On 26 July 2018, the Constitutional Court handed down its judgment in the matter of Assign Services (Pty) Limited v National Union of Metalworkers of South Africa and Others. Judging by the press coverage, there is confusion about what this judgment means for the Temporary Employment Services (TES) industry (also referred to as the labour broking industry).
The case, several years in the making, only revolved around the interpretation of LRA s198A(3)(b) and the very narrow question of whether or not it gives rise to a “dual” or “sole” employment relationship after the 3-month deeming period for the purposes of the Labour Relations Act (LRA).
The Constitutional Court judgement clarified that for TES employees earning under the BCEA threshold, currently R205 433 per annum, and who work longer than three months, they would be deemed to be solely employed by the Client (where they are placed) for the purposes of the LRA only.
The Constitutional Court case was not about whether or not deeming means that the assigned employee becomes permanent and/or rights to equal pay. These issues are not contentious and are addressed by other sections of the LRA, not s198A(3)(b) – which was the subject matter of the case. This is an important point that seems to have been missed by many commentators.
Does this mean that employees transfer to the client?
The Constitutional Court, having found in favour of sole employment for the purposes of the LRA, does not mean that TES employees employed for longer than 3 months now transfer as permanent employees of the client. The question of deemed indefinite, as per the LRA wording, is dependent on the contract of employment with affected employees.
Sole employment is limited to the LRA only. There are several other pieces of legislation which impact the employment relationship in terms of which the TES remains the only employer. The most important of these being the Basic Conditions of Employment Act, which establishes many terms and conditions of employment. At paragraph 75 of the judgment, the Constitutional Court clearly explains that there is no transfer to a new employment relationship and that the triangular employment of TES, employee and client relationship continues.
A leading labour lawyer put it as follows: “The Constitutional Court’s conceptualisation of the nature of the (sole) employment relationship with the client post-deeming, appears to be in the nature of one only at statutory level – and ostensibly