Constitutional Court judgment is not a death knell for labour brokers

Section 198A(3)(b) of the Labour Relations Act (LRA), simplistically put, means an employee who earns less than the stipulated threshold and is contracted through a temporary employment service (TES) — or labour broker — to a client for more than three months, is deemed to be indefinitely employed by that client.

However, until the case of Assign Services versus the National Union of Metalworkers of SA (Numsa), TESs and trade unions had been at loggerheads over what this means in practice.

TESs have contended that Section 198(2) and 198A(3)(b) of the LRA gives rise to a dual-employment relationship where a placed employee is deemed to be employed by both the TES and the client. Trade unions have always contended that it creates a sole-employment relationship between the employee and the client for the purposes of the LRA, as the two provisions were mutually exclusive.

On 27 July 2018, the Constitutional Court held that the purpose of Section 198A must be contextualised within the right to fair labour practices in Section 23 of the constitution and the purpose of the LRA as a whole.

The majority found that, on an interpretation of Sections 198(2) and 198A(3)(b), for the first three months, the TES is the employer, then the client becomes the sole employer. The majority found that the language used by the legislature in Section 198A(3)(b) of the LRA is plain and that when the language is interpreted in the context, it supports the sole-employer interpretation.

The Constitutional Court judgment is certainly not the death knell of TESs; it merely assists in regulating them in respect of employees earning less than the stipulated threshold and working for the client for more than three months.

Once an employee becomes employed by the client by operation of Section 198(3)(b), the employees must, in terms of sub-section (5), “be treated not less favourably than an employee of the client performing the same or similar work, unless there is a justifiable reason for different treatment”.

This is not a transfer to a new employment relationship but rather a change in the statutory attribution of responsibility as employer within the same triangular employment relationship between the TES, the placed employee and the client.

In addition, in terms of sub-section 4, should a TES or client terminate an employee’s assignment to avoid the operation of Section 198A(3)(b), that termination will be considered a dismissal and the usual remedies available through the LRA will apply.

The judgment states that the TES’s continued liability lasts only as long as its relationship with the client and while it (rather than the client) continues to remunerate the worker. Nothing in law prevents the client and the TES from terminating their contractual relationship on the triggering of Section 198(A)(3)(b), with the client opting to remunerate the placed employees directly.

• Msimanga is legal counsel for Imperial Logistics. He writes in his personal capacity.