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Is This the Beginning of the End for Labour Brokers?

Is This the Beginning of the End for Labour Brokers

Assign Services (Pty) Ltd vs Numsa and Others - Is This the Beginning of the End for Labour Brokers?

Introduction
When the amendments to the Labour Relations Act 66 of 1995 (hereafter referred to as “the LRA”) came into operation on 1 January 2015, everyone thought that it would be the end of Labour Brokers. The amendments came about to give security to marginalized Employees and to regulate the industry.

The amendment renamed Labour Brokers to “Temporary Employment Services”. Section 198A(3)(b) of the LRA stipulates that an Employee that earns less than the determined threshold and is contracted through a Temporary Employment Service (hereafter referred to as “TES”) to a Client for longer than three months, will be deemed to be the Employee of the Client.

This created a lot of confusion because it was unclear what the deeming provision meant. Some argued that a dual relationship was now created by the LRA whereby the Employee is deemed to be employed by both the Client and the TES. Others argued that it created an employment relationship between the Client and the Employee solely for the purposes of the LRA.

The Constitutional Court finally resolved the debate when it delivered judgment in Assign Services (Pty) Ltd V Numsa and Others1 on 26 July 2018. The case will be discussed below to give both Clients, Employees and TES guidance as to what the nature of the relationship between the Parties are.

Case study: Assign Services (Pty) Ltd V Numsa and Others
Assign Services (Pty) Ltd (hereafter referred to as “Assign Services”) is a registered TES that places Employees at Clients. Krost Shelving and Racking (Pty) Ltd (hereafter referred to as “Krost”) was the Fourth Respondent to this dispute.

Assign Services placed 22 workers with Krost to supplement Krost’s permanent Employees on the 1st of April 2015. The said Employees worked for longer than three months at Krost. The period thus triggered the deeming provision of Section 198A(3)(b) of the LRA. Many of the placed Employees belonged to NUMSA.2

A dispute arose between Assign Services, NUMSA and Krost. Assign Services were of the opinion that the placed Employees became the Employees of Assign Services as well as Krost for the purposes of the LRA. NUMSA disagreed with this view and claimed that when the deeming provision of Section 198A(3)(b) were triggered, that Krost became the sole Employer of the placed Employees.3

On 23 April 2015 Assign Services referred the matter to the CCMA to be determined by Arbitration. The CCMA Commissioner that heard the matter came to the conclusion that dual Employer interpretation would create confusion whereby which Employer would be allowed to discipline the Employees and thus determined that the triggering of the deeming provision contained in Section 198(A)(3)(b) resulted in the Client becoming the sole Employer of the Employees.4

Assign Services took the Award issued by the Commissioner, on review to the Labour Court. The Labour Court determined that the Commissioner committed a material error of law. Brassey AJ stated that:

“the contract of employment between the TES and the employee to be the ‘source of control’ in the employment relationship. The TES therefore retains control despite any new statutory relationship between the employee and the client.”

The Client would thus only be the Employer for the purposes of the LRA whilst the "common law contract between the TES and the employee remains firmly in place.” 5

NUMSA applied for leave to appeal against the judgment of the Labour Court to the Labour Appeal Court. The Labour Court refused NUMSA leave to appeal. The Labour Appeal Court granted NUMSA leave to appeal directly.6

The Labour Appeal Court determined that “a placed employee who has worked for a period in excess of three months is no longer performing a temporary service and the client become the sole employer by virtue of Section 198A(3)(b).” 7

Assign Services applied for leave to appeal to the Constitutional Court. Assign Services argued that the Labour Appeal Court’s decision albeit “banned labour broking” and that this would be to detriment of the South African Labour Market.8

The Constitutional Court were tasked to determine how Section 198A(3)(b) were to be interpreted. It had to decide whether the triggering of the deeming provision created a dual employment relationship as Assign Services claimed or a sole employment relationship as NUMSA claimed.

What the Constitutional Court decided
The Constitutional Court determined that Section 198A(3)(a) regulates the employment relationship between TES and Employees and the deeming provision stipulates that the Employees are the Employees of the TES.9

However, when the deeming provision of Section 198A(3)(b) kicks in, that is when the Employees are placed at a Client for a period longer than three months, the deeming provision stipulates that the Employees are now the Employees of the Client.10

Conclusion
The Constitutional Court thereby did not ban labour broking or TES as has been stated. The Constitutional Court had finally given clarity on a contentious and confusing issue. TES may still place Employees at Clients.

Should the Employee be placed at the Client for a period shorter than three months, then the Employee will remain the Employee of the TES. However, should the Employee be placed at the Client for a period that exceeds three months, the Client will be become the Employer of the Employee. The Client would then be advised to supply the Employee with an Employment Contract. Should the Client not want to become the Employer of the Employee, the Employee should only be placed at the Client by the TES for a period shorter than three months.

At SchoemanLaw Inc we can assist you with the drawing up of Employment Contracts and advising you on all complex Labour-related and Employment matters. Contact SchoemanLaw Inc. today for expert assistance!  

1 2018 ZACC 22, Case CCT 194/17. 
Paragraphs 12 and 13 of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17.
Paragraphs 14 of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17. 
4 Paragraphs 15, 18 and 19 of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17.
5 Paragraphs 21 and 23 of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17.
6 Paragraphs 24 and 25 of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17.

7 Paragraph 28 of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17.

8 Paragraph 29 of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17.
9 Paragraph 83(c) of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17. 
10 Paragraph 83(d) of ASSIGN SERVICES (PTY) LTD V NUMSA AND OTHERS, 2018 ZACC 22, Case CCT 194/17. 

© Helena Roodt - Schoemanlaw Inc. - 2018

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2018 ZACC 22, Case CCT 194/17.