Any employer making use of labour brokers, particularly where the labour broker employees are working for periods exceeding three months and are earning less than R205 433, 30 per annum should review the terms on which they appoint labour brokers as well as the terms on which those workers are engaged.

In our first note we dealt with some general provisions and concepts which are important to an understanding of the amendments as a whole. These included the idea of non-standard employment, avoidance and justifiable reasons for different treatment.

In this note, we consider the use of labour brokers. Although the correct term as used in legislation is ‘temporary employment service’, we continue to use the more familiar and well-used term of ‘labour broker’.

The note does not purport to be a detailed or complete explanation of the amendments or their significance. It must not therefore be read as constituting legal advice but rather as a means for employers to identify and respond to the most obvious risk areas.

The provisions dealing with labour brokers are found in section 198 of the Labour Relations Act, 1995. The existing provisions of section 198 are little changed. In summary:

  • The definition of labour broker has been very slightly changed: now a person who, for reward, procures for or provides to a client other persons who perform work for the client, and who are remunerated by the client.
  • As settled by the courts, the labour broker is the employer of the worker, and the client is not.
  • The labour broker and the client are jointly and severally liable for breaches by the labour broker of certain wage regulating measures, but not, it must be noted, for any unfair dismissal by the labour broker.

It is useful to note that there are three parties to this arrangement: the ‘labour broker’, the ‘worker’ and the ‘client’ and these are the terms we use in what follows.

Major changes are however introduced by the insertion of new sub-sections (4A), (4B), (4C), and (4E) and the new section 198A. Sub-section (4F) which deals with the registration of labour broker businesses is not yet in force.

There are four main changes.

The first is a wide range of measures which affect collective bargaining, organizational rights and industry wage regulating measures.

  • Clarifying the position and possibly changing existing law is the provision that when determining in which industry or sector the worker is engaged, regard is to be had to the industry or sector in which the client is engaged. Thus, for example, workers supplied to a client operating in the mining industry are therefore engaged in the mining industry. This means also that a labour broker may have workers in different industries or sectors.
  • Related to this is the new provision that a trade union may seek organizational rights in respect of the labour broker’s own employees either in in the labour broker’s own workplace or in the workplace of one or more of the labour broker’s clients. If it does so in respect of one or more of the labour broker’s clients, then the clients’ premises is to be included as part of the labour broker’s premises.

Second, this demarcation principle is important because workers supplied into a particular industry must be employed on the terms and conditions applicable to that industry. It follows that labour broker workers in, say, the metal industry, would be obliged to become members of one or other of the industry retirement funds. The labour broker would also need to be registered as an employer in that industry.

Third, where the labour broker and the client are jointly and severally liable for breaches by the labour broker of certain wage regulating measures, the worker may institute proceedings against either the labour broker or the client or against both. An order made against one may be enforced against the other, even it seems, if the other was not a party to the proceedings. Such a provision is of course unlikely to pass constitutional muster but the overall effect is to substantially water down the limitations of the joint and several liability of the client and thereby to increase the client’s risk.

Fourth, there is the introduction of the concept of a ‘temporary service’. This is work for a client by a worker provided by a labour broker:

  • for a period not exceeding three months;
  • as a substitute for an employee of the client who is temporarily absent; or
  • in a category of work and for any period of time which is deemed by the Minister or by an applicable wage regulating measure to be a ‘temporary service’.

For as long as the labour broker worker is provided in circumstances amounting to a temporary service, the labour broker, and not the client, is the employer of the worker.

However, contrary to this principle and to established jurisprudence that the labour broker is the employer of the worker, and the client is not, there are circumstances introduced by the new section 198A where the client will be deemed to be the employer. The most significant risks which arise as a result of such a deeming are twofold:

  • First, the client will become responsible for the unfair dismissal of a worker by the labour broker, and for any unfair labour practice by the labour broker.
  • Second, the worker 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.

The client will be deemed to be the employer and its liability will arise in the following circumstances:

  • The worker is earning less than the threshold prescribed by the Minister under the Basic Conditions of Employment Act, 1997, currently R205 433, 30.
  • The worker will be working for the client for a period in excess of three months.
  • The worker will not be working for the client as a substitute for an employee of the client who is temporarily absent.
  • The worker will not be working for the client in a category of work and for any period of time which is deemed by the Minister or by an applicable wage regulating measure to be a ‘temporary service’.