Temporary employment services: An important decision

Temporary employment services
23 Dec 2015

Amendments  to the Labour Relations Act, 66 of 1995 (“LRA”), which came into force in January of this year, introduced important and controversial provisions dealing with temporary employment services (“TES”), commonly known as labour brokers.

The most important of these provisions is found in the newly-enacted section 198A. It makes a distinction between what can be regarded as the “acceptable” use of a TES services and the “unacceptable” use of its services. Acceptable use is described as the provision of a “temporary service” and is defined as the following, namely if:

  • a TES employee is assigned to a client  for a period of less than three months;
  • a TES employee is assigned to a client as a substitute for an employee who is temporarily absent from work;
  • a TES employee is assigned to a client to perform a category of work which is determined to be a temporary service by a collective agreement concluded in a bargaining council, a sectoral determination or a notice published in the Government Gazette by the Minister of Labour.

This provision is clearly aimed at discouraging the use of the employees of a TES on a long-term basis to avoid the costs of the employment of permanent employees. The sanction it imposes if a client makes use of a TES in circumstances that fall outside the definition of a temporary service is an interesting one and consists of two parts:

  • The first is that the employee assigned to the client is “deemed” to be the employee of the client, for the purposes of the LRA and is employed on an indefinite basis by the client.
  • The second is that the client must treat the deemed employee “on the whole not less favourably” than an ordinary employee who performs the same or similar work, unless there is a justifiable reason for not doing so.

The deemed employment provisions only apply if the employee earns less than the threshold prescribed by the Minister in terms of section 6(3) of the Basic Conditions of Employment Act, 75 of 1997. At present, this is ZAR 205 433.30 per annum.

There has been much debate whether the operation of the deemed employment provision results in the client being regarded as the sole employer or whether the TES also remains the employer. If the latter scenario applies, the employee assigned to the client will, in effect, have two employers, at least for the purposes of the LRA.

The CCMA and bargaining councils have been called upon to consider this issue in at least two arbitration proceedings. In both awards, the client was regarded as the sole employer. In Assign Services (Pty) Ltd v CCMA & others (Unreported JR 1230/15 8 September 2015) the Labour Court was required to consider an application to review and set aside an award where it was held that the client became the sole employer for the purposes of the LRA.

The Court found that the commissioner had erred and came to the conclusion that the employment relationship between the TES and the assigned employee continued to exist for the purposes of the LRA. It did so in the following terms:

“[12] So (and once again I repeat) the only issue, on the stated case at any rate, is whether the TES continues to be an employer of the worker and, by reason of this fact, is concurrently vested with the statutory rights/obligations and powers/duties that the Act generates. I see no reason why this should not be so. There seems no reason, in principle or practice, why the TES should be relieved of its statutory rights and obligations towards the worker because the client has acquired a parallel set of such rights and obligations. The worker, in contracting with the TES, became entitled to the statutory protections that automatically resulted from his or her engagement and there seem to be no public policy considerations, such as pertain under the LRA’s transfer of business provisions (s 197), why he or she should be expected to sacrifice them on the fact that the TES has found a placement with a client, especially when (as is normally so) the designation of the client is within the sole discretion of the TES.”

It is highly unlikely that this decision is the last word on the issue as an appeal is likely; but the question is what effect the decision may have in practice?

From the perspective of a TES, the decision does seem to be of importance. It appears that at least some TES’s want to be seen as remaining the employer of the assigned employee. As the Court pointed out –

“[6] … By these means it envisages that it can continue to provide a justification for the service that it offers the client and so warrant the charge it levies in the conduct of its labour broking business.”

These TES’s will therefore be happy with the outcome.

From the client’s perspective, it may well be asked whether the decision has any meaningful consequences in practice. In most cases, it is likely that an employee will seek to exercise his or her LRA rights against the client rather than a TES, irrespective of whether there is one or there are two employers. Only time will tell as this complex piece of legislation is interpreted.

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)

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