Merging into a Private University: Law Regulating the Transfer of Academic Employees in Swaziland

Law Regulating the Transfer of Academic Employees

The law sources which were studied to determine a legal framework that can be used for the transfer of academic employees consists of the Constitution, the Employment of Act 5 of 1980, Industrial Relations Act 1 of 2000 and the Higher Education Bill of 2010.

Constitutional protection is found in the labour rights which are guaranteed to everyone (including employees that are transferred). Labour rights that are in particular relevant are the right to employment as guaranteed in section 32(1) of the Constitution and the rights to be protected against victimization and unfair dismissal or treatment (Swaziland, 2005, s 32(1)–(4)(d)). The labour rights of employees that are transferred find expression in the Employment Act 5 of 1980. Section 33 bis of the Employment Act (Swaziland, 1980) provides:

This brings the question whether the merger of higher education institutions will fall within the ambit of section 33 bis (1)(b) to the fore. The South African Labour Court confirmed in Schutte and Others v Powerplus Performance (Pty) Ltd and Another (1999) 20 ILJ 655 (LC), para. 671 B-E) that mergers will constitute a transfer for the purposes of section 197 of the Labour Relations Act 66 of 1995:

A business or part of a business, may be transferred in circumstances other than a sale. These may arise in the case of a merger [our emphasis], takeover or as part of a broader process of restructuring within a company or group of companies.

Similarly, the CCMA in Mwamwenda and University of KwaZulu-Natal (KNDB8712-04 18 March 2006, paras. 2185 G-I, 2186 B-C) maintained that mergers of higher education institutions will constitute automatic transfers and thus fall within the ambit of section 197 of the Labour Relations Act. If we thus accept the Industrial Court of Appeal contention in Swaziland Hotel Catering Allied Workers Union v Swazispa Holdings Ltd (para. 37) that there ‘is a thin line between the words “transfer” used in the South African statute and “take over” appearing in our Act’, it stands that mergers of higher education institutions will also fall within the ambit of the Swaziland equivalent of section 197 of the South African Labour Relations Act; for example, section 33 bis of the Employment Act.

Protection Guaranteed by Section 33 bis

The Industrial Court of Appeal in Swaziland Hotel Catering Allied Workers Union v Swazispa Holdings Ltd (para. 30) confirmed the court a quo’s description of the legislative intent of section 33 bis as ‘… to prevent fraudulent activities from being perpetrated by employers by allowing a sale or takeover of their business, thus depriving the employees of their terminal benefits’.

The question is what is the extent of protection provided to employees by this section? Du Toit (2004: 115) is of the opinion that the section provides a lesser degree of protection than section 197 of the Labour Relations Act because it does not provide for the transfer of ‘an enterprise as a going concern’. This view is supported by the fact that terminal benefits are due on the ‘termination of his previous employment’ which implies that continued employment (the main requirement of transfer as an ongoing concern) is not guaranteed. If a higher education institution is transferred (via a merger) as a going concern, employees do not have to terminate employment with the old employer because ‘the new employer is automatically substituted in the place of the old employer in respect of all contracts of employment in existence immediately before the date of transfer’ (Republic of South Africa [RSA], 1995: s197(2)(a)).

This matter becomes complicated when one also considers 41(c) of the Industrial Relations Act (Swaziland, 2000: s41(c)):

In the event of amalgamation, the newly constituted organisation shall assume all the rights and duties of its predecessor organisations unless the Court on good cause show upon the application of an interested party directs otherwise.

It stands to argue that the fact that ‘all rights and duties’ are transferred, that those will include the rights and duties with regard to employment. If so, this section implies the transfer of a business as a going concern. But, read together with section 33 bis, such interpretation will not stand. Du Toit (2004: 115) correctly observes that ‘neither the Employment Act 5 of 1980 nor the Industrial Relations Act 1 of 1996 contains provisions relevant to the transfer of an enterprise as a going concern’. The authors contend that the Industrial Relations Act 1 of 2000 likewise does not provide for the transfer of a business as going concern. While the Industrial Court of Appeal (Swaziland Hotel Catering Allied Workers Union v Swazispa Holdings Ltd, para. 35) described business in terms of the Employment Act as a going concern, it also accepted the exposition of the court a quo (para. 29) of benefits to include: ‘payment for severance allowance and additional notice’. Since severance allowance will only be payable on the termination of employment, the Industrial Court’s interpretation could be questioned.

Taking into account the benefits of being transferred as an ongoing concern as provided for in the South African Higher Education Act 101 of 1997 (RSA, 1997: s23) and the absence of those in section 33 bis, the authors concluded that this section does not provide for transfer of a business as a going concern. Section 23 of the Higher Education Act provides valuable guidelines on the protection provided to employees when a business is transferred as a going concern:

Although the Industrial Appeal Court’s attempt to provide a transferring employee ultimate protection is laudable, the authors are not convinced that the wording of either the Employment Act or the Industrial Relations Act supports such interpretation, not even when purposively interpreted.

What Are Terminal Benefits?

The next question to be answered is what is meant by ‘all the benefits accruing and are due for payment to the employees’? The Industrial Court of Appeal (Swaziland Hotel Catering Allied Workers Union v Swazispa Holdings Ltd para. 29) accepted the court a quo’s view that severance allowance and additional notice could be regarded as benefits for the purposes of section 33 bis.

Du Toit (2004: 115–116) expresses doubt whether the old employer can claim redundancy to dismiss employees prior to transfer. The authors maintain that this doubt is, in light of the Industrial Court’s acceptance of severance pay as terminal benefit, well founded. If the employee is declared redundant by the old employer he or she will then not be entitled to severance allowance since redundancy is regarded as a fair reason for dismissal for which the payment of severance allowance is not required (Du Toit, 2004: 115; Swaziland, 1980: ss34–36). Should the old employer dismiss an employee before transfer on ground of redundancy, the employee could allege unfair dismissal in terms of section 35(2) of the Employment Act. This section gives effect to employees’ right to be protected against unfair dismissal or treatment (Swaziland, 2005: s32(1)(d)). In this instance, the employee will have to file a complaint with the Labour Commissioner who will then seek to settle the complaint (Swaziland, 1980: s41(1)). If the Labour Commissioner cannot settle the complaint within 21 days, he or she will submit a report to the Labour Court who will then proceed to deal with the matter (Swaziland, 1980: s41(3)).

The amount of the severance allowance is calculated as wages for 10 working days for each year of completed employment, in excess of one year continuous employment, by the specific employer (Swaziland, 1980: s34(1)). It seems that an employee must thus at least have been employed for two years by the specific employer before he or she could claim severance allowance. The severance allowance could be reduced by counter claims by the employer. The amount the employer has contributed to a gratuity, pension or provident fund to the benefit of the employee could be reclaimed by the employer up to an amount not exceeding the claim of the severance allowance (Swaziland, 1980: s34(3) and (4)). Nothing prohibits the new employer from dismissing transferred employees on the ground of redundancy (provided of course that the correct procedures are followed). ⁷

What is meant by ‘additional notice’ or ‘pay in lieu’ as a benefit? This means that if an employer does not give sufficient notice of the lay-off, the employer has to pay the employee’s normal wages for the minimum notice period (see section 33(1) of the Employment Act). Prescribed notice periods (see section 33 of the Employment Act) determine the amount of notice pay.

Other terminal benefits, or statutory benefits (Weatherson v Usuthu Farm [2005] SZIC 5 31 January 2005) are: leave days, notice pay, overtime due (Tsela v Tsela T/A Terminator Restaurant and Bar [2011] SZIC 8 31 March 2011, para. 15); pension benefits ⁸ (YKK Southern Africa (Pty) Ltd Swaziland Plant v Mthethwa and Others [2006] SZIC 57 12 May 2006, paras. 5, 7); and medical aid reimbursement (Weatherson v Usuthu Farm [2005] SZIC 5 31 January 2005). ⁹ Payment for long service could also be regarded as a terminal benefit if it is provided for in the conditions of service (Swaziland Hotel Catering Allied Workers Union v Swazispa Holdings Ltd, para. 29).

