Breaking labour brokers

The risks associated with incorrect use of agency workers became very real to many employers when South Africa's highest court, the Constitutional Court (CC), handed down its long-awaited judgment on 26 July 2018.

The case of Assign Services (Pty) Limited v National Union of Metalworkers of South Africa [2018] ZACC 22 concerned the interpretation of the much-debated section 198A(3)(b) of the Labour Relations Act (LRA) regarding dual or deemed employment by the client.

In terms of this section an employee earning less than the stipulated threshold and who is contracted through an agency or Temporary Employment Service (TES) to a client for more than three months, is deemed to be an employee of the client.

The court considered whether the deeming provision creates a "sole" or "dual" employment relationship between a TES, the placed worker and the client. This section is part of a suite of amendments to local labour legislation during 2015.

The debate surrounding the correct interpretation of section 198A(3)(b) gained momentum in April 2015, when 22 workers were placed by Assign Services (Pty) Ltd (Assign Services), an agency or TES, at its client Krost Shelving and Racking (Pty) Limited (Krost) on a temporary basis for longer than three months.

Assign Services claimed that the effect of section 198A(3)(b) was that it created a dual employer relationship, whereas NUMSA contended it created a sole employer relationship, and resulted in Krost being the sole employer.

The matter was referred to the statutory employment tribunal, the Commission for Conciliation, Mediation and Arbitration for determination. The tribunal held that section 198A(3)(b) created a sole employment relationship and that the client is regarded as the only employer of the employee. The matter was subsequently taken on review to the Labour Court.

This court disagreed with the tribunal's award and held that the section created a dual employment relationship. It held further that both the client and the TES have rights and obligations in respect of the TES employee. The trade union appealed to the Labour Appeal Court (LAC). The higher court disagreed with the approach of the lower court.

It held that the client is the sole employer of the employee where the employee is placed with a client for a period in excess of three months. The CC confirmed the decision of the LAC, finding that on a proper interpretation of section 198A(3), this created a sole employer relationship.

In arriving at its decision, the CC held that section 198A(3)(b) must be contextualised with the right to fair labour practices as contained in section 23 of the Constitution and the purpose of the LRA.

The CC provided that the purpose of this section seeks to afford protections to employees who find themselves in perilous employment situations. The CC stated that section 198A(3)(a) defines a temporary employee as an employee of the TES (in terms of section 198(2)) - the main provision dealing with agency workers.

The legislature created an alternative - contained in section 198A(3)(b) - which provides that, if the employee is not performing temporary services, they would be deemed to be an employee of that client. The CC noted that the word "or" between section 198A(3)(a) and 189A(3)(b), mandated a choice and that either the TES or the client are employers of the employee, and not both.

In determining the liability of the TES and the client, the CC noted that section 198(4A) provides that the employee would be entitled to lodge claims against the employer or the TES where the client is deemed the employer and a relationship continues between the TES and the client. This does not, however, prevent the TES from choosing to terminate their contractual relationship where section 198A(3)(b) is triggered.

It is important to remember that the deemed transfer of employment from the agency to the client only applies to workers who are not on temporary assignments and earn less than the prescribed statutory earnings threshold. However, to the extent that employers still need to structure operations to give effect to the risks associated with using agency workers, time is running out before the floodgates open and agency workers and trade unions lodge claims against clients.

By Johan Botes, Partner and Head of Practice, Tracy Robbins, Associate, and Rui Lopes, Candidate Attorney, Employment & Compensation Practice, Baker McKenzie Johannesburg

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