Constitutional Court ruling on Labour Brokers

On 27 July 2018, the Constitutional Court provided clarity to an area that has been a matter for different interpretation over a period of time.

With regard to temporary employees, the Labour Relations Amendment Act, 2014, which came into effect 1 January 2015, determined that a temporary worker, working more than 3 months, becomes a permanent worker in respect of labour rights.

Previously, the Labour Court handed down judgement to provide clarity on the interpretation of the “deeming provision” contained in section 198A (3)(b) of the Labour Relations Act (LRA). There was much debate as to whether the deeming provision means that the client of a Temporary Employment Services (TES) becomes the sole employer or the dual employer of the TES employees.
At the time, the legal position was that TES employees remain the employees of the TES and, by virtue of the deeming provision, could assert their rights against the clients of the TES as well. The
finding of the Labour Court supported the “dual employer” approach and TES employees would not transfer to the client as the sole employer.

This was not the end of the debate around this amendment to the LRA.

There were two different views on the “deeming provision” clause. One view is that, once the deeming provision kicks in, the company using a labour broker becomes the sole employer of the employees placed by that labour broker. This would mean the employees placed by the labour broker are effectively “transferred” to the client of the labour broker. The second view is that a dual employment relationship arises with both the labour broker and the client of the labour broker being regarded as employers of employees placed at the company, which is using the labour broker.

The Constitutional Court’s decision last week favoured the first approach and, therefore, effectively means the company or business where a worker is placed by a labour broker becomes the sole
employer of that worker upon completion of three months of service, if that employee earns below R205 433 a year.

This also means all labour rights can be demanded of the client instead. That includes unionisation rights, the right to strike and bargain and any other right the Labour Relations Act gives a worker. In addition, in terms of sub-section 4, should a TES or client terminate an employee’s assignment to avoid the operation of Section 198A(3)(b), that termination will be considered a dismissal and the usual remedies available through the LRA will apply.

The court ruling does not ban labour broking in its entirety, it merely confirms that after three months employees have labour relation rights against the client (where they work). Ordinarily‚ the
labour broker will remain the employer of the placed worker in terms of contract.

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