ILJ 160 (LAC) and Myers v National Commissioner of the SA Police Service & another (2014) 35 ILJ 1340 (LC)) the Court formulated the following principles. Reinstatement means the restoration of the status quo ante i.e the employee must be placed in the position as if he had never been dismissed. This means that the employee must be taken back into service on the same terms and conditions that he enjoyed at the date of dismissal. A new contract of employment does not commence; the old contract is revived. The original starting date of employment will remain the date on which he commenced employment. But the issue of retrospective reinstatement is a separate issue which a judge or arbitrator must consider. A reinstatement order coupled with retrospectivity is not automatic. Retrospectivity in practice refers to backpay and constitutes what the judge or arbitrator requires the employer to pay the employee for the period which he did not receive remuneration as a result of his unfair dismissal. If reinstatement is ordered, but the judge or arbitrator makes no determination as to the retrospectivity of the award, the reinstatement will only operate from the date of the award. The judge or arbitrator should specifically address this issue. When applying the above principles to this case the Court found that it meant that the employee was entitled to be reinstated as from 28 December From this date onward he was restored into employment in terms of his original contract of employment with continuity of employment being calculated from the original date of employment. Because his contract was restored this meant that he was entitled to be paid his salary as provided for in his contract. The argument was raised that because the employee did not work, he was not entitled to be paid. This was firmly rejected in the following terms - [ 32] Now it is true that the applicant did not actually work in terms of his contract of employment, from 28 December 2009 to 8 June 2012, the latter being the date when he finally actually resumed his duties. Normally, payment in terms of a contract of employment is a quid pro quo for work actually performed. But the reality is that whilst the respondent, as employer, indeed has the right to review in terms of section 145 of the LRA, the exercise of such right has consequences. The simple fact is that by exercising this right, and then requiring the employee (applicant) not to report for work whilst the exercise of this right is ongoing, it is the employer (respondent) that by way of its own conduct is preventing the employee from rendering work under the employment contract. The employer simply cannot then benefit Page 87

8 from this conduct by contending that the employee did not work and thus should not be paid, because the right to be paid is founded on rendering work in terms of the employment contract. In casu, the respondent decided on its course of action, and must live with all the consequences resulting from such decision. The Court accepted that, as a starting point, the employee was entitled to be paid the salary he received at the date of dismissal this was the contractual entitlement that he was entitled to in terms of his contract of employment. Wage increases The next question was whether the employee was entitled to any wage increases that other employees of the employer had received during the period commencing on the date that the commissioner ordered his reinstatement and ending on the date that he was actually reinstated, i.e. 8 June The Court argued that this question had to be decided with reference the provisions of his contract of employment or the provisions of any applicable collective agreement or sectoral determination. The fact that other employees who had not been dismissed may have received an increase was irrelevant. The Court came to the conclusion that the employee had not established that his contract provided him with a contractual right to an annual wage increase during this period. There was also no sectoral determination that granted a right to an increase. There were, however, two collective agreements that had been entered into between the employer and a union that the Court referred to as NEWU. These agreements, which would have been applicable to the employee if he had been employed by the employer at the time that they were entered into, provided for a 9 per cent increase for the year and a 7 per cent increase for the year. The provisions of these collective agreements had been incorporated into the employee s contract of employment and he was therefore entitled to these increases. As for the year 2010/2011, the Court found that the employee was not entitled to an increase. No collective agreement had been entered into for that year and wage increases had been granted on an individual basis. The Court rejected the employer s argument that the employee was not entitled to increases in terms of the two collective agreements because he was not employed at the time that they were entered into. The court s view was that the effect of the reinstatement order was that the employee was never dismissed and that he was therefore an employee at the time the agreements were entered into. Bonuses The same approach was applied to whether or not the employee was entitled to bonuses. Did the employee have a contractual right to the payment of a bonus? The Court found that the two collective agreements did make provision for the payment of a bonuses amounting to 10 days remuneration. Discretionary wage increases Perhaps of most interest in this decision is the Court s view that the first place to look for an entitlement to a wage increase is an employee s contract of employment. However, most contracts of employment do not make provision for wage increases. At most there will be a statement to the effect that wages or salaries will be reviewed annually. But does this statement that wages be reviewed not perhaps, in the right circumstances, give rise to a contractual right to have such a review conducted and, if so, have this done in a bona fide manner? See in this regard the decision of the High Page 88

