Due to the recent recession and our volatile economy, a-typical types of employment have become a trend. Employers are finding it more economical to procure workers through temporary employment services (“TES”) which has the effect of essentially circumventing the administrative and procedural obligations imposed on employers by the Labour Relations Act (the “LRA”). Due to the high unemployment rate in South Africa, workers are desperate to secure any form of employment even if it’s on a temporary basis.

Temporary employment services, commonly referred to as ‘Labour Brokers’, are governed by section 198 of the Labour Relations Act which defines a TES as, “any person who, for reward, procures for or provides to a client other persons who render services to, or perform work for, the client and who are remunerated by the temporary employment service.” The relationship works as follows: the TES is the employer of the person who will render the services which are rendered in favour of a third party, namely the client. The TES is paid directly by the client and it the TES who in turn pays the worker who renders the services. This relationship is criticized due to the fact that it places the client in the preferential position of having no obligations towards the worker and as a result the rights enjoyed by the worker under the LRA are exploited. As a result of these abuses, many jurists have called for the abolition of TES.

The advantage of a TES is that it provides labour to clients without the onerous obligations which are usually imposed on employers by the LRA. The disadvantage however is that workers are placed in vulnerable positions and without adequate job security. Furthermore, workers employed under a TES will seldom join trade unions as they are not active in a particular industry long enough to categorize themselves which significantly diminishes their bargaining power.

Section 185 of the LRA provides employees with the right not to be unfairly dismissed for reasons of conduct, capacity or operational requirements. The controversy around TES occurs in connection with inter alia the employees right not to be unfairly dismissed. In general, a dismissal occurs where an employer (TES) terminates a contract of employment with or without notice. What often happens is that the TES will terminate the workers employment when the client terminates its service with the TES. In the case of SACCAWU v Primeserv ABC v Recruitment Ltd 2007 (1) BLLR 78 the court confirmed the obligation imposed on a TES in relation to their workers. The court held that a TES is not absolved from its duty to treat employees fairly at the time of their contract with the client coming to an end. They are therefore still required to comply with the provisions of the LRA to ensure that the dismissal is both substantively and procedurally fair. The issue that arises is that the client bears none of the obligations imposed by the LRA and when the client terminates the services of the TES, the TES in turn terminates the services of the worker and the worker has no recourse against the client.

Accordingly, the accountability of clients was problematic as the client could terminate the services of the TES as and when they please which often resulted in the termination of the worker by the TES. These gaps allowed for abuse and exploitation of employees rights, as the client was essentially able to hire and fire without consequence.

In the case of LAD Brokers (Pty) Ltd v Mandla 2002 (6) SA 43 (LAC), the court held that the worker was the employee of the TES which it concluded was due to the remuneration structure between the TES and the worker. The court however held that while the TES is the workers employer, the TES and the client are jointly and severally liable if the TES contravenes: a bargaining council agreement regulating terms and conditions of employment; an arbitration award; the basic conditions of employment act; or a sectoral determination. This case is of great importance because it created an interest for the potential liability of clients and forced them to ensure that certain rights were upheld in favour of the workers in fear that they could for the first time incur liability if certain obligations were not met.

A further matter of contention surrounding a TES is when a worker has been employed on a temporary basis or for a fixed period of time. The entire arrangement of a TES conflicts with a number of presumptions in labour legislation namely, section 57 of the Employment Equity Act which provides that for the purposes of employment equity, the worker who provides services for an indefinite period is deemed to be an employee of that particular client. The Basic Conditions of Employment Act along with the LRA provide that unless the contrary is proven, a person who works for or renders services to any other person is generally regarded an employee of that person. In considering these presumptions, one could argue that the worker is an employee of the client, creating a direct employment relationship between them.

The future of labour brokers in South Africa is a controversial debate that fluctuates from the total banning to the regulation thereof. The Namibian Supreme Court of Appeal has held that the banning of labour brokers would not be appropriate, as it would not be permissible to ban labour brokering on the basis of proportionality and rationality. The constitutional objectives of regulating labour brokers would be more favourable then a total ban where numerous jobs could be lost. The proposed regulatory system of reform includes mandatory registration for all practitioners; an establishment of a Board to regulate and enforce set standards; a code of conduct enforced by the industry board; annual consideration of profit margins and promotion of job creation initiatives. If this system is successfully enforced, unskilled workers who wish to break into the market place, employed by labour brokers would have adequate protection of their rights. Prescribed minimum standards would then ensure security for the temporary worker.

In South Africa there has been a movement towards the total “ban” of TES and Labour Brokers, as the proposed amendments put forward for comment repeal section 198 of the LRA. Furthermore, the Department of Labour suggests a move towards a more comprehensive definition of ‘employer’ to wit “any person who provides work for and directly supervises” will be considered the employer, resulting in the TES no longer being recognized as the employer. In addition suggestions include that an employee must be employed permanently unless the employer can show reason or justification for providing a fixed term employment. These proposed amendments therefore leave no room for TES and very little movement for fixed term employment. It will be interesting to observe whether the proposed amendments and suggested abolition of labour brokers will be implemented as their already seems to be some debate and resistance from existing labour brokers and clients.

Written by Lauren Hastie of BKM Attorneys, Rosebank