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The Pitfalls of Engaging a Labour Broker following the LRA Amendments

0015 - CaveatLegal_26_08_2015_webThe introduction of section 198A of the Labour Relations Act 66 of 1995 (“LRA”) in January last year caused uncertainty amongst Temporary Employment Services (“TES”) commonly known as labour brokers and clients making use of their services.

In summary, section 198A distinguishes between what is regarded as “acceptable” use of a TES service and the “unacceptable” use of its service.  Acceptable use is described as the provision of a “temporary service” and is defined as the following, namely if:

  1. A TES employee is assigned to a client for a period of less than three months;
  2. A TES employee is assigned to a client as a substitute for an employee who is temporarily absent from work;
  3. 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.*

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 imposed, if a client makes use of a TES in circumstances that fall outside the definition of temporary services, is the following:

  1. 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; and
  2. 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 uncertainty arises from the abovementioned deeming provision.  Does it mean that the client becomes the sole employer of the TES employee or does the TES employee now have two employers, namely the TES and the client?

It was hoped that the Labour Court would put an end to the confusion when handing down judgment in the matter of Assign Services (Pty) Ltd v CCMA and others (Unreported JR1230/15 8 September 2015).  This was a review of a CCMA arbitration award in which the Commissioner had found that the client became the sole employer for the purposes of the LRA.  The Court set aside the arbitration award and found:

[12] So (and once again I repeat) the only issue, on the stated case, is whether the TES continues to be an employer of the worker and,  by reason of this fact, is concurrently vested with statutory rights/ obligations and powers / duties that the Act generates.  I see no reason why this should not be the case.  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 statutory protections that automatically resulted from his or her engagement and there seems to be no public policy considerations, such as pertain under the LRA’s transfer of business provisions (s197), 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.

If there are two employment relationships at play it begs the question, where one of the parties terminates the employment relationship (deemed or otherwise) with the TES employee does the other employment relationship continue to exist independently?  How does the client of the TES, who is not the de facto employer, ensure that it is not sanctioned for an unfair dismissal that may have been committed by the TES?

This is of particular importance following the introduction of section 198(4A) which provides that if the client of a TES is deemed to be the employer of an employee in terms of section 198A:

  • the TES employee may institute proceedings against either the TES or the client or both; and
  • an order or award made against a TES or client may be enforced against either.

Until such time as we have more certainty on how the provisions of section 198 and 198A are going to be interpreted and enforced by our courts it would be prudent to scrutinise any contracts our clients may be concluding with a TES in order to ensure that they contain the necessary indemnities and practical provisions regulating the employment relationships; the termination of these employment relationships; and litigation in the CCMA and Labour Courts to afford our clients sufficient protection.

Prevention being better than cure, the safest approach for clients is to only engage the services of a TES where genuine operational requirements necessitate this.

* This deeming provision only applies to employees earning below the earnings threshold prescribed by the Minister of Labour in terms of section 6(3) of the Basic Conditions of Employment Act, 75 of 1997.  Currently this amount is R205 433.30 per year.

Justine Del Monte

Justine has a BLC and LLB (cum laude) from the University of Pretoria and was admitted as an attorney in 2002. She spent 6 years at Irish Ashman Attorneys where she rose to the level of partner before leaving to focus on her employment law practice. She joined Caveat Legal in 2015.


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