When a job seeker has been absorbed by a company through the services of a labour broker for a period of more than three months, do they become the permanent employee of the company, the labour broker, or both?
In this scenario, they become an employee of the company, according to a judgment by the Constitutional Court on Thursday, which changes the mechanics of South Africa’s labour broking system.
For many years, the labour market has grappled with the phenomenon of dual employment relationships, whereby employees hired for more than three months and earning below R205 433 annually are deemed to be employed by both the labour broker and its clients (companies absorbing job seekers).
The interpretation of the amended Labour Relations Act (LRA), particularly section 198A(3)(b), which protects marginal and low-paid workers in temporary employment from unfair labour practices, was disputed by labour unions, employees, and brokers.
This section of the LRA ensures that an employee who earns less than the stipulated threshold (below R205 433 annually) and is contracted through a labour broker’s client for more than three months is deemed to be permanently employed by that client.
However, acting judge Daniel Dlodlo, who wrote the Constitutional Court judgment, said the language of the LRA section is “plain” and “supports the sole employer interpretation”. In other words, the clients of labour brokers remain sole employers and labour brokers are eliminated from the employment equation completely.
The judgment has massive implications for the profitability of labour brokers and the provision of their services after the lapse of the three-month period as a large portion of SA’s workforce is employed through labour brokers.
Start of dispute
The matter has featured in several court processes since May 2015, when a dispute was first heard at the Commission for Conciliation, Mediation and Arbitration (CCMA) between labour broker Assign Services, its client Krost Shelving & Racking, and the company’s employees, represented by the National Union of Metalworkers of SA (Numsa).
Assign placed 22 employees with Krost in April 2015, all of whom worked on a full-time basis for a period of more than three months – triggering a dispute about the interpretation of section 198A(3)(b) of the LRA.
At the CCMA, Assign argued that the placed employees remained their employees and also Krost’s employees. It added that there is nothing under the LRA that imposes a ban on labour brokers after an employee has been absorbed for more than three months. Numsa disagreed, saying Krost was the only employer and having a dual employer structure creates confusion and uncertainty, and prejudices vulnerable employees.
The CCMA ruled in favour of Numsa. Assign had CCMA’s ruling successfully reviewed and set aside at the Labour Court, which adopted the dual employment interpretation as the rights of employees would be protected under this structure.
Numsa successfully appealed the Labour Court judgment in March 2016 at the Labour Appeal Court, which successfully ruled that an employee who has worked for a period over three months is no longer performing temporary service and the client/company they work for is the sole employer.
Assign submitted an appeal to the judgment at the Constitutional Court, saying that the Labour Appeal Court’s decision was “tantamount to a ban on labour broking” despite, it added, the LRA still allowing labour brokers to offer their services after the three month cut-off. Meanwhile, Numsa argued that sections of the LRA don’t ban labour brokers but “regulates them in respect of only lower paid placed employees in employment for more than three months”.
The Constitutional Court upheld the Labour Appeal Court judgment. Dlodlo said a plain reading of 198A(3)(b) “clearly distinguishes” between employees employed by labour brokers for temporary work and those deemed to be employed by the labour broker’s client where the work is not temporary.
“Interpreting this section to mean that a client becomes ‘one of the employers’ strains the language used,” he said.
Dlodlo said the current legislation is suitable for protecting employees from unfair labour practices as they can sue the client and the labour broker (if there’s still a contract between the labour broker and the employee) and ensures that employees are fully integrated into the workplace after a three-month period.