Following the recent amendments to the Labour Relations Act the Competition Commission could potentially now consider certain temporary and fixed term employees within the scope of employees that might be affected by a merger.

The Labour Relations Amendment Act has increased the protection afforded to certain labour broker employees and employees employed in terms of fixed term and part-time contracts. The effect of these amendments is that if labour broker employees do not truly provide temporary services or, in the case of fixed term employees, there is no justifiable reason for fixing their term, they may be deemed to be the permanent, indefinite employees of the firm to which their services are provided.

Insofar as labour broker employees are concerned, the amendments to the Labour Relations Act define a “temporary service” as meaning work for a client by an employee: (i) for a period not exceeding three months, or (ii) as a substitute for an employee of the client who is temporarily absent; or (iii) in a category of work and for any period of time which is determined to be a temporary service by a  collective agreement concluded in a bargaining council, sectoral determination or notice published by the Minister of Labour.  Where an employee (earning below the prescribed earnings threshold, which is currently R205,433.30 per annum) does not perform a “temporary service”, that employee will, for purposes of the Labour Relations Act, be deemed to be an employee of the client to which the services are provided and, unless certain requirements have been met, will be deemed to be employed on an indefinite basis.

“Fixed term contract” is defined in the Labour Relations Amendment Act as a contract of employment that terminates on: (i) the occurrence of a specified event; (ii) the completion of a specified task or project; or (iii) a fixed date, other than an employee’s normal or agreed retirement age3. An employer may employ an employee on a fixed term contract or successive fixed term contracts for longer than three months of employment only if: (i) the nature of the work for which the employee is employed is of a limited or definite duration; or (ii) the employer can demonstrate any other justifiable reason for fixing the term of the contract. Where an employee (earning below the prescribed earnings threshold referred to above) is employed on a fixed term contract for longer than three months and there is no justifiable reason for fixing the term, the employee will be deemed to be employed indefinitely.

Thus, labour broker employees that do not provide temporary services or employees who are employed on fixed term contracts may, depending on the circumstances, effectively be deemed to be indefinite, permanent employees of the firm to which the services are provided.

This has consequences for the assessment of employment when a merger is notified.  The competition authorities are required to assess the impact that the merger will have on employment, when considering whether the merger can or cannot be justified on substantial public interest grounds. Temporary or fixed term employees that were previously not considered in the merger notification process may now warrant consideration.  Where such employees are considered to be permanent, indefinite employees of either of the merging parties, job losses affecting these employees will need to be carefully considered, and any moratorium on retrenchments could well extend to cover these employees.

Bowman Gilfillan Africa Group