Labour Broker Employees: Latest Ruling

CBA Association Member Phakisa Corporate Services has drawn our attention to the Labour Court Ruling that could have an important implications for CBA Members who make use of labour brokers or Temporary Employment Services (TES).

On 8 September 2015, the Labour Court handed down Judgment in the much anticipated case of Assign Services (Pty) Ltd versus CCMA and others.

Background to the Case

Earlier in 2015 the Labour Relations Act, 66 of 1995 (“LRA“) was amended.  The amendments sought to provide additional protection to employees perceived as particularly vulnerable, such as those employed by labour brokers.  These additional protections have resulted in:

• the client and the TES being jointly and severally liable if the TES contravenes the Basic Conditions of Employment Act, 75 of 1997 (“BCEA“) (or sectoral determinations under the BCEA), as well as collective agreements or arbitration awards which apply in respect of these employees;

• If the TES employee works for a client for a period exceeding three months, and is paid less than the annual earnings threshold (currently R205 433.43 per annum), the client is the “deemed employer” of the TES employee;

• once the TES employee is deemed to be the employee of the client, he or she must be treated “on the whole no less favourably than an employee of a client performing the same or similar work, unless there is a justifiable reason for different treatment”.

New Ruling

The central question in this dispute was what happens to the employment relationship between the labour broker (TES) and its employees once the latter are deemed to be employed by the labour broker’s client.

In the case of Assign Services and CCMA, NUMSA and Krost Shelving and Racking, the CCMA award was reviewed and overturned. It found that despite the deemed employer provisions in the LRA, the TES remains the employer of its employees, and that it must – as an employer – continue to comply with the obligations of an employer in terms of the LRA, as well as its contractual obligations under its contracts of employment with the TES employees.  Equally, the client must ensure compliance with the LRA in respect of employees assigned to it, and will be liable if there is non-compliance.

Practical Implications of the Judgment

• There is no transfer of the employment relationship from the TES (Temporary Employment Services Provider) to the client;

• The TES remains an employer of the employees, and must continue to pay salaries and must provide the BCEA as well as its contractual obligations in respect of its employees;

• The client of the TES is deemed to be the employer solely for the purposes of the LRA. As such, if the employee is dismissed by the TES, or subjected to an unfair labour practice by the TES, the employee can claim the remedies for unfair dismissal or unfair labour practice against the client directly;

• The client of the TES is jointly and severally liable for contraventions of the BCEA and the employee may claim against the client directly;

• Two employment relationships are established that are discernible from each other, and that these operate in tandem. Each relationship has its own individual rights and obligations, as well as shared rights.

Having said that, it must be accepted that the debate is still far from over. The TES industry is said to generate R40 billion per year and there may be powerful pressures for alternative interpretations of section 198A(3)(b) that would attenuate its impact and preserve the status quo as far as possible. And, indeed, for labour broker employees placed with clients for less than three months, or those earning more than the threshold applicable to the section, the status quo largely continues.