City Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd CCT 133/14 [2015] ZACC 9  (20 April 2015) per Tshiqi AJ.

Today, in a unanimous judgment, the Constitutional Court delivered its long awaited judgment in the ongoing dispute between City Power (Pty) Ltd and Grinpal Energy Management Services (Pty) Ltd.  Leave to appeal was granted but the appeal was disallowed.

In the Labour Appeal Court anxiety was expressed about the implication for municipalities having to assume certain financial responsibilities for employees of the initial service provider.  These concerns were rejected in this appeal.

See also the Labour Appeal Court judgment – City Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd [2014] 10 BLLR 945 (LAC); (2014) 35 ILJ 2757 (LAC) [2014] ZALAC 22 (29 May 2014).

Two service level agreements concluded between City Power v Grinpal Energy Management Services  triggered an application of s 197 of the Labour Relations Act 66 of 1995 (‘LRA’).  With effect from 1 August 2012 the employment contracts of 41 affected employees were transferred to City Power  in terms of s 197(2) of the LRA.

The Labour Appeal Court disallowed the appeal but reached its decision ‘with some anxiety’.  It was concerned that where an organ of State, such as the municipality, enters into an outsourcing agreements for a defined period, it runs the risk, upon the termination of that contract, that the municipality is required to assume the obligation of financing the ongoing employment contracts of those who had previously been employed by the initial service provider, more particularly within the specific context of a second generation transfer.

The consequences of the application of s 197 of the LRA to second generation transfers may be to impose significant financial burdens on municipalities which are already constrained by limited available public resources to fulfil their important obligations of providing services to all residents who fall within their jurisdiction.