Ricochet News

The Future of Temporary Employment Services

By Arno Swart, IR Product Manager, LabourNet Eastern Cape - Aug 23, 2018
The Future of Temporary Employment Services

It has long been a common practise that companies within the Republic of South Africa have been utilizing Temporary Employment Services otherwise commonly known as Labour Brokers as provided for in terms of S198 of the Labour Relations Act (LRA) 66 of 1995.

In terms of S198(1) of the Labour Relations Act temporary employment services means any person who, for reward, procedures for or provides to a client other persons —

(a)    Who preform work for the client, and

(b)   Who are remunerated by the temporary employment service.

In terms of S198A(3)(b) the Act has made provision that the employee is “deemed” to be the employee of the client and that the client is “deemed” to be the employer.

What had created much controversy however is the “dual relationship” approach which had been interpreted in different manners and not much clarity had been made on whether the client becomes an employer in addition to the TES or in substitution for the TES as the employer.

Thus, there had been much controversy on whether a “dual relationship” is created by a Temporary Employment Service or whether it is a “Sole relationship” where the client replaces the TES as the employer after three months.

In 2015 the Commission for Conciliation, Mediation and Arbitration (CCMA) as well as the National Bargaining Council for the Road Freight Industry (NBCRFLI) handed down awards wherein which the commissioners came to the conclusion that the client becomes the “sole employer” after three months of service rendered by the TES employees.

These awards are Assign Services Proprietary Limited and Krost Shelving and Racking Proprietary Limited and NUMSA (CCMA)andRefilwe Esau Mphirime and Value Logistics Ltd / BDM Staffing Proprietary Limited respectively (NBCRFLI).

This caused uproar within the Temporary Employment Services industry however relief had been felt by the industry when the CCMA case of Assign Services Proprietary Limited and Krost Shelving and Racking Proprietary Limited and NUMSAhad been successfully reviewed and set aside in the Labour Court (LC) where it had been found that the “dual relationship” interpretation of S198A(3)(b) offered the best protection to employees.

On 2 March 2016 NUMSA brought its notice to appeal against the Labour Court judgement. The Labour Appeal Court had found that an employee is no longer performing true “temporary service” and that after three months the client becomes the “sole employer” by virtue of the amendments to the Labour Relations Act (LRA) 66 of 1995 in terms of S198A(3)b).

Subsequently an application for leave to appeal to the Constitutional Court had been submitted. The long anticipated judgement had been handed down on the 26th of July 2018.

In a majority judgement the Constitutional Court granted leave to appeal but dismissed the appeal with costs. The Constitutional Court upheld the decision of the Labour Appeal Court with regards to the fact that after three months the client becomes the “sole employer” of a TES employee as it provides for the greatest protection for employees.

Where does this Leave Temporary Employment Services (TES) or Labour Brokers?

Currently over seven hundred thousand (700 000) employees are placed on a daily basis through Temporary Employment Service providers and thus the Constitutional Court decision could potentially have a great impact on the labour market.

Since the Constitutional Court judgement had been handed down trade unions have widely celebrated the fact that Labour Brokers have come to an end and that they would no longer exist.

It is however not all “doom and gloom” as the true purpose of a Temporary Employment Service still exists. The Constitutional Court judgement in paragraph 71 emphasizes the fact that the “triangular relationship” between Temporary Employment Service providers and client continues to exist.

As stated by the majority judgement the true purpose of a Temporary Employment Service would be to deliver employees to the client and handle the payroll and human resources aspect of “placed employees” at a fee.

Thus the need for true legitimate Temporary Employment Service providers continues to exist within the market and the judgement purely eradicates the illegitimate use of Temporary Employment Services with the purpose to afford greater protection for employees.

It is thus the view of experts that initially the judgment would cause a uproar and unsettle the market however the legitimate need for Labour Brokers continue to exist within the “triangular relationship” and that Temporary Employment Service providers would continue to thrive in the industry meeting the true needs of their client through placing employees for their clients and dealing with the payroll and human resources aspect of staff members.