Debate on labour broker, client responsibility heats up

(iStock)
(iStock)

Cape Town – Is there an ulterior motive behind the trade unions' resistance to labour brokers, notwithstanding ample protection against exploitation of vulnerable workers provided for in employment legislation?

This question is posed by Professor Hugo Pienaar, director in the employment practice at Cliffe Dekker Hofmeyr after the issue of who is to be regarded as the employer of temporary employees once the controversial so-called "deeming provision" in the Labour Relations Act (LRA) kicks in, was recently argued before the Constitutional Court.

"In the face of the uncertain global economy, many businesses locally and internationally focus beyond the traditional employer-employee model and place reliance on third-party service providers or independent contractors like labour brokers," Pienaar told Fin24.

He explained that the intention of amendments to the LRA in 2015 was to provide additional protection to temporary employees who earn below the earnings threshold (currently R205 433.30 per year) and who have been placed with a client of a labour broker for longer than three months.

The aim of the amendments was to protect this category of workers from exploitation by regulating the temporary employment services industry. Such reforms were desperately needed and are also in line with international trends, according to Pienaar.

He said that as a result of the protections provided to temporary employees by the amendments, clients of a labour broker can incur liability for things like the unfair dismissal of or unfair labour practices towards employees placed by that labour broker.

'Deeming clause'

The controversial "deeming" provision in the LRA provides that an employee not performing a temporary service for the client is deemed to be the employee of that client and the client is deemed to be the employer after a three-month period.

The debate around the interpretation of this "deeming clause" centres around the intention of the legislature, according to Pienaar.

One view - including that of National Union of Metalworkers of SA (Numsa) - is that once the deeming clause kicks in, the temporary employees are effectively "transferred" to the client of the labour broker. In this view, the client becomes the sole employer, thereby effectively resulting in a "ban" on labour brokers.

The contrary approach, preferred by Pienaar, is that a dual employment relationship is created after a three-month period, with both the labour broker and the client being jointly regarded as "employers".

According to this interpretation of the "joint and several liability" provisions, a person who was unfairly dismissed, can then hold both the labour broker and its client responsible. Pienaar said this would be in sync with the wording of the relevant provisions in the act.

"What is important here is that there is no provision in the Act for the transfer of the employees to the client of the labour broker. The act does not use the word 'transfer' and nowhere in international law are employees deemed to be 'transferred' after three months," explained Pienaar.

Sole employer approach

In his view, the sole employer approach would mean that after three months the labour broker is effectively banned and despite this still incurs liability under the Act.

"That would be nonsensical and unconstitutional. The sole employer approach can also not be correct, because why would there then be the need for a joint and several liability clause to give the employee protection against the labour broker's conduct?" asked Pienaar.

He said if the intention of the LRA was for the employee to be "transferred" to the client of the labour broker after three months, then there is no need for the equal treatment clause or the permanent employment clause for that matter. These protections then become redundant, argues Pienaar.

"If the labour broker is regarded as being off the scene after three months, how do you reinstate the employee in the services of the labour broker? Then you could not enforce a court order of unfair dismissal obtained against the employer (client) against the labour broker as well," he said.

In Pienaar's view, the dual employer approach actually provides an employee added protection by having two "employers" he or she can enforce his or her rights against.

"Why would trade unions still object to labour brokers despite ample protection against exploitation of vulnerable workers? Perhaps the answer lies in the fact that trade unions support the banning of labour brokers as they assist an employer to continue its operations during a strike through the use of labour brokers. There is much more to this debate than meets the eye," claims Pienaar.

Court

The Labour Appeal Court, however, has rejected the dual employer approach in favour of the sole employer approach.

In Pienaar's view, the Constitutional Court should, when considering the Labour Appeal Court judgment, in addition consider "the increased reliance on the creation of employment in an atypical environment; the greater number of youth employed by labour brokers; and the impact of the amendments on the current unemployment rate in South Africa".

The Constitutional Court has yet to rule on the matter. 

Pienaar added that the use of temporary employees also enables the important aspect of multi-skilling the workforce, where temporary employees move from one client to another.

"It is important that the temporary employment industry is where most of the youth find jobs. One must, therefore, look at the important role labour brokers play against the backdrop of more than 50% youth unemployment in SA," said Pienaar.

He added that "at the same time, the creation of employment lies in the flexi-work environment, in the use of a-typical employees".

Therefore, in his view, the notion that the dual employer approach would lead to exploitation of vulnerable workers is simply bad in law and without merit.

Fin24 did approach Numsa for comment earlier this week, but have not received a response yet.

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