WHO IS THE EMPLOYER? THE LABOUR BROKER OR THE CLIENT?

WHO IS THE EMPLOYER? THE LABOUR BROKER OR THE CLIENT?

I was employed by a Temporary Employment Service (“TES”) to work on a fixed-term basis for a company that manufactures stationery. After working for the same client continuously for six years, I was informed that my services will no longer be needed. I want to refer my matter to the Commission for Conciliation, Mediation and Arbitration, however, who will be the responsible party?

As a vast majority of employees in South Africa obtain employment through TES or commonly known as labour brokers, it is a predicament which many are faced with when the client of a TES, suddenly and sometimes without prior notice, decides to end the employment of the employee. As the employee was providing his labour to the client and not the TES, the question arises: who is then actually the employer of the employee?

The deeming provision in s198A(3)(b)(i) of the Labour Relations Act, 66 of 1995 (“LRA”) provides that an employee of a TES not performing a temporary service for the client is “deemed to be the employee of that client and the client is deemed to be the employer…”

In a recent series of cases between Assign Services (Pty) Limited and the National Union of Metalworkers of South Africa the Labour Court, Labour Appeal Court (“LAC”) and eventually the Constitutional Court were given the task to decide who will be deemed to be the employer of an employee who was employed through the use of TES.

The aforesaid section was the crux of the matter and the two main points of argument were: firstly, that once the deeming provision kicks in, the client of the TES becomes the sole employer of the employees, meaning that the TES employees are effectively “transferred” to the client. Secondly, that a dual employment relationship arose with both the TES and client as employers.

When the matter was referred to the Commission for Conciliation, Mediation and Arbitration, the commissioner held that the client becomes the sole employer of the placed TES employees for purposes of the LRA.

The matter was then taken on review to the Labour Court who rejected the argument that s198A(3)(b)(i) creates a sole employment relationship between the client and the placed employees. According to the Labour Court, the deeming provision augmented the employment contract between the TES and its employees and added the client as the party against whom the employees could claim their rights in terms of the LRA.

The Labour Court’s decision was then taken on appeal to the LAC. The LAC held that the TES is the employer of the placed employee until the employee is deemed to be the employee of the client and that the deeming provision becomes applicable after three months of continuous employment with the same client, the client becomes the statutory employer of the TES employee. The TES employees are deemed to be permanent employees of the client.

The matter was then referred to the Constitutional Court to make a final ruling on the matter. In a majority decision of the Constitutional Court, the ruling of the LAC was supported and accepted. The court supported its interpretation of the deeming provision by refereeing back to the whole idea of the legislator in providing protection to the TES employees. The court further held that the s198A must be contextualised within the right to fair labour practices in section 23 of the Constitution of the Republic of South Africa, 1996 and the purpose of the LRA as a whole. According to the court, a TES’s liability only lasts as long as its relationship with the client and while it continues to remunerate the employee. As soon as the client elects to remunerate the employee directly, the TES will then not be part of the employment relationship.

In light of the Constitutional Court judgment, as soon as the employee provides services to the client of a TES for a period longer than three months, the deeming provision will become applicable and the client will be faced with the duties and responsibilities of an employer. The employee automatically becomes employed on the same terms and conditions of similar employees, with the same employment benefits, the same prospects of internal growth and the same job security that follows. This will also mean that any legal action and liability that flows from the aforesaid will also be direct against the client.

Sources:

  • Labour Relations Act, 66 of 1995
  • Assign Services (Pty) Limited v National Union of Metalworkers of South Africa and Others 2018 (5) SA 323 (CC)
  • https://www.golegal.co.za/deeming-provision-lra/
  • The Constitution of the Republic of South Africa, 1996

 
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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