Who is the employer of a temporary employee once the three-month employment period has lapsed – the client, the labour broker or both?
The Constitutional Court (CC) had recently handed down Judgment in the very controversial and captivating case of Assign Services vs NUMSA (CCT 194/17). This article provides a practical view as to whom the employer is of temporary employees placed in employment through the services of labour brokers.
This case was in regard to the contentious amendments of the Labour Relations Act (LRA) relating to Temporary Employment Services (TES), more commonly referred to as labour brokers. In terms of Section 198(1) of the LRA, a temporary employment service, means any person who, for reward, procures for or provides to a client other persons:
(a) who perform work for the client, and
(b) who are remunerated by the temporary service?
In terms of paragraph 14 of the Assign case, a dispute had arisen between Assign Services (The Labour Broker), Krost (The Client) and NUMSA (The Union) regarding the interpretation and effect of Section 198A (3)(b). Assign was of the view that the consequences of the deeming provision were that the placed workers remained their employees for all purposes but were also deemed to be Krost’s employees for the purposes of the LRA. Assign termed this the ‘dual employer’ interpretation of Section 198A (3)(b). NUMSA disagreed and its view was that Krost became the only employer of the placed workers when Section 198A (3)(b) was triggered. NUMSA termed this the ‘sole employer’ interpretation.
In terms of the amended Section 198A (1) of the LRA, a temporary service means work for a client by the employee:
a) For a period not exceeding three months;
b) As a substitute for an employee of the client who is temporarily absent.
The critical different between the original Section 198(1) a temporary employment service and S198A, relating to what is a temporary service is that while Section 198(1) defines what a TES is, Section 198A defines what conduct or duration of employment under the triangular labour broking arrangement is an actual temporary placement or an abuse of the TES model.
Further in terms of S198A (2), the amends do not apply to employees earning in excess of the threshold as prescribed in the Basic Conditions of Employment Act currently sitting at R 204 533, 33 gross remunerations per annum.
The greatest interpretation challenge had presented itself in Section 198A (3), which states that for the purposes of this Act, an employee:
a) Performing a temporary service as contemplated in subsection Section 198A(1), for the client is the employee of the temporary employment service in terms of Section 198 (2); or
b) Not performing such temporary service for the client is:
i) Deemed to be the employee of that client and the client is deemed to be the employer; and
ii) Subject to the provisions of Section 198B, employment on an indefinite basis.
The CC held at paragraph 73, in evaluating these arguments, it is necessary to consider the ‘triangular’ nature of the TES/client/placed employee relationship. The triangular relationship exists to split the functions of the employer between the TES and the client for a fee. However, the functions for which the TES is responsible seldom relate to the actual work of the employee. Their primary responsibilities are to pay and manage the human resources component of employment, while the day-to-day management, work allocations and performance assessment in most circumstances are conducted by the client only. The client is also responsible for the employees’ working conditions because employees are placed on the client’s premises. Importantly the client also has the power to discontinue the employee’s service. In a sense, the TES is merely the third party that delivers the employee to the client. The employee does not contribute to the business of the TES except as a commodity.
The CC held at paragraph 82 that Section 198A must be contextualized within the right to fair labour practices in Section 23 of the Constitution and the purpose of the LRA as a whole. The court held further at paragraph 84 that on an interpretation of Sections 198 (2) and Section 198A (3)(b) that, for the first three months the TES is the employer and then subsequent to that time lapse, the client becomes the sole employer. The Court found that the language used by the legislature in Section 198A (3)(b) of the LRA is plain and that when the language is interpreted in the context, it supports the sole employer interpretation.
SERR Synergy guides and assists businesses in a practical and supportive way with regard to the required processes and procedures to ensure labour legislation compliance and to minimise the risk that the business is exposed to when employing staff.
About the Author: Jared Francis joined SERR Synergy in October 2016, and currently holds the title of KZN Labour Manager. He is an admitted attorney who has practised in KZN and Gauteng. Amongst other qualifications, he holds an LLB degree, a Post-Graduate Diploma in Industrial Relations and a Post-Graduate Certificate in Forensic Investigation from the University of KwaZulu-Natal. He has more than 10 years’ experience in the legal and industrial relations fields respectively.
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