Sometimes a single case throws light on a bigger issue. A recent judgment in the Labour Court gives a fresh perspective to the highly contentious issue of labour broking in South Africa.

Mr Dyokwe started working a factory in Cape Town in 2000. In 2003, the manager told him to go to an office in Tyger Valley “to sign a form”. The office turned out to be the premises of a labour broker where he was told he would have to sign a contract with the labour broker to keep his job. He signed the form and returned to the factory where he continued in the same job under the same supervisor. However, his hourly rate was cut from R 12, 50 to R 10, 00. He worked for another 5 and a half years but in January 2009 he was told that his name was on a list of employees whose services had been terminated. He went to the labour broker but was told that he was too old to be placed in another job. That’s the thanks he got for almost a decade’s work.

Opinions over labour brokers divide the country. The labour broking industry presents itself as a generator of jobs. Critics argue that the rise of labour broking has led to employees doing the same work for less pay and with less employment security: the sort of thing that happened to Mr Dyokwe.

The voices of the labour broking industry respond to any evidence of abuse by blaming it on rogue operators: the small-time “bakkie brigade”. So who who ganged up on Mr Dyokwe?. The factory was owned by Mondi, a South African-based multi-national and one of the world's largest paper manufacturers; the labour broker was Addecco, the world’s large employment services company which operates in 60 countries. According to its website, Addecco is the world’s leading supplier of HR solutions. Mr Dyokwe can testify to one of those solutions: the inglorious spectacle of two multi-nationals scheming to screw an illiterate worker out of R 2, 50 per hour and his protection against unfair dismissal.

Mr Dyokwe’s case was heard by Judge Anton Steenkamp of the Labour Court. Before joining the bench, Judge Steenkamp had a distinguished career as a labour attorney acting for both trade unions and employers. He found that Mr Dyokwe was still employed by Mondi and that Addecco never became his employer. This is a correct reading of the law as a temporary employment service (the statutory name for a labour broker) is an agency that “provides or procures” employees to work for their clients. Addecco neither provided nor procured Mr Dyokwe to work for Mondi because Mondi had referred him to Addecco.

This may be an individual case, but it is highly unlikely that a leading employer such as Mondi is an aberrant outlier totally out of step with the rest of South African employers. The case throws a long shadow over the claims by labour brokers as to how many jobs they create. Research conducted for the Department of Labour almost a decade ago established that labour broker employees earned less than their equivalent workers employed directly by companies. The industry vehemently denies this without producing a shred of evidence. There are doubtless many, many workers in same position as Mr. Dyokwe.

Mr Dyokwe’s case was not brought by the trade unions but by the Legal Resources Centre. If the judgment of Judge Steenkamp is confirmed on appeal, it will provide considerable additional protection (and the possibility of back-pay claims) to employees who have received the same treatment as Mr. Dyokwe.

The Minister of Labour has now clarified that labour brokers are not going to be banned. But by the same token there is no rationale for labour brokers to continue to be classified as the employers of employees who are supplied to clients on a long-term basis. The LRA Amendment Bill does recognise the role of labour brokers in supplying temporary workers by permitting labour brokers to remain the employers of employees they place with clients for up to six months.

There are other situations in which it may be mutually beneficial for employees to be employed by an agency and not the client. One of these is nurses who provide care for the elderly and the infirm in their homes. It makes sense for these nurses to remain employees of the agency because they retain an ongoing and closer relationship with agency. Before the proposed new Act comes into effect, the Minister will invite representations to ascertain which categories of work should be regulated in this way.

Representatives of the labour broking industry have embarked on a high profile campaign of mis-infomation. For instance, the much-quoted Mr. Loane Sharpe of Adcorp frequently cites the figure that while 7,5% of South Africa’s employees are employed by labour brokers; only 0,8% of cases referred to the CCMA are against labour brokers. This is misleadingly used to create the impression that labour brokers are excellent employers because they dismiss their workers so infrequently. Rather the low rate of referral of cases by employees engaged by labour brokers reflects the fact that these employees do not have effective protection against unfair dismissal and unfair labour practices. When the assignment of an employee who has been placed with a client by a labour broker terminates, this is not classified as a dismissal, no matter how long the employee has worked for the client. (Mr Dyokwe only qualifies for protection because he had worked for Mondi before being referred to the labour broker). This statistic is therefore an argument for why the government is obliged to revise the LRA to ensure that the constitutional right to protection against unfair labour practices (including unfair dismissal) is extended to employees who are placed to work with clients by labour brokers.

The labour broking industry tends to portray criticism of it as Luddite opposition to change in the labour market. No doubt, the unfeasible call for a total ban has played into the industry’s hand in public debates. But something more fundamental is at stake.

Perhaps the major economic achievement of the trade union movement has been to move their members from being low-paid contract workers without security or benefits to wage-earners who enjoy employment security and the benefits of membership of provident funds and medical aid schemes. This has enabled them to support their families and extended families and has contributed significantly to creating a more stable society during the period of political transformation. This achievement, won through collective bargaining in the last years of apartheid, has now been put under immense pressure as many employers seek to cut their wage and “social wage” costs by making work more informal and less protected. (Even on the labour brokers’s own figures, for instance, very few of their employees belong to provident or medical aid funds). As a result, employees increasingly bear the full risk of uncertainty in the labour market. Like Mr Dyokwe they have to try plan their lives on the basis that tomorrow their name could be on a list and they will be out on the street unable to meet their commitments. Not the recipe for a stable society

Labour was able to forge a better life for workers despite repressive apartheid laws. That is an achievement we need to build on and not dismantle.

Written by Professor Paul Benjamin Director of Cheadle Thompson and Haysom Attorneys

This article was first published in the Business Report