Labour brokers / temporary employment services (TES) place employees with their clients to carry out work over a temporary period of time, for example, Green Labour Brokers sends their employee, Joe Smith, to work for Plasma Pharmaceuticals. Section 198A of the Amended Labour Relations Act states that a “temporary employment service” (“TES”) means work for a client by an employee:

• For a period not exceeding three months;
• As a substitute for an employee of the client who is temporary absent; or
• In a category of work for a period of time which is determined to be a temporary service by a collective agreement included in a bargaining council, a Sectoral Determination or a notice published by the Minister in accordance with the Labour Relations Act (“LRA”).

This section does not apply to employees earning in excess of the threshold set out in Section 6 of the Basic Conditions of Employment Act (R205 433.00 per annum).  

Section 198A(3)(b)(i) states that employees not performing a temporary service for a client are deemed to be the employees of that client and the client is deemed to be the employer.   There is much speculation around how to interpret this, as “deemed to be” is not the same as “is”, and one has to ask why the Legislature chose that word specifically.  The interpretation has also caused debate because the TES employs the employee and then contracts with the client for the employee to work for the client (the triangular relationship).

The point came before the Commission for Conciliation, Mediation and Arbitration (“CCMA”) and the Road Freight Bargaining Council in two separate disputes recently.  Both rulings made extensive reference to the Memorandum of Objects on the Labour Relations Bill 2012 to provide insight into the meaning and intention of Section 198A.

The Memorandum points out that Section 198 of the LRA still applies to all employees regardless of their earnings.  This section confirms that the TES and the client remain jointly and severally liable if the temporary service employees contravene collective agreements, arbitration awards and the law.  However the Memorandum points out that Section 198A introduces additional obligations intended to protect vulnerable workers.   If the clients are in breach of Section 198(1) (i.e. not used to perform temporary work), then those employees will be deemed to be the employees of the client and not the TES.

In the CCMA award, the Commissioner held that the commercial relationship between the TES and the client continues even after the three-month period in which the temporary service is used, has lapsed.  However, once this occurs and for the purposes of the LRA, the client is deemed to be the sole employer of the temporary service employee.  How this will work in practice is not explained.  It is also not clear how the TES contract with the client (where the TES’s employee is to carry out work for the client) can continue to exist if the client is deemed to be the sole employer.

In the Road Freight Bargaining Council, the Commissioner ruled that when Section 198A(3)(b)(i) is given its normal grammatical meaning, the client is the employer for the purposes of the LRA.  The section does not imply that the employee has been transferred to the client nor does it indicate that the previously triangular relationship, involving the temporary service employees, has automatically dissolved.  The critical question for the Commissioner was who is responsible for the duties and obligations in terms of the LRA once the temporary service employee is utilised in circumstances that are not temporary as defined?  The Commissioner concluded that the wording in the section is clear and is unambiguous and that the client is deemed to be the employer and therefore the client bears the responsibility to ensure that duties and obligations towards the employee in terms of the LRA are met.  In these circumstances any claim brought in terms of the LRA must be brought against the duty bearer, who is the client.  This would include any claim for unfair dismissal or unfair labour practice as well as any claim for reinstatement or compensation.  The Commissioner did warn however that the impact of the change in the duties and obligations might affect the commercial relationship between the temporary service employee and the client. The effect of this would have to be negotiated between the relevant parties in terms of their business arrangement.

Neither award sets out the arguments presented before the Commissioners and the rulings raise a number of questions particularly in their rejection of the applicability of joint and several liability of the temporary service employees and the client arising as a consequence of the “deeming” provision is section 189(A)(3)(b).  Both awards rely on the legislature's intention to protect vulnerable employees.  However, the rulings do not deal with the right of an employee who is deemed to be the employee of the client to institute proceedings against either the TES or the client or both. The TES may offer better and bigger prospects for the employee and the employee may not want to be reinstated to the client.

One of the awards is in the process of being reviewed, so we must wait for the courts to determine the matter before there is any certainty on this topic.  In the interim, we recommend that companies proceed with caution and contact the Shepstone & Wylie Employment Department if you have any queries / require any advice.