The Meaning of the Con Court's TES Sole Employer Ruling

[Ivan Israelstam]

Opinion is divided on the meaning of the Constitutional Court’s judgement on sole employment as regards Temporary Employment Services.
Some argue that, after three months of employment, the employee, for purposes of all labour legislation, becomes the employee of the client.
Others argue that the Court’s judgement means that, after 3 months, the TES remains the employer in respect of all labour law other than the LRA. Our panel debates the meaning of this judgement found at http://www.saflii.org/za/cases/ZACC/2018/22.html.

[Michael Bagraim]

ASSIGN SERVICES (PTY) LTD vs NUMSA AND OTHERS

The Constitutional Court in the Assign Services (Pty) Ltd case has given its final and binding ruling on the widely known deeming provision. The Labour Court did rule a situation of sole employment when an employee of a labour broker is placed at a client for more than three months and that employee earns less than the threshold as set by the BCEA. The Constitutional Court has preferred the sole employer interpretation and there are certain implications to this, which implications will be discussed hereunder.

It must be noted up front that the Constitutional Court made this ruling “For the purposes of the LRA”. This means that the labour broker remains the employer for the purposes of all the other pieces of labour legislation including The Basic Conditions of Employment Act, BEE, Workmen’s Compensation, UIF etc. The Court has confined itself only in so far as the LRA is concerned. This means that for claims under The Labour Relations Act the client after the three month period would be deemed to be the employer. There was certainly no ruling with regard to the possibility of banning labour broking. The Court said, “The employee may still claim against the temporary employment service as long as there is still a contract between the temporary employment service and the employee. This is imminently sensible considering that the temporary employment service may still be remunerating that employee”. In other words, the Court is supporting the structure as it stands for the entire employment relationship between the labour broker and the employee. In other words, the labour broker is still generally liable as the employer. This is very much in line with the way in which the labour brokers have structured themselves.

One should look at Section 198(4) of The Labour Relations Act where a labour inspector acting in terms of the BCEA may secure and enforce compliance against the labour broker if it were the employer. The clients’ liability is that the client is deemed to be the employer of the placed worker and can thus be sued directly in the CCMA or the Labour Court in situations of an unfair labour practice, unfair dismissal or a retrenchment.

The indemnity granted to clients means that they will step in to the breach whenever there is a labour legal claim against the client. It is fundamentally important for the client to ensure that its legal advisors would be brought on board as soon as action needs to be taken under The Labour Relations Act.

There is no transfer of new employment but there is a deeming provision in our law that grants statutory attribution of responsibility as employer to the client. This responsibility has to be managed carefully and properly so as to ensure that the action taken in terms of The Labour Relations Act is done in accordance with the requirements of the legislation.

There is no change in the statutory attribution of responsibility or liability in relation to claims under all the labour legal statutes.

Temporary employment services will continue to play a role in workforce management and in fact a much greater role as they involve themselves with skills development and employment in the economy. This judgment in the Constitutional Court is the final statement on the matter and it is now important for business to be bedded down and for the relationship to be built as strongly as possible. What this judgment does do is to ensure that the structured relationship between the labour broker and the client must be very carefully handled

MICHAEL BAGRAIM
BAGRAIM ATTORNEYS

[Patrick Deale]

I disagree with the notion that the labour broker continues to be an “employer” in any capacity after its employee is deemed to be an employee of its client after three months of employment. If this were the case, the labour broker would effectively continue to be a “co-employer” or “dual employer” with the client after deeming.This would perpetuate the traditional triangular relationship, albeit in a more limited way, after deeming. It was precisely this relationship which the ConCourt rejected in the Assign judgement in so far as it applies to employees below the threshold.

In doing so, it cut the broker out of the triangular relationship which exists between the broker, the employee and the client after deeming. In my opinion, the supposed retention of the dual employer relationship despite the “sole employer” ruling after deeming on the basis of the court’s reference “for the purposes of the LRA” is unsustainable.

The labour courts have a well established tradition of interpreting and applying the labour laws in a “purposive” way. The idea is to cut through the technical legal arguments and the range of possible interpretations to identify and apply the real purpose for which the particular the law was intended.

In the Assign judgement, the court identified the real purpose of the deeming provision is to provide a measure of job security for vulnerable employees below the BCEA minimum threshold. It applied this purpose by ruling that the client becomes the “sole employer” after deeming.

If it had intended to limit the scope of the deemed employment relationship only to the LRA and to thus retain the broker in the triangle for the purposes other than for the LRA – for the BCEA etc – it would have said so. The fact that it did not, does not sustain the argument that the dual employment relationship continues alongside the sole employment relationship which the court ruled is the real purpose of the deeming provision.

Apart from the legal considerations, the retention of the employee’s “limited dual relationship” with the broker simultaneously with his or her “full sole employer” relationship with the deemed employer would be impractical to manage and would inevitably lead to a range of new disputes.

The deemed employer could retain a relationship with the broker after deeming – not as a dual employer – but as an outsourced contractor to provide payroll and other admin services for the deemed employees. In this sense, although the Assign judgement cuts the broker out as an employer of deemed employees below the threshold, brokers are free to adapt their relationships from employer to service providers.

In this way, they can continue their relationships with their clients in commercial relationships. They can also continue as labour brokers for employees below the threshold if the jobs are genuinely temporary – and if the employees earn more than the threshold. To this extent, I agree that the Assign ruling certainly does not “ban” labour brokers – but it does exclude their continued role as an employer in the triangular relationship where vulnerable employees below the threshold are concerned.

[Author]

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