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It’s not uncommon these days to consider outsourcing a department within a residential estate. Doing this may be more practical or cheaper. There could be a host of benefits to the residential estate as well as its management.
However, the key is to ensure that employers are treated fairly in terms of labour law during this process. Not doing so could land the homeowners association (HOA) or estate managers in hot water.
Estate Living talks to Tanya Barnard, practicing attorney at Kusile Consulting Services, who highlights where HOAs and estate managers could go wrong and spells out the labour law surrounding outsourcing and how it works.
Misunderstanding of labour law
According to Barnard, many employers don’t understand the provisions of the Labour Relations Act 55 of 1996. She explains: ‘They misconstrue the information and the requirements as laid out in the Act.’
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She says that consideration must be given to Section 197 of the Act. She adds: ‘This talks to the issue of transfers of a business or part thereof as a “going concern”. When considering the section, the section defines “business” as “that which includes the whole or a part of any business, trade, undertaking or service; and”, “transfer” means the transfer of a business by one employer (the old employer) to another employer (the new employer) as a going concern.
‘This means that when the employer considers outsourcing a part of the business, or even a service, for e.g., the security department i.e., outsourcing could be seen as a transfer in terms of the law.
‘The old employer, for example: the HOA, would have to engage in discussions with the outsource company (who will now be referred to as the new employer), to take over the staff, in that this would form part of the definition of transferring a business or part thereof.
‘Where this does not happen an employee may argue that he or she was not transferred to the new employer, that retrenchment (if this is the case) was not fair and this could be ultimately found to be an automatically unfair labour practice, which in turn could mean a 24-month compensation award.’
How much protection is there?
The Act has been designed to protect both the employer and the employee. Barnard explains that the CCMA and Labour Courts can frown upon employers that don’t comply with the provisions of the Act.
She says: ‘When considering transfers especially with regards to outsourcing there are various requirements for the employer to comply with, such as meaningful consultation with the employees, an agreement between the old and new employer in respect of leave, (annual leave, sick leave, family responsibility, leave balances).
‘The issue of severance pay i.e., who will be held liable for severance pay where the new employer has to terminate / retrench employees within the first 12 months of such a transfer, that the transfer must not be done on “less favourable terms and conditions” than those which the employee was employed for to name but a few. There is therefore very little protection to employers who do not comply with the provisions of the Act.’
Don’t cut corners
If you’re considering outsourcing and shifting workers to the new company that will offer services to the residential estate, it’s important to realise that this will not be a straightforward procedure.
Barnard says: ‘This is a highly complex consultation that needs to take place with experienced people specialising in the Act. We have seen previously where employers end up retrenching all the staff, meaning at a fee i.e., severance packages etc, then only some employees are taken over by the outsource company which in turn means that the remaining employees may have the right to argue that the retrenchment itself was not automatically unfair.
‘It is therefore our opinion, as Kusile Consulting Services, that formal consultation should be entered into and employees should be consulted with. Once the consultations have taken place, various agreements are to be produced between the old and new employer to avoid any claims for unfair dismissal.
‘Specifically referring to Section 197 the old employer and / or the new employer can be held liable for a period of twelve months after any termination where a transfer took place.’
