Organised labour has been extremely vocal about the tenuous nature of employment relationships existing within the “Temporary Employment Services” sector, more commonly known as Labour Broking. In fact, if one were to have reference to the Explanatory Memorandum to the recent Labour Relations Amendment Bill, 2010, the Department of Labour have gone as far as saying that “the labour brokers manipulated this section and operated under the auspices of this section (Section 198 of the Labour Relations Act 66 of 1995)” and have proposed that Section 198 be repealed in its entirety.

If one were to have reference to Section 198, it becomes clear that while an individual may tender his/her services and be under the effective control and supervision of a client (who would have concluded a labour supply agreement with the Labour Broker), the Labour Broker remains the employer of the employee. The complexities of this tripartite relationship have often been prone to abuse and contractual manipulation that has sought to limit the liability of the Labour Broker and the client leaving the employee vulnerable and exposed to abuses that would normally be frowned on in a conventional employment setting.

Section 198 (4) of the Labour Relations Act contemplates only four contraventions in which the client and Labour Broker can be held jointly and severally liable by the “employee”. These are a contravention of a collective agreement or arbitration award which regulates terms and conditions of employment, the Basic Conditions of Employment Act (“BCEA”) as well as a determination made in terms of the Wage Act. It is noteworthy to mention that dismissal is not one of these and the employee is constrained to pursue the Labour Broker in the event that he/she alleges dismissal.

Bearing the above in mind, the so-called “automatic termination” clauses are often included in employment contracts. The content and intended consequence of these clauses highlight the vulnerability of these “employees” as regards security of tenure, particularly when the client terminates the service contract with the Labour Broker.

This was highlighted in the case of Mahlamu v CCMA and others (JR1702/09 of 30 November 2010). The Applicant was employed as a security officer by Gubevu Security Group (Pty) Ltd, which had contracted with the Bombela Joint Venture to provide various armed escort services at various sites related to the Gautrain project. In terms of his employment contract, it was to commence on 23 October 2008 and automatically terminate on expiry of the contract between Gubevu and Bombela alternatively, in the event that Bombela did not require the services of Mahlamu for whatsoever reason.

During January and February of 2009, Bombela cancelled the contract with Gubevu and Gubevu addressed a letter to Mahlamu, advising him that owing to the cancellation of the contract and lack of alternative positions, his services were no longer required. It appears that Mahlamu thereafter referred the matter to the CCMA where his claim was dismissed on the basis that his employment had “automatically terminated” in terms of the provision in his contract and that he had therefore not been dismissed.

The effect and consequence of this was that Mahlamu’s tenure was entirely dependent on the will of Bombela, who was the client and not the employer of Mahlamu. Furthermore, Bombela could for any reason, irrespective of the arbitrariness of the reason, advise Bombela that his services were no longer required and this would result in the automatic termination of his employment contract. The effect of this would leave Mahlamu with no recourse, either against Bombela or Gubevu.

As not to be outdone, Mahlamu then brought a review application, challenging the finding contending that the Commissioner had made a material error in law. The Labour Court upheld the review on the basis that the “automatic termination” clause precluded Mahlamu from exercising his right not to be unfairly dismissed in terms of the Labour Relations Act. The Court went further to state that the “automatic termination” clause would be invalid unless the Labour Relations Act permitted such contractual provision. In finding that this was not permissible, the Court held that “parties to an employment contract cannot contract out of the protection against unfair dismissal afforded to the employee whether through the device of “automatic termination” provisions or otherwise”.

In consequence, the Court held that the automatic termination of Mahlamu’s contract of employment constituted a dismissal for the purposes of the Labour Relations Act and Mahlamu was granted leave to refer the matter to the Labour Court or CCMA.

This finding has profound and far-reaching consequences as regards the enforceability of an “automatic termination” clause included in an employment contract which provides for the automatic termination of the employment contract, should the Labour Broker no longer require the services of the employee. In terms of this case, this will now constitute a dismissal for the purposes of the Labour Relations Act and the aggrieved party will be entitled to refer the matter to the CCMA or Bargaining Council on the basis of an unfair dismissal claim.

The effect of this is that Labour Brokers are now effectively precluded from including or rather enforcing these “automatic termination” clauses in employment contracts as this will be considered a dismissal in terms of the Labour Relations Act.

Irvin Lawrence is a Director in the employment department at ENS ilawrence@ens.co.za
Jason Moodley is a Candidate Attorney in the employment department at ENS jmoodley@ens.co.za