Constitutional Court Judgment on Labour Broking
Constitutional Court Judgment on Labour Broking in South Africa
The Constitutional Court of South Africa (“the Court”), on 26 July 2018, handed down judgment in a case concerning the correct interpretation of Section 198A(3)(b) (“the section”) of the Labour Relations Act 66 of 1995 (“the Act”), a seemingly rather controversial section of the Act which came into effect on 1 January 2015. The section regulates temporary service employment in South Africa and specifically applies to workers who earn below the threshold as set by the Minister of Labour in terms of Section 6 of the Basic Conditions of Employment Act 75 of 1997 (“BCEA”).
The Court had to decide whether, in terms of the section, the client of the labour broker (“client”), which is referred to as a Temporary Employment Services (“TES”) in South Africa, becomes the sole employer of the temporary placed worker, or whether a dual employment relationship exists whereby both the TES and the client are the employers of the placed worker.
The matter was first heard before The Commission for Conciliation, Mediation and Arbitration (“CCMA”) and subsequently on appeal to the Labour Court where it was held that a correct interpretation of the section supports the dual employment relationship. The matter was then taken on appeal to the Labour Appeal Court (“LAC”) which found that the sole employer interpretation best protected the rights of placed workers and promoted the purpose of the section.
The Court, on appeal, upheld the LAC decision and held that a worker employed by a TES and who has worked for a period in excess of three months for the client, is no longer performing a temporary service and the client, as opposed to the TES, becomes the sole employer of the worker by virtue of the section of the Act.
Background to TES in South Africa
A significant percentage of workers in South Africa are employed through TES. In terms of the old Labour Relations Act 28 of 1956, the TES was deemed to be the employer of the placed worker and then outsourced them to their clients for indefinite periods. Consequently, a placed worker will be reassigned to a new employer, usually without the placed worker’s consent and forced into a new employment relationships on terms, which they have not initially agreed to.
This arrangement benefitted the clients as they utilised the services of TES for the purpose of not only eliminating the typical burden and costs associated with employing full time employees, but also because of a means of circumventing many labour law responsibilities.
The TES managed the employment contract and salary payments and acted as a payroll and HR manager. The clients did not have to deal with trade unions and could dismiss the placed worker with relative ease and not have to deal with CCMA disputes, which was the responsibility of the TES. This was subsequently changed in 2014 with amendments to section 198 of the Act, which saw the introduction of section 198A. The change aimed at providing protection to temporary placed workers especially those in precarious employment.
Impact of the Courts Judgment on placed workers
The 2014 amendments, however, created some uncertainty as alluded to above so accordingly this judgment serves to confirm that a temporary placed worker is now fully incorporated into the workplace as the employee of the client after the lapse of the three-month period. The employee automatically becomes employed on the same employment terms and conditions to that of other similar employees of the client, with the same benefits and job security that follows. Further, and more importantly, now with the added security and stability in their employment, it allows workers earning below the threshold, the ability to plan ahead financially and enter into long term contracts for the purchase of cell phones, furniture, etc.
On the expiry of the three-month period, the placed worker is now a permanent employee of the client and the TES is not a party to the employment relationship and accordingly not permitted to continuously move a placed worker, reduce their wages and change their job descriptions. This self-evidently manifests employment security and the employee can now demand equal pay without having any difficulty enforcing any claims they may have in terms of the Act against employers.
The judgment merely focuses on the interpretation of a specific section of the Act dealing with workers earning below the threshold and does not necessarily mean the beginning of the end for TES as placed workers earning above the BCEA threshold can continue to be employed through TES without any restrictions.
As regards the sole employer interpretation, the Court found that not only does it give effect to the purpose of the 2014 amendments, it also promotes the constitutional rights of workers as envisaged in Section 23 of the Constitution.
With the rate of unemployment in South Africa being exorbitantly high and continually increasing, this confirmatory judgment is more than welcoming and long overdue and puts any discrepancies and confusions regarding sole and dual employer employee relationship to rest.
Assign Services (Pty) Limited v National Union of Metalworkers of South Africa and Others (CCT194/17)  ZACC 22 (26 July 2018)
Labour Relations Act 66 of 1995
Basic Conditions of Employment Act 75 of 1997
Labour Relations Act 28 of 1956
The Constitution of the Republic of South Africa, 1996
Statistics South Africa Statistical Release P0211, Quarterly Labour Force Survey Q4: 2017 (13 February 2018)