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Legal experts weigh in on labour broker ruling

Jul 27 2018 17:31
Carin Smith

The Constitutional Court does not ban labour broking in its entirety, but rather aims to ensure that the provision of temporary services is truly temporary, according to legal experts at Cliffe Dekker Hofmeyr.

This is their view despite the National Union of Metalworkers of SA (Numsa) saying on Thursday that it hopes the new Constitutional Court judgment in the union's favour will be the "death knell" for the entire labour broker industry.

Hugo Pienaar, Jose Jorge, Steven Adams and Nonkululeko Sunduza, part of the firm's employment practice, weighed in on the ground-breaking ConCourt judgment in favour of Numsa this week. The case related to the ongoing debate about who should be regarded as the employer of workers placed in jobs by labour brokers under certain legal circumstances.

The debate centres on what the legislature intended by introducing the so-called "deeming clause" in the Labour Relations Act (LRA). One view is that, once the deeming provision kicks in, the company using a labour broker becomes the sole employer of the employees placed by that labour broker. This would mean the employees placed by the labour broker are effectively “transferred” to the client of the labour broker.

The second view is that a dual employment relationship arises with both the labour broker and the client of the labour broker being regarded as employers of employees placed at the company, which is using the labour broker.

The ConCourt decision favoured the first approach and, therefore, effectively means the company or business where a worker is placed by a labour broker becomes the sole employer of that worker upon completion of three months of service, if that employee earns below R205 433.30 a year.

The employee then 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.

According to the Cliffe Dekker experts, a temporary employment service (TES) - commonly referred to as labour brokers - essentially occupies the role of a pay roll administrator.

"The court has concluded that this will not constitute a transfer to a new employment relationship, but rather a change in the statutory attribution of responsibility falling on the client [of the labour broker] as employer within the same triangular employment relationship," the Cliffe Dekker team said in a statement.

"This triangular relationship then continues for as long as the commercial contract between the [labour broker] and the client remains in force and requires the [labour broker] to remunerate the workers."

In a single dissenting judgment, judge AJ Cachalia held that the “dual” employer interpretation applied and found that this interpretation provides greater protection for the placed employees.

In the view of Pienaar and his colleagues, unresolved issues raised in this dissenting judgment will likely lead to more litigation on the issue.

The majority, on the other hand, held that the "deeming clause" must be contextualised within the right to fair labour practices in the Constitution and the purpose of the LRA as a whole.

According to the ConCourt, a labour broker's liability only lasts as long as its relationship with the company which is its client and while it (the labour broker) rather than the client continues to remunerate the worker. Upon the triggering of the deeming clause though, and the client elects to remunerate the employee directly, the labour broker will then fall out of the employment relationship entirely.

The Federation of Unions of SA (Fedusa) has hailed the Constitutional Court ruling as a victory for workers.

"The court ruling pulls the wind out of the hated labour brokerage practice and puts an end to a precarious situation where workers recruited through these third parties found themselves in a dual employment relationship... Labour broker workers did not enjoy any social protection such as pension or provident funds or medical aid," Fedusa said in a statement on Friday.

Global talent management company Adcorp, on the other hand, commented that the new Constitutional Court ruling in favour of Numsa does not negate the "important role" played by temporary employment services, nor does it affect their ability to operate. Adcorp argues that the judgment does not relate to equal treatment on remuneration and benefits, as this was already dealt with in the Labour Relations Act Amendments, effective since 2015.

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fedusa  |  adcorp  |  numsa  |  labour brokers  |  jobs  |  sa economy  |  employment
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