Labour broker employees

bowman-gilfillan1 January 2015 saw the introduction of stricter regulation of a-typical forms of employment with the  Labour Relations Act (LRA) amended to include a number of provisions specifically aimed at giving labour broking employees, employees employed on fixed term contracts, and part-time employees greater protection. Except for the amendment to s186(1)(b) of the LRA, which applies to all employees irrespective of their level of remuneration, the amendments only apply to employees on a-typical work arrangements who earn below the prescribed earnings threshold. This threshold is currently R205,433.30 per annum, but it is anticipated that it will increase with effect from 1 July 2015. Small employers, that is those with less than 10 employees, are exempt, and so are start-ups with less than 50 employees (that is, businesses in operation for less than 2 years – but not if the employer conducts more than 1 business or where the business was formed by the division or dissolution of an existing business).

The amendments did not ban labour brokering and section 198 of the LRA accordingly still applies. The main amendment related to labour brokering is, however, that labour broker employees may under certain circumstances be deemed to be the employees of the client for purposes of the LRA. Where the deeming provisions do not apply:

  • the labour broker is the employer of the employees;
  • the labour broker and the client are jointly and severally liable for compliance with the BCEA, a sectoral determination, a collective agreement concluded in a bargaining council and an arbitration award that regulates terms and conditions of employment.

An important amendment to s198 is the inclusion of s198(4A). In terms of this section, where the labour broker and the client are jointly and severally liable, or where the deeming provisions apply, the employee can institute proceedings against either the labour broker or the client, or both. A labour inspector may enforce compliance against the labour broker or the client as if it were the employer, or both. And any order or award may against a labour broker or client may be enforced against either. This obviously has far-reaching implications for clients and labour brokers alike and they would be well-advised to include in their service level agreements an obligation to notify the other if they received dispute referrals or arbitration awards/orders that might be enforced against the other.

Labour brokers are, by virtue of s198(4B) obliged to provide employees whose services are procured for a client with written particulars of employment in accordance with s29 of the BCEA. This is nothing new – as the employer of these employees, the labour broker is required to do this anyway. Labour brokers must be properly registered as such but non-registration is not a defence to any claim instituted against a labour broker or a client that makes use of employees provided through the labour broker concerned.

Deeming provisions

Section 198A contains the deeming provisions. Labour broker employees who earn below the earnings threshold and who do not perform a temporary service for a client are a) deemed to be the employee of the client; and b) subject to the provisions of s198B, deemed to be employed indefinitely.

A “temporary service” means work for a client for a period of not more than three months, or as a substitute for an employee of the client who is temporarily absent. It is possible to conclude a collective agreement in terms of which the categories of work and the period of time that would constitute a “temporary service” would be determined, but such a collective agreement must be concluded in a bargaining council. Likewise, the Minister of Labour could exclude certain categories of employees from the provisions of s198A in an applicable sectoral determination.

Employees earning below the earnings threshold who perform a temporary service, are the employees of the labour broker; those who do not perform a temporary service are deemed to be the employees of the client, and are deemed to be employed indefinitely, unless it can be shown that the employee was assigned to the client for a fixed term and that there was a justifiable reason for fixing the term.

The termination of an employee’s assignment to the client in order to avoid the deeming provisions from kicking in, or because the employee exercised a right in terms of the LRA, is a dismissal.

The deeming provisions apply “for purposes of this Act”, i.e. the Labour Relations Act. The following must be noted in this regard:

  • section 198A does not refer to a “transfer” of employment from the labour broker to the client when the deeming kicks in, neither does s198A state that the labour broker is no longer the employer – the employees are simply treated “as if” they are employees of the client for purposes of the LRA;
  • the deeming applies “for purposes of” the LRA, i.e. for purposes of dismissal, unfair labour practices, strikes, organisational rights and s197 transfers.

In the case of dismissals for misconduct, the client would need to have a fair reason to terminate the service of the deemed employee and it would have to act in accordance with a fair process in doing so – probably with the assistance, involvement or at least knowledge, of the labour broker. The same applies to dismissals for poor work performance and ill health.

Retrenchments become more complex as a result of the amendments: where labour broker employees are deemed to be the client’s employees and the client contemplates the need for retrenchments, these deemed employees must be included in the retrenchment consultation process and selection criteria must be applied fairly across the deemed employees and the employees of the client. The client may be at risk of unfair dismissal claims if it were to simply give notice to the labour broker to remove the deemed employees and thus consult only with its “own” employees. Likewise, where a part of the client’s business is transferred as a going concern and there are deemed employees in this part, they may need to transfer across to the new employer. These matters can become very complex and clients would be well-advised to obtain advice timeously in order to properly deal with all the potential permutations.

For all other purposes the labour broker remains the employer and therefore remains responsible for, among others:

  • payment of the employee’s salary;
  • administration of leave;
  • registration with and payment of UIF contributions;
  • registration with SARS and payment of PAYE and Skills Development levies.

Equal treatment

Employees who are deemed to be employees of the client must be treated on the whole not less favourably than an employee of the client performing the same or similar work, unless there is a justifiable reason for different treatment. Section 198D lists the justifiable reasons that could be relied upon, namely seniority, experience, length of service, merit, quantity or quality of work performed and any other non-discriminatory reason. Again, the right to equal treatment arguably does not mean that labour broker employees can demand identical treatment to that offered to employees of the client and the employer would therefore arguably be in compliance with the equal treatment provisions of s198A if it provided a monetary equivalent where provision of the exact same benefit is not practicable or possible.

Talita Laubscher/Helen Wilsenach, Bowman Gilfillan Africa Group

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