Background

The key issue in the underlying dispute was whether the termination of a service level agreement (SLA) concluded between the King Cetshwayo District Municipality (Municipality) and Water and Sanitation Services of South Africa (Pty) Ltd (WSSA) for the provision of bulk water services to the Municipality’s residents triggered the application of section 197 of the LRA. Both the Labour Court and the Labour Appeal Court (LAC) found that it did. Therefore, the Municipality sought leave to appeal to the Constitutional Court

In terms of the SLA, WSSA was responsible for providing various services related to the Municipality’s water infrastructure. These services included operational services, maintenance, monitoring and general asset management services. To fulfil these obligations, WSSA was granted the right to use the Municipality’s infrastructure and subsequently provided some of its own assets, tools, software and employees. The relationship between the parties commenced in 2003 when the first SLA was concluded. Subsequent SLAs were concluded and extended until the non-renewal and ultimate termination on 30 June 2020. At the time of termination of the SLA, WSSA employed 666 employees.

Prior to the termination of the SLA, on 30 June 2020, WSSA raised a concern with the Municipality that the termination would trigger the effect of section 197 of the LRA. It contended that, upon termination, the Municipality was required to take transfer of the 666 employees. Alternatively that, in terms of the SLA, a new service provider must take transfer of the employees. The Municipality disputed this, contending that WSSA was seeking to avoid undertaking a retrenchment process.

WSSA approached the Labour Court on an urgent basis seeking a declarator that the termination of the SLA constituted a transfer of a business as a going concern in terms of section 197. The Labour Court upheld WSSA’s position, finding that the termination of the SLA constituted a transfer in terms of section 197 and that the contracts of employment of the employees were transferred to the Municipality in terms of section 197(2) with effect from 1 July 2020. On appeal, the LAC upheld the Labour Court’s finding and held that the requirements of section 197 of the LRA were met as the business of providing bulk water services continued, albeit now in different hands.

The Constitutional Court

In addressing the Municipality’s application for leave to appeal, the Constitutional Court first dealt with whether it had jurisdiction to hear the appeal. In this regard, Majiedt J drew a distinction between the court’s constitutional jurisdiction, that is whether a constitutional matter is raised, and general jurisdiction, that is whether the matter raises a point of law of general public importance. The Constitutional Court found that its constitutional jurisdiction was engaged as the dispute concerned the interpretation of section 197 of the LRA, which gives effect to the right to fair labour practices in terms of section 23 of the Constitution. Consistent with the earlier Constitutional Court decision of NEHAWU v University of Cape Town [2015] 8 BLLR 757 (CC), the Constitutional Court reiterated that disputes relating to the interpretation of the LRA will almost always raise a constitutional issue.

The court then turned to whether it was in the interests of justice to grant leave to appeal. Central to this enquiry were the prospects of success and the importance of the constitutional questions raised. In other words, an appeal must raise questions of principle about the interpretation or constitutionality or the scope of constitutional labour rights. A litigant must persuade the court that the appeal raises new legal principle or new legal argument warranting the attention of the Constitutional Court.

Turning to the dispute before it, the Constitutional Court found that no novel legal issues relating to section 197 of the LRA were raised by the Municipality. In a unanimous judgment, Majiedt J emphasised that the role of the Constitutional Court is to determine issues of legal principle and not to re-evaluate factual findings or the incorrect or alleged misapplication of settled legal principles by the lower courts. The court surmised the Municipality’s grounds of appeal as being a factual error; misapplication of the ‘going concern test’ and error of findings of the Labour Court and LAC respectively. The Constitutional Court accordingly refused leave to appeal, with costs.

Key takeaways

The Constitutional Court reaffirmed that disputes involving the interpretation and application of the LRA will invariably engage its constitutional jurisdiction as the statute gives effect to a constitutional right. However, the judgment makes it clear that jurisdiction is merely the threshold enquiry and does not entitle a litigant to have an appeal entertained by the Constitutional Court.

This judgment also serves as a reminder that the mere misapplication of law or disagreement with the factual findings by lower courts is insufficient to warrant intervention from the Constitutional Court. The Constitutional Court’s role is not to re-evaluate factual findings or the misapplication of legal tests. Rather, appeals before the Constitutional Court must raise new or unsettled questions of law a rather than fact specific disputes dressed up as questions of principle.