In March 2015 SEESA published a newsletter reporting on the amendments to the Labour Relations Act (LRA) that drastically impacted the practices of Temporary Employment Services (TES), a.k.a. labour brokers. In that newsletter we predicted the industry’s extinction. Now, with the Constitutional Court’s ruling on TESs in July 2018, the industry as we know it has come to an end.
SEESA Internal Training & Research National Manager, Otto Bronkhorst, shares his analysis of this topic.
Leading up to the ruling – what was wrong the first time?
The amendments in 2015 were affected in such a way that it would restrict the practices of TES in such a way that it would lead to their downfall. What we meant with downfall was not necessarily that these services would in totality be worthless in the Labour market, but it would bring an end to established practices that made it worthwhile for them and their clients to exist. The practices that we are referring to, is when labour brokers provide employees to their client and where such employees are placed in long-term permanent positions, but the employees are subjected to short-term contracts that are renewed on a continuous basis. This led to unfairness because the employee could never be sure of permanent employment and he/she received less remuneration and benefits in comparison with the client’s permanent employees.
If one looks at the purpose and history of the LRA with regard to TES, Section 198 of the LRA provided for the provision of employees to a client for reward. The TES was the employer of the employee and should pay the employee’s remuneration. Irrespective of the fact that the Act referred to “Temporary Employment Service” in the heading of this section, the concept of “temporary employment” has not been defined in the LRA. This “defect” made it possible that employees could be permanently placed with clients. The amendment to the LRA rectified this defect and now defined that is meant by “temporary services”. It is inter alia, described as worked for a client that does not exceed a period of 3 months and to substitute an employee that is temporarily absent.
The direct effect of this is that a TES can only provide employees to a client if they do not work for a period exceeding 3 months. In other words, only providing services that are temporary in nature. He can, however, provide an employee to a client for longer than 3 months but only for the purpose to replace another employee that is temporarily absent for whatever reason.
The ConCourt’s ruling to protect workers
The amendments to the LRA now determined that if an employee is placed at a client by the TES for a period longer than 3 months and the work is not of a temporary nature, that employee would be deemed to be an employee of the client and the client deemed his/her employer. Because of the uncertainty of the word “deemed” and the assumption that the employee became the client’s employee in such a case, the interpretation caused a series of disputes and it was finally heard by the Constitutional Court to determine the meaning the legislature with regard to the use of the word “deemed”. The highest Court then determined that the stipulation has the intention that the employee becomes the employee of the client if he/she provides a service that is not of a temporary nature and if he/she worked longer than 3 months at the client.
The implication for TES
The effect of the Court’s decision is that TESs are put in their place as the Legislature initially intended. They can only supply temporary employees or provide services of the temporary nature or to replace an employee that is temporarily absent.
If a TES places an employee at clients to deliver a service that is no longer than 3 months, or is not of a temporary nature, the client will automatically become the employer. The use, need of benefits and avoiding the risk the TES provided in the past has now been watered down so much, that clients can rather employ employees themselves, because using these services will provide very little advantages.
These provisions will only be applicable to employees that earn less than R205 433.30 per annum. If the TES and their clients want to circumvent these amendments, they will have to increase the employees’ remuneration to such a degree that it will not be worthwhile to make use of such a service.