The Constitutional Court has the Final Say on Temporary Employment Service Providers AKA Labour Brokers

Before the recent defining case of Assign Services (Pty) Limited and National Union of Metalworkers of South Africa, labour brokers and their Client Companies under S198A (3)(b) specifically of the Labour Relations Act (LRA) as amended in 2014, had uncertainty regarding who the actual Employer was of workers employed by the broker initially. In other words the parties were unsure if the Company for which that Employee rendered services through the labour broker also became the Employer of that Employee upon expiration of the Employee’s three month fixed term contract. It is important to note that this section only relates to Employees earning below the threshold of R205 433.30 per annum, as determined by the Minister of Labour.

For ease of reference, S198A (3)(b) of the LRA states as follows:

198A (3) For the purposes of this Act, an employee —

(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, employed on an
indefinite basis by the client.

This was very confusing for labour brokers, its Client Companies and affected Employees because it created uncertainty about what was expected from the labour broker or its Client in terms of the law. When the aforementioned case was referred by the NUMSA to the CCMA, the Union argued that the interpretation by the Respondent, Assign Services (Pty) Limited, that S198A (3)(b) of the LRA as amended brought about a dual employment relationship was incorrect. They argued that it not only created confusion but it also failed to properly protect the affected Employee’s rights.

The Commissioner at the CCMA agreed with the Union and ruled that the section of the Act should be interpreted to mean a sole Employer after expiration of the three months; therefore no dual employment. Assign Services (Pty) Limited then referred the matter to the Labour Court for the review of the Arbitration Award. Here the Labour Court held in favour of the Company stating that the section of the LRA was to be interpreted such that it created a dual employment relationship between the labour broker and its Client i.e. both were seen to be the Employer after the 3 month period. The Union was not satisfied and thereafter referred this Court Order to the Labour Appeal Court for adjudication.

The Labour Appeal Court after hearing the parties agreed with the Union and the CCMA award and held that the section should be interpreted in such a manner that the Client Company of the labour broker would become the sole Employer after the first three months of temporary work by the affected Employee. You can guess, the Company still refused to accept this Order and thereafter approached the highest Court in the land, the Constitutional Court for the final say.

Assign Services found no luck here as the majority of the Constitutional Court Justices, eight out of nine, agreed that the section of the Act must be read to mean that the Client of the labour broker Company becomes the sole Employer and that therefore the labour broker was no longer the Employer of the Employee placed at the Client. The section could thus not mean there would or could be a dual employment relationship due to this final and binding decision. This landmark judgment by the Constitutional Court means that Employees have a clear understanding of who their Employer is (the Client Company) after the initial three month period in order to properly enforce their rights when necessary, for example who to name as their Employer when referring a dispute to the CCMA if they have been dismissed and so on. Another practical example that the Constitutional Court referred to was the rights of workers to strike legally in terms of the LRA, as dual employment would not assist them because they could only claim a protected strike against one Employer, not both. This would have meant that they could be unfairly dismissed by the second Employer as it would be deemed an unprotected strike.

Naturally labour brokers countrywide are not happy with the outcome of the matter by the Constitutional Court however they have no choice but to follow. Their argument is that the law is getting rid of labour brokers in South Africa. This is not necessarily the case as the Court did not rule in this regard and they do assist in placing people in temporary positions thus creating new job opportunities for people who might otherwise not have succeeded in getting employment due to lack of skills and so on. They also carry the administrative burden related to employed staff and this is often why they are made use of. Employees must be clearly protected by our laws in order to, amongst other things, be able to uphold their rights to fair labour practices as afforded to them in Section 23 of South Africa’s Constitution.