Labour Brokers and Clients: The Assigned roles of Employers

In recent years South Africa has experienced progressively stricter regulation on the use of labour brokers (also known as employment agencies in some other jurisdictions - placing workers with hirers). A widely held perception is that restrictions are necessary because workers are often exploited through the use of labour brokers.

This has resulted in the recent enactment of sections 198A and 198D of the Labour Relations Act which seeks to afford additional protection to workers who are considered to be vulnerable employees in the labour brokering industry. One of the more far reaching consequences of these provisions is that in certain circumstances the worker may be deemed to be the permanent employee of the client.

The new provisions apply only to the more vulnerable class of workers, ie those workers who earn below the earning threshold which is currently set at R205 433.30 per annum. In summary, the new law provides, inter alia, that:

  • Only genuinely temporary work is excluded from the ambit of these provisions.   
  • Save for a few exceptions, no genuine temporary service arrangement exists in law if the work performed endures for a period exceeding three months.  An acceptable exception includes the scenario where a worker temporarily replaces another employee of the client who is absent for a longer period of time, for example if the replaced employee is on maternity leave or sabbatical.  Another acceptable exception is where the work is specifically identified as a temporary service in terms of a collective agreement or a sectoral determination.  
  • In the event that the work an employee performs is considered not to be a temporary service, the client is deemed to be the employer of the employee, and that client must ensure that the deemed employee is employed on terms and conditions that are not less favourable than those enjoyed by the client’s other permanent employees.

The impact and interpretation of these sections were widely anticipated and hotly debated in South Africa, particularly with respect to the effect of the deeming provisions on the triangular employment relationship. The matter seemed to be somewhat settled when two lower-tribunal decisions recently interpreted the impact of the ‘deeming’ provisions to mean that the client becomes the sole employer of the labour broker’s employee after three months and in the absence of an exception.

More recently however, on 8 September 2015, the labour court (which is a superior court) had occasion to consider the initial interpretation and effectively overruled it in Assign Services (Pty) Ltd v Krost Shelving & racking (Pty) Ltd.

In this case the labour court held that if the deeming provision is triggered the employment relationship present in labour brokerage naturally develops into two discernible relationships that operate in tandem. The employer role is shared between the labour broker (with whom the contract of employment exists) and the deemed employer/client (who instructs and monitors the employee’s work capabilities on a day-to-day basis). This principle, according to the court, breathes life into the need for joint and several liability in matters concerning employees of labour brokers.

Therefore even in the event that the deeming provision is triggered, labour brokers remain the employer of the workers, albeit that the client also assumes certain employer rights and obligations. Compliance with the obligations of an employer in terms of the LRA is therefore still required of the client, and the same rings true for the contractual obligations arising out of contracts of employment with employees.

The recent judgment has sparked some controversy, and it is anticipated that the matter will be taken on appeal. For now, however, labour brokers and the clients need to pay careful attention to these provisions and the judgment, and to regulate their affairs accordingly.