The cost of employee benefits is spiralling, having to deal with trade unions is often painful, the complexity of dismissing undesirable employees is frightening and the cost of dealing with CCMA disputes and strike action is immeasurable.

It is therefore no wonder that employers look for alternative means of hiring labour instead of employing workers directly. This they do through employment agencies and labour brokers referred to as “temporary employment services” (TES) in the Labour Relation Act (LRA).

The business uses the TES staff to do the work that company employees would normally do. The TES thus frees the client from many labour law responsibilities in return for a fee. While employment agencies and labour brokers can make profits from this business they often pay a very high price for taking over the labour law risks involved. This is because:

• Becoming an employer in South Africa is fraught with legal dangers whether you are a TES or not;
• Agencies and brokers are often at the mercy of their business clients who may mistreat the TES staff and thus incur legal liabilities for the TES;
• Many employment agencies and brokers neither understand our labour law pertaining to TESes nor understand how to protect themselves from the legal liabilities imposed on them due to their client’s actions.

A case in point is that of Labuschagne vs WP Construction (1997 9 BLLR 1251 CCMA). In that case the employee was hired by WP Construction, a labour broker and assigned to work at Setraal Wes, a client of the labour broker. The foreman of Sentraal Wes caught Labuschagne sleeping and terminated his assignment. Labuschagne referred an unfair dismissal claim to the CCMA.

The CCMA regarded WP Construction, the labour broker, to be the employer in terms of section 198 of the LRA and the broker’s defence against the unfair dismissal charge was as follows. The broker claimed that:

• Labuschagne was not its employee at all because the broker had hired him as an independent contractor who would then have no labour law rights;
• In view of the fact that Labuschagne was an independent contractor they did not know that a disciplinary hearing was necessary;
• Labuschagne had been caught sleeping on the job previously.

Despite these defences the CCMA arbitrator found that:
While the broker claimed that Labuschagne was an independent contractor the circumstances under which he worked showed him to be an employee of the broker;
All employees have the right to a fair disciplinary hearing;
Despite the fact that the employee had been caught sleeping twice, the fact that no disciplinary hearing had taken place rendered the dismissal unfair.

The labour broker, who had not even been involved in the dismissal, was therefore forced to pay he employee compensation for the unfair dismissal.

In the case of Jonas vs Quest Staffing Solutions (2003 7 BALR 811) Jonas was employed on a fixed-term contract by Quest, a labour broker, to render services as an insurance agent to Quest’s client. Jonas was charged with misconduct and given a final warning. However, although he did not repeat the misconduct, he was fired because the client “no longer required his services”. The broker pointed out to the arbitrator that Jonas’s contract permitted a dismissal if the client no longer required his services.

The arbitrator found that, despite this contractual clause the broker had no right to dismiss the employee without first following the legal procedures laid down in the LRA. The broker was therefore forced to pay the employee for the balance of the fixed-term contract.

In another case (Sibiya & others vs HBL Services cc 2003 7 BALR 796) the employees were employed by a labour broker to provide work to a client. The employees refused to change to a new shift system introduced by the client. When the employees arrived for work the next day to render services under the old shift system the broker’s client locked them out and they referred an unfair dismissal dispute.

The arbitrator found that the employees had been dismissed for refusing to work under the new shift system. As the employees were entitled to refuse the change and as no proper dismissal procedures had been implemented the arbitrator ordered the broker to reinstate the employees with full back pay. If the broker was not able to persuade the client to allow the workers back on to the work site the broker would have been stuck with a number of employees reinstated on to its payroll but with no work to do.

Labour brokers and employment agencies can avoid these legal traps by using labour law experts to draw up TES contracts with clients and workers and to ensure that their employees are hired, disciplined and/or dismissed via legally sound and effective strategies and procedures. With the new labour broker legislation imminent this is even more crucial.

To book for our Johannesburg seminar on DEFEATING THE DANGERS OF DISMISSAL please contact Ronni on ronni@labourlawadvice.co.za or 0845217492.

Written by lvan lsraelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or on e-mail address: ivan@labourlawadvice.co.za. This article was first published in The Star newspaper. Go to www.labourlawadvice.co.za.