South Africa: Labour Broking

Last Updated: 20 August 2012
Article by Audrey Johnson

Most Read Contributor in South Africa, September 2018

The proposed changes to the Labour Relations Act (LRA) regarding labour brokers, or 'temporary employment services (TES)' to give them their official name, will make the option of using labour brokers a far less attractive one for employers (these changes are discussed at the end of this article). That's because they remove some of the perceived benefits of using labour brokers:  the ability to reduce labour costs, and the ability to avoid some of the onerous obligations of being an employer. But a recent decision of the Labour Court in Cape Town has shown that, irrespective of whether or not the changes become law, the courts are likely to examine the issue of labour broking  very closely in future.

The case involved packaging company Mondi, labour broker Adecco, and an employee by the name of Dyokwe. The facts were interesting. Dyokwe was employed by Mondi from 2000 - 2002, but in December 2002 he was told that his contract would be terminated. For reasons that aren't entirely clear, he stayed on at the company and there was proof that he received Mondi payslips in 2003. In July 2003, however, he was told that he would have to sign a new contract with labour broker, Adecco, after being assured by employees of Adecco that 'nothing would change'. Dyokwe, who didn't read English, signed the contract, which was headed 'Contract of employment defined by time' despite the fact that it had no termination date, and which specified that he would be 'employed at Mondipack'. Dyokwe continued doing the same job at Mondi, but things did change: his wages dropped by some 20% (it seems that Dyokwe did complain about this, but that he was advised by someone at the CCMA to simply accept it).  After 5 ½ years Dyokwe's employment was summarily terminated by Adecco, who told him that they had no work for him because he was too old. So Dyokwe referred an unfair dismissal dispute to the CCMA, citing Mondi as a party. The Commissioner ruled that Adecco was Dyokwe's employer, which meant that Mondi should be excused from the proceedings, and that arbitration proceedings involving Adecco should be rescheduled. Dyokwe took this decision on review. So the question the court had to decide was this: who was Dyokwe's employer, Mondi or Adecco?

Judge Steenkamp naturally started off by looking at section 198 of the LRA, which is the section that deals with labour brokers. This defines a TES as 'any person who, for reward, procures for or provides to a client other persons who render services to, or perform work for the client, and who are remunerated by the temporary employment service.'  It goes on to say that the TES is the employer of such a person, and it provides for joint liability for the TES and the client in certain circumstances, although not for unfair dismissals.

The judge then went on to look at the fundamentals of labour legislation.  He noted that Section 1 of the LRA says that the purpose of the Act is to advance 'economic development' and 'social justice', and that its objects are to give effect to 'the fundamental rights conferred by section 27 of the Constitution' and the 'obligations incurred by the Republic as a member state of the International  Labour Organisation'. And he noted that, in the case of NEHAWU v UCT, the Constitutional Court recognised that one of the core purposes of the LRA is to safeguard workers' employment security, especially the right not to be unfairly dismissed. 

The judge then examined labour broking in more detail, looking far and wide for guidance. He noted that South African courts have recognised that workers are 'the weakest and most vulnerable party in the triangular relationship', and held that an employee of a TES cannot be dismissed in terms of a clause that says the contract terminates when the client no longer needs that employee. Looking to the world of academia, he noted that Prof Paul Benjamin has said that 'while section 198 was enacted to regulate the temporary employment sector, it has become a vehicle for permanent triangular employment...it is an entirely superficial construction (and one that gives rise to immense scope for abuse) to make an agency the employer of an employee working on an on-going or indefinite basis for a "client" merely because the employee's pay is routed through the agency.' Looking beyond South Africa's borders, he noted that the Namibian Supreme Court said this on the issue: 'Labour is not a tradable innate object but an activity of human beings. Unlike a commodity it cannot be sold on the market without regard to the inseparable connection it has to the individual who produces it... it is integral to the person of a human being... it is the means through which human beings provide for themselves, their dependants and their communities.'  And he noted that the International Labour Organisation has recommended that member states should 'combat disguised employment relationships.'

The judge had little hesitation in finding that the Commissioner's decision was wrong. First, there was no evidence that Mondi had ever terminated Dyokwe's employment contract - the judge noted that the company changed its tune during the proceedings, initially claiming that the contract had been terminated at the end of December 2002, and then claiming that it had happened in July 2003.  Second, the agreement between Adecco, Mondi and the worker was in fraud of the law – the judge stressed that one must look at the true nature of the relationship, and he pointed out that, in the case of Dyokwe, Adecco didn't comply with the definition of a labour broker, having neither procured nor provided Dyokwe. The judge also referred to an earlier decision in a case involving a business called Melmons Cabinets CC, where the judge described a situation where an employee was told that he would in future be an independent contractor as a 'sham', and a 'cruel hoax' on an employee who was 'blissfully ignorant of his newly acquired obligations and the loss of rights and privileges which Melmons has persuaded him to forego'. Third, the agreement with Adecco had been void from the outset because of a misrepresentation - Dyokwe had been told that nothing would change, and he clearly had not understood that he would be entering into a new employment relationship.  And finally, it was against public policy to enforce the Adecco contract and hold that Adecco was the employer – the judge referred to a Constitutional Court decision of Barkhuizen v Napier, where Judge Cameron said that courts should not enforce a contractual clause if 'implementation would result in unfairness or would be unreasonable for being contrary to public policy', noting that  in this case there was extreme inequality in bargaining power, something that was exacerbated by Dyokwe's illiteracy.

So the decision that Mondi was excused from the proceedings was set aside and replaced with a ruling that Mondi was Dyokwe's employer. And the CCMA was directed to set down the unfair dismissal dispute for hearing. A clear warning that courts will look at substance rather than form to determine if a company has sought to avoid its responsibilities under labour law by using the services of a labour broker.

So what exactly are the changes that have been proposed to Section 198?  Well, although the provision that says that employees procured and provided by TES are deemed to be employees of the TES and not the client remains in place, this will in future only apply in cases of 'temporary services' . This term is defined, inter alia, to mean services that do not exceed a period of six months.  Employees who do not fall within the definition of 'temporary services' will be deemed to be employees of the client. The proposed changes also provide that if the assignment of the TES employee is terminated because the client does not want to become the employer (which might be proved if it hires another person to do the job),  that will be deemed to be a dismissal. And they provide that TES employees who are deemed to be employees of the client cannot be treated less favourably than other employees, unless there are justifiable reasons (like seniority perhaps).  There are other changes too, including ones extending the joint liability of the TES and the client.  The only comfort for employers that make extensive use of labour brokers is that these protections will only apply to individuals earning below the earnings threshold prescribed by the Minister of Labour which is currently R183 008,00 per annum.

What do these proposed changes mean for you as an employer?  Well, they mean that if you use the services of someone provided by a TES for more than six months, that person will be deemed to be your employee. They mean that you will need to treat that person the same way that you treat your other employees. And they mean you won't be able to avoid these consequences by simply terminating the person's services before the expiry of the six-month term.  Serious stuff!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright South Africa
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright South Africa
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions