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Davis Dumiso Sibanda Labour Matters
Many disputes arise over issues related to transfer of undertaking, with workers crying foul and the exiting employer washing his hands of blame and the new employer seeing the workers as being unreasonable and ungrateful. The process of transfer of an undertaking from one employer to another requires careful management from a labour relations’ perspective if labour disputes are to be avoided at a later stage.
In Zimbabwe transfer of an undertaking or in simple language when a business changes hands the guiding legislation is the Labour Act, Section 16 which says that irrespective of the manner the business changes hands, unless workers have been lawfully terminated, the workers are automatically deemed to have been transferred to the purchaser of the business.

The law says that the worker’s conditions of service with the previous employer remain unchanged. The new employer cannot vary conditions of service of employees to less favourable ones.

The law, however, allows the new employers to negotiate conditions that are less favourable. However, such agreements shall not diminish workers’ rights to social security, pension, gratuity or other retirement benefits without the approval of the Ministry of Labour. Experience has shown that where everything is done above board, workers are willing to trade some benefits in exchange for new ones but they are unlikely to agree to any reduction of benefits which they see as an unfair exchange.

All pending cases and disputes do not extinguish at takeover or merger of business but the owner inherits the cases and can be sued over cases. This makes it important at takeover for parties to be clear on how all pending disputes and other labour related issues should be handled. For example, if an organisation takes over a business with a pending wage dispute, if the courts rule in favour of workers later the new employer is liable.

Employers need also to recognise that workers can legally block any transfer or merger if provisions of Section 2A (5) (c) of the Labour Act have not been satisfied. The Labour Act makes it mandatory for the employer to consult the Works Council over mergers and transfer of ownership. I am of the view that if the transfer of ownership or merger is effected without evidence of consulting workers, there is a risk of having the whole process nullified or put on ice until workers have been consulted. The law does not say workers have to approve but that consultations are to allow for their interests to be captured or catered for. The Act merely says that parties have to attempt to reach a consensus.

The process or mergers or takeovers or transfer of undertaking as defined in the Labour Act is required much more than complying with the law but it also requires effective labour relations management. In short it requires effective labour takeover management plans that clearly identify possible flashpoints and put in place plans to manage.

Most mergers and takeovers by their nature create an atmosphere of mistrust, fear and suspicion. Workers start to fear that they could lose jobs, be downgraded, lose status, be transferred to hostile conditions, be dismissed, be retrenched, be made to work under harsh conditions and many other fears.

Above all there is the fear of losing rights and benefits they are enjoying under present contracts. There is the fear of outright extinguishing of these and fear of having them gradually eroded within a threatening environment.

A poor management of transfer of undertaking can easily lead to expensive protracted litigation with unions and workers hiring lawyers to defend their rights at a huge cost.

Best practices call for the employer to engage workers at Works Council or at NEC level and ensure that the process is rolled out after all hurdles have been dealt with. Where the process has certain aspects handled secretively, the danger is that some information will leak in a distorted manner causing avoidable labour unrest.

In conclusion, the process must be guided by a labour expert who can easily pick up possible flash points and put in place an agreed plan to deal with them.