9 Court, albeit in another context, in Erasmus & others v Senwes Ltd & others (2006) 27 ILJ 259 (T) as well as Mans v Mondi Kraft Ltd (2000) 21 ILJ 213 (LC). Of course, if this is the case the remedy will in all probability not be the granting of a wage increase but rather that the employer is ordered to conduct such a (bona fide) review. PAK le Roux Section 197: an update I n CLL Vol 24 No 7 we discussed the question of when the outsourcing by an employer of certain services can constitute a going concern transfer as envisaged in s 197 of the Labour Relations Act, 66 of 1995 (LRA). We also considered when so-called second generation outsourcing and transfers can fall within the ambit of this section. It was pointed out that a survey of the decisions indicated that most outsourcing arrangements and second generation transfers would fall within the ambit of s 197 as interpreted and applied by our courts. In recent weeks two further decisions, one of the Constitutional Court and one of the Labour Appeal Court, have been handed down. In this contribution we deal with these decisions. City Power (Pty) Ltd v Grinpal Energy Management Services & Others (Unreported CCT 133/14 20/4/15) During the course of 2003 City Power (Pty) Ltd (City Power) awarded a tender to Grinpal Energy Management Services (Grinpal) for the provision of prepaid electricity meters. When this contract expired a further agreement was entered into. This second agreement was terminated by City Power in A dispute then arose as to the validity of the termination but eventually agreement was reached to the effect that City Power would take over the services provided by Grinpal until a new service provider was appointed by City Power; City Power would use the infrastructure provided by Grinpal. A dispute arose as to whether this arrangement constituted a transfer of a business as a going concern. The Labour Court found that there had been a transfer of a business as a going concern and that Grinpal s employees had been transferred to City Power. The Labour Appeal Court (LAC) came to the same conclusion. City Power then appealed to the Constitutional Court. The Constitutional Court also held that there had been the transfer of a business as a going concern. It came to this finding in two short paragraphs - [39] On the present facts, there is no dispute that City Power took over the full business as is, with all of the complex network infrastructure, assets, know how, and technology required to install and operate the prepaid electricity system with the clear intention of maintaining uninterrupted electricity services to Alexandra Township. The project continued after termination of the service level agreements and completion of the handover process. The business is identifiable and it is discrete. Ultimately a business of providing a system of prepaid electricity to residents of Alexandra Township continued, save that it was now conducted by a different entity. [40] It follows that there was a transfer of business from Grinpal to City Power as a going concern; which means that the contracts of employment of Grinpal s employees were automatically transferred to City Power. The appeal must fail. It is clear from the decision that the Constitut- Page 89

10 -tonal Court was influenced by the fact that when City Power took over the service there was a significant transfer of tangible and intangible assets but it also emphasised there was an identifiable and discrete business.. Communication Workers Union & others v Mobile Telephone Networks (Pty) Ltd (Unreported DA 10/13 21/4/2014) In 2010 Mobile Telephone Networks (Pty) Ltd (MTN) established a call centre in KwaZulu- Natal to provide certain services to its prepaid customers. It operated and managed the centre itself until 2006 when it outsourced the services provided by the centre to Interaction Call Centre (Pty) Limited (Interaction). Interaction utilised employees (referred to as agents ) employed by temporary employment services to deal with calls from MTN customers. They were managed and controlled by supervisors who were employed by Interaction itself. Interaction also employed call centre managers to manage teams of agents and supervisors. In addition it employed a workforce department which drew up work and shift schedules. It also employed quality assurance specialists as well as a range of managers. In 2010 MTN informed Interaction that it would perform the function provided by Interaction itself; it then cancelled its contract with Interaction. All the call centre managers, the entire workforce department, eight supervisors and three quality controllers were employed by MTN immediately after the cancellation of the contract. Two months later four former supervisors employed by Interaction were also employed by MTN. It also retained the services of some 47 agents. Once again, a dispute arose as to whether there had been a going concern transfer as envisaged in s 197 of the LRA. The Labour Court found that there had been no transfer as envisaged in this section. This was motivated as follows I am persuaded by the first respondent s submission that at no stage did the second respondent have its own infrastructure as it had to utilise that of the first respondent infrastructure. The employees it employed to provide the services to the first respondent played a very limited, constricted role in the first respondent s call centre in KZN. The actual work in the call centre was performed by the agents employed by a labour broker and everything done by the managerial or supervisory staff employed by the second respondent had to conform to the first respondent s standards and directions. Moreover, the majority of employees used by the second respondent were not required by the first respondent when it commenced on 1 December 2010 to provide the service of managing the agents in the call centre. Managers and supervisory staff were transferred from Johannesburg and only some of the second respondent s employees who had the required skills were appointed. The union representing the employees in the matter then appealed to the LAC. It argued that Interaction had operated a defined and discrete business, independent of that run by MTN. When the agreement with MTN was cancelled it was this business that was transferred to MTN as a going concern. Services continued to be rendered to the same category of clients. The main business objective remained the same as it had been during the duration of the agreement. The same operational methods of rendering services were utilised by MTN. In addition, MTN took over a significant part of Interaction s former employees together with a significant number of agents. MTN argued, on the other hand, that Interaction had not owned its own infrastructure and only provided a service utilising MTN s infrastructure. Interestingly, it also argued that it was relevant that its own employees played a very limited role in the provision of the service Page 90

11 and that the core of the work had been performed by agents who were employed by a temporary employment service. In addition, all activities performed by the managerial/ supervisory staff employed by Interaction had to conform to standards imposed by MTN and the majority of employees employed by Interaction had not been required by MTN. The LAC rejected MTN s submissions and, after an analysis of the contract that had been entered into between MTN and Interaction when it was agreed that Interaction would provide a call centre service, came to the conclusion that there had been a transfer of a business as a going concern. It did so in the following terms [21] In my view, the evidence which was provided to the court a quo justifies an answer that the second respondent was operating a call centre as a discrete business. The fact that it was its only business is hardly material to the case. In terms of clauses 7 and 8 of the agreement, second respondent could not, without permission of first respondent, operate a call centre for another cell phone company. It was therefore not surprising that, in relation to the running of a call centre business for a cell phone company, second respondent had but one client. Outside of a cell phone company, it was possible for second respondent to create another business. The fact that it had but one client and operated a discrete business for this client should not detract from a conclusion that it was operating a call centre business which constituted a discrete business, sufficient to fall within the scope of s197 of the LRA. Comment Of the two decisions the MTN decision is the more interesting, and probably the more important, as it deals with the situation where very few assets, if any, transfer from one employer to another. Here the Court seems to have considered whether there is a discrete or separate business entity that changes hands. This reflects the approach adopted in TMS Group Industrial Services (Pty) Ltd t/a Vericon v Unitrans Supply Chain Solutions (Pty) Ltd & others [2014] 10 BLLR 974 (LAC). See also City Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd & others [2014] 10 BLLR 945 (LAC). Although the City Power decision involves a transaction where various assets and employees were transferred to City Power from Grinpal, the excerpt quoted above also seems to endorse a similar approach. Finally, it is interesting to reflect what would have happened if the transaction described in the MTN decision had taken place after the coming into force of the latest amendments to the LRA. It seems that the use of temporary employment service employees was, in a sense, permanent. The result was that the use would arguably have fallen within the scope of s 198A of the LRA. As a further result the employees of the temporary employment service would have been deemed to be the employees of Interaction for the purposes of the LRA. This in turn would arguably have meant that these employees would have transferred to MTN, as employees or deemed employees, with all the consequences that this implies. But this does not necessarily mean that the commercial arrangement between Interaction and the temporary employment service would have transferred. What would happen to this contract? Would the TES be able to argue that it is still entitled to be paid if it can provide other employees to Interaction? These and other questions in connection with s 198 will surely have to be considered by the arbitrators and the courts in the near future. P.A.K. le Roux Page 91