Transfer Procedures

Section 41(b) of the Industrial Relations Act indicates that mergers may take place (and it is accepted including the transfer of employees) in a manner provided for in the constitution of the merging institutions as long as it does not contravene the prescripts provided by the Act (Swaziland, 2000: s41(b)). In this section the authors looked at the University S case to identify procedures that proved to be essential for effective transfer of academic employees. The constitutions of the three merging colleges did not contain procedures on how transfers should be handled (College A, 2009; College B, 2009; College C, 2008; Church Higher Education Consortium, 2008).

From the University S case it became evident that there must be a consultation process because that informs the actual transfer process. It also became evident that there is a need for law regulating the termination of employment with the old employer, the employment with the new employer as well as the transfer schedule.

There were allegations that the transfer of employees to University S was marked by inadequate consultation and a lack of transparency. The Board of Trustees of Swaziland Church Health Institutions (hereafter the Board of Trustees) made continuous accusations that it did not receive official communiqué for the establishment of University S from the National Board; the Board of Trustees was, for that reason, reluctant to address any issue related with the transfer of academic employees from College C to University S. Similar allegations were made by Hospital C’s management. ¹⁰ During the meetings between the academic employees from College C and the human resource manager of Hospital C, the human resource manager indicated that he did not have any official communication or documentation about University S and as a result questioned the legality of University S and was reluctant to address the questions and concerns presented by the academic employees in relation to the transfer process (Faculty Board of College C, 2011 a, b, minutes). The Secretary of the National Board (2011, interview), however, alleged that the National Board officially communicated the matter to the Board of Trustees and the management of Hospital C. Whatever the case was, what is illustrated here is the importance of consultation, as a first step of the transfer process, and how a lack thereof could hamper the transfer process. Koontz (2009: 9) emphasizes:

Maintaining open communication and providing employee consultation and opportunities for involvement at all levels of a merger is likely to be beneficial. In particular, it is important for organizations to emphasize the potential benefits of the merger at both the individual employee and organizational level. Consultation and involvement appears to play a significant role in restoring employees’ perceptions of control at a time when they are likely to experience a sense of powerlessness.

Matters that should be addressed during the consultation process include: payment of accrued benefits; the options available to the academic employees; and the effect of each option.

Transfer procedures should, second, provide for specific steps to regulate the termination of services by the old employer. This could be addressed during the consultation process, by means of collective agreement or be regulated by means of policy. The need for clarity on when and how the employment with the old employer will be terminated is evident from a letter from the Chairperson of the Board of Trustees to the lecturers of College C:

The Board of Trustees is concerned about the [transfer] of College C staff to University S, of particular concern is the process of terminating the employment with [Swaziland Church Health Institutions] and starting with the new employer University S.

The Board resolved that College C lecturers remain [Swaziland Church Health Institutions] employees until such a time the appropriate authority gives the Board of Trustees notice that College C employees will become employees of University S. The Board further resolved that they would not like to see College C employees lose their accumulated benefits but noted that losing benefits or protection of same is dependent on how the process is handled, unfortunately the process is not under the control of the Board because University S is a separate entity. (Board of Trustees of the Swaziland Church Health Institutions 2012, correspondence) ¹¹

It was evident from the University S case that employees felt disempowered after the transfer which brings the need to provide employment security after employment with the old employer is terminated to the fore. Since the transfer of the higher education institutions is not done as a going concern and academic employees’ employment with the old employer is terminated, transferred academics need to apply for positions with the new employer. It seems that the only protection these employees enjoy with regard to security of employment with the new employer is that the positions are only internally (within the merging institutions) advertised. This, however, is a deduction made from the University S case where senior lecturer, lecturer and teaching assistant positions were only internally advertised (University S, 2011). Whether the positions will be made available only to employees from merging institutions or whether such employees will have to compete for those with outside applicants will most probably depend on the agreement between the old and new employer or collective agreements.

