An important judgement when using labour brokers


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Since the amendments to legislation, the use of labour brokers and temporary staff has been a source of much debate in the Human Resources industry. Business and Trade Unions have held very opposing views on the subject and argued strongly for their positions, but there has been no firm outcome. Until now.

A landmark judgement has finally been made that gives the parties something to work with. This judgement gives clarity to whether, when a client contracts with a labour broker for temporary staff, those temporary staff placed by the labour broker at the client site, will be employees of the labour broker and/or the client.

The relevant judgement is NUMSA vs Assign Services and others, which was handed down on 10 July 2017 by the Labour Appeal Court (LAC).

This ruling finally gives us a definitive interpretation of section 198A(3)(b) of the Labour Relations Act, 66 of 1995 (LRA) which section is also known as the "deeming provision". This is applicable to employees who earn below the prescribed earnings' threshold (aimed at protecting those deemed to be vulnerable employees).

The implication for labour brokers and clients is the following:

  1. It confirms the principle that labour brokers may only be used for temporary employment services (providing staff to a client on a temporary basis), for a maximum period of three months per provided temporary staff member;

  2. Should such an employee of the labour broker remain with the client for more than three months, it is deemed that on the first day after three months (that they are with the client), they become the permanent employee of the client. They are thus upgraded from a temporary or contract employee of the labour broker to a standard or permanent employee of the client;

  3. The reason granted for the protection of these vulnerable employees is to ensure that they are fully integrated into the client organisation as other employees of the client. The aim is to ensure that they are treated not less favourably than the employees of the client (this would refer to benefits and earnings);

  4. The employee of the labour broker is thus automatically transferred by operation of law (statutory) and a statutory employment relationship is thus created between the client and the employee of the labour broker. This employment relationship is thus independent of the terms of any contract between the employee of the labour broker and the labour broker. Such an employee is thus solely employed by the client, and

  5. The labour broker automatically is not the employer of such an employee any longer regardless of any contractual agreement. The LAC advised that the labour broker would be an unwarranted "middle man" adding no value to the employment relationship whatsoever.

 

Any organisation making use of labour brokers would be well advised to assess the impact of this LAC ruling on their current business practices. If you would like further information or guidance with this, please make contact with us.

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