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Labour Relations Act, 1995 (Act No. 66 of 1995)

Chapter VIII : Unfair Dismissal and Unfair Labour Practice

197A. Transfer of contract of employment in circumstances of insolvency



(1) This section applies to a transfer of a business—
(a) if the old employer is insolvent; or
(b) if a scheme of arrangement or compromise is being entered into to avoid winding-up or sequestration for reasons of insolvency.


(2) Despite the Insolvency Act, 1936 (Act No. 24 of 1936), if a transfer of a business takes place in the circumstances contemplated in subsection (1), unless otherwise agreed in terms of section 197(6)
(a) the new employer is automatically substituted in the place of the old employer in all contracts of employment in existence immediately before the old employer's provisional winding-up or sequestration;
(b) all the rights and obligations between the old employer and each employee at the time of the transfer remain rights and obligations between the old employer and each employee;
(c) anything done before the transfer by the old employer in respect of each employee is considered to have been done by the old employer;
(d) the transfer does not interrupt the employee's continuity of employment and the employee's contract of employment continues with the new employer as if with the old employer.


(3) Section 197(3), (4), (5) and (10) applies to a transfer in terms of this section and any reference to an agreement in that section must be read as a reference to an agreement contemplated in section 197(6).


(4) Section 197(5) applies to a collective agreement or arbitration binding on the employer immediately before the employer's provisional winding-up or sequestration.


(5) Section 197(7), (8) and (9) does not apply to a transfer in accordance with this section.