The fourth procedural aspect that must be addressed is setting a consolidated transfer schedule for employees from the various higher education institutions involved in a merger. The lack of a consolidated transfer schedule for the academic employees from the colleges hindered the transfer process. Addressing the attendants of the meetings held on 27 October 2011 and 11 November 2011, the human resource manager of Hospital C indicated that there was no schedule upon which the transfer of academic employees from College C to University S could occur (Faculty Board of College C, 2011a, minutes).

Another procedural requirement that came to the fore was that there must be clarity on who will be responsible for various aspects of the transfer process. In the University S case the Secretary of the National Board indicated that setting the transfer schedule is the responsibility of the old employer (e.g. Hospital C; Secretary of the National Board 2011, interview), while Hospital C in its capacity as employer indicated that it could not transfer academic employees from College C to University S if the National Board did not provide it with a transfer schedule (Faculty Board of College C, 2011a, minutes). The secretary also referred to the role of the task team in setting a consolidated transfer schedule for the transfer of employees from the three colleges (Secretary of the National Board 2011, interview). However, during a meeting between the academic employees from College C and steering committee it was indicated that the task team was only responsible for the transfer of academic employees from College A to University S (Faculty Board of College C, 2011b, minutes).

As already stated, the authors contend that transfers during mergers will inevitably be external mergers. However, during the University S merger it was argued that the transfer of employees from College B was handled as an internal transfer. During a joint meeting between the Board of Governors Executive Committee of the Church Higher Education Consortium, the Rector’s Advisory Committee and representatives from the National Board, the participants indicated that the transfer of academic employees from College B to University S was not necessary because College B was an institution governed, managed and financed by the Church. As an institution managed and financed by the church, the establishment of University S did not imply a change of employer for academic employees from College B (Mbanze, 2009, personal notes).

The authors question whether the transfer of employees from College B to University S was indeed an internal transfer. The question is whether the church is ‘owner’ of or ‘shareholder’ in the university. Furthermore, is the church or University S, as a separate legal entity, the new employer? The steering committee referred to the fact that University S was a juristic person with all the rights accorded to her and consequently the employer. That was corroborated by the Chief Executive Officer of Hospital C in a letter dated 15 February 2013 addressed to Faculty of College C. In that letter the Chief Executive Officer stated:

In 2010, the Church together with the Government of the Kingdom of Swaziland upgraded the Church colleges in Swaziland (Nursing, Theology, and the Teacher Training College) into a university: University S, hereafter referred to as ‘University S’. The establishment of this new entity [our emphasis], a Christian university, has necessitated the transcendence of specific SCHI (Swaziland Church Health Institutions) employees from the SNHI to University S…

As a result of this transition, College C will cease to exist after 31 March 2013. It is intended that on the 31 March 2013 your employment contract with the SCHI will come to an end. Should you choose not to engage in the transition process and remain with SCHI, you are directed to seek individualized counselling with the Human Resource Department to discuss options for redeployment in the institution. This termination is not due to any real perceived disciplinary action; it is necessary action to end your employment with the current entity (SCHI) [our emphasis] before you can begin employment with the new entity (University S) [our emphasis]. If you so choose, you will be scheduled to begin your employment contract with University S on 1 April 2013. (Board of Trustees of the Swaziland Church Health Institutions, 2013, correspondence)

Employees in this situation should carefully consider their options because it seems that the law does not provide them any protection. The employer will be able to declare such employees redundant since the employees themselves opted not to transfer, thus indirectly terminating their employment since the old institution will cease to exist. As discussed above, such employees will not be able to claim severance pay since redundancy is a fair reason for termination of service.

Terms and Conditions of Transferred Academics

The need to standardize terms and conditions of employment is an inevitable part of mergers (Israelstam, n.d.). However, Labour law restricts the manner in and extent to which the new employer may alter the terms and conditions of service. The Higher Education Bill requires that ‘the merger may not work to the detriment of existing employees’ (Swaziland, 2010: s38(3)), thus implying that the new terms and conditions of service may not be less favourable than those with the old employer.

Again, since the transfers under Swaziland law are not transfers of higher education institutions as going concerns, the employment contracts are not automatically transferred to the new employer. The new employer will conclude new employment contracts with the employees and will thus not be bound by section 26 of the Employment Act that regulates changes made to employment contracts. When the transferred employees have successfully applied for positions with the new employer and had accepted the appointment, the new employer has to provide the employee within two months after the appointment date with a completed copy of the written particulars of employment form (e.g. the Second Schedule to the Employment Act; Swaziland, 1980: s22(1)). Should the employer thereafter want to make changes to the Second Schedule he or she has to comply with section 26 of the Employment Act.

Conclusions and Recommendations

There is paucity in law and policy regulating the transfer of academic employees during the merger of higher education institutions in Swaziland. Section 33 bis of the Employment Act is the main general law regulating transfers of employees including transfers of academic employees during mergers. Unfortunately it does not provide sufficient protection to academic employees being transferred. This is mostly because it does not provide for the transfer of higher education institutions as going concerns with the result that transfers are not automatic, continued employment not guaranteed, and the rights and obligations between the old employer and each employee do not continue in force with the new employer. It is recommended that the Swaziland legislature considers amending section 33 bis so that it provides for transfer of businesses as going concerns. Similarly, it is also recommended that section 38 of the Higher Education Bill of 2010 be amended to provide for the transfer of higher education institutions as going concerns.

Statutory, terminal benefits that must be paid by the old employer to academic employees before the merger are: severance allowance, notice pay, additional notice, leave days, notice pay, overtime due, employee contributions to pension funds and medical aid reimbursement. Other benefits, such as payment for long service, may also be payable if provided for in the conditions of service.

The Industrial Relations Act provides that mergers may take place in terms of procedures prescribed by the merging institutions’ constitutions. In the absence of such provisions, the merger into University S presented many procedural problems. The study of the University S case brought to light the importance of a consultation process, the necessity for specific steps to regulate the termination of services by the old employer and employment security after employment with the old employer is terminated by regulating the appointment by the new employer, setting a consolidated transfer schedule for employees from the various merging higher education institutions and clarity on who will be responsible for various aspects of the transfer process. It is suggested that the legislature consider including a requirement that when higher institutions want to merge they must submit their procedures as set out in their constitutions and their transfer schedule to the Labour Commissioner for approval before the process begins. That will allow the commissioner to consider whether employees’ labour rights are sufficiently protected.

It is recommended that institutional constitutions (policies) include rules to regulate both internal and external transfers. These policies should be adopted by collective agreement so that greater protection is provided to academic employees that are transferred.

The authors are of the opinion that the Industrial Court of Appeal’s approach in Swaziland Hotel Catering Allied Workers Union v Swazispa Holdings Ltd should be followed and section 33 bis should purposively be interpreted with the aim of providing protection to transferred employees. It is further suggested that the constitutional labour rights should also be used to guide the interpretation of section 33 bis. This is essential because a literal interpretation will not provide sufficient protection. That said, the authors strongly suggest that this must be an interim measure and that the legislature should take notice of the problems surrounding the interpretation of section 33 bis and address those by amending the section.

Since the Swaziland government supports the establishment of private universities to keep graduates in the country, it will defeat the purpose if it fails to ensure employment security to transferring academics. A successful merger and institutional success depends on how well the transferring academics’ professional identities are upheld and whether they are facilitated to continue with their professions in a similar fashion than before the merger.