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LANDMARK JUDGEMENT: CON COURT RULES ON DEEMING PROVISIONS FOR LABOUR BROKERS

On 26 July 2018, the Constitutional Court handed down a judgment in an application for leave to appeal against an Order of the Labour Appeal Court (LAC), in the matter between Assign Services (Pty) Limited v National Union of Metalworkers of South Africa and Others [2018] ZACC 22.

The matter involved the interpretation of section 198A(3)(b) of the Labour Relations Act 66 of 1995 (LRA) and the determination of whether the provision in contention results in a “sole employer” relationship between a placed worker and a client or a “dual employer” relationship between a Temporary Employment Services (TES), a placed worker and a client. The Court had been placed in the position to determine what would happen to the employment relationship when effect of the aforesaid provision is given.

Factual Background to the Matter

In April 2015, the Applicant, Assign Services (Pty) Limited (Assign Services), a Temporary Employment Service (TES) placed 22 workers with the Fourth Respondent, Krost Shelving and Racking (Pty) Limited (Krost). The workers rendered services at Krost on a full time basis for a period in excess of three months. In terms of the LRA, one of the requirements that must be adhered to by TES as provided in section 198A(1) inter alia:

“…a ‘temporary service’ means work for a client by an employee-

  • For a period not exceeding three months;
  • As a substitute for an employee of the client who is temporarily absent…”.

As a result of the continued employment post the three-month period, section 198A(3)(b) of the LRA was triggered. Section 198A(3)(b) inter alia states the following, that:

“…for purposes of this Act, an employee-

  • not performing such temporary service for the client is-
    • deemed to be the employee of that client and the client is deemed to be the employer; and
    • subject to the provision of section 198B, employed on an indefinite basis by the client”.

The dispute arose between Assign Services and National Union of Metalworkers of South Africa (NUMSA), whom several of the placed employees were members of.

 Issue in Dispute and Application to the Facts at Hand

The issue in dispute between Assign Services, Krost and NUMSA related to the interpretation and effect of section 198A(3)(b). Assign Services’ view was that section 198A(3)(b) created a dual employer relationship, while NUMSA’s adopted the view that the provision results in a sole employer relationship.

The matter was brought before the Commission of Conciliation Mediation and Arbitration (CCMA) who found in favour of NUMSA’s interpretation of the provision. The Commissioners ratio decadendi was found by giving effect to s198A(3)(b) primary objectives and further provided that dual employer relationship would result in uncertainty and the vulnerability of placed workers to whom the LRA aims to afford a greater protection.

Assign Services sought to have the Commissioner’s reward reviewed and set side contending that the Commissioner committed a material error of law. In the Labour Court, it was held that a proper reading of the section could not support the sole employer interpretation. It considered the contract of employment between the TES and the employee to be a “source of control” in the employment relationship, and further provided that section 198A(3)(b) created a dual employer relationship, in that, both the TES and the client have rights and obligations in respect of the placed workers.

The decision of the Labour Court was taken on appeal by NUMSA. On appeal the LAC found that the sole employer interpretation best protected the right of placed workers and further promoted the purpose and objects of the LRA and the 2014 amendments.

Application of the Law by the Constitutional Court

The matter was brought before the Constitutional Court where Acting Justice Dlodlo writing for the majority held that the purpose of section 198A must be contextualized within the right to fair labour practices in section 23 of the Constitution of the Republic of South Africa, 1995 (the Constitution) and the purposes of the LRA as a whole. The Majority found that the language used by the legislature in section 198A(3)(b) of the LRA is plain, and when the language is interpreted in the context of the LRA, it supports the sole employer interpretation.

In the dissenting judgment, acting Justice Cachalia found that the dual employer interpretation was correct, as the language of the LRA does not expressly state that the TES would cease to be the employer after three months. The drafters of section 198A(3)(b) could have expressly stated this to be the position but omitted to do so.

Accordingly, the decision by the Constitutional Court ruled that for the first three months the TES is the employer and after that period the company, where the employee was placed by the TES, now becomes the “sole employer”. Practically, section 198A(3)(b) operates as a deeming provision, which creates a legal fiction of sorts, whereby the three month period acts a trigger event, which turns the temporary employee into a permanent employee of the company. This transition happens ex lege or by operation of law, and does not entail entering a new separate employment agreement with the company. Rather what appears to occur is statutory shift in who is deemed to be the employer as there is no interruption or variation to the employment agreement thereto,, provided

This means companies are obligated to provide former temporary employees with permanent contracts after the three-month period lapses which leaves many placed workers believing that the interpretation taken by the Constitutional Court would provide greater protection, benefits and eliminate any source of dispute arising out of the interpretation of section 198A(3)(b).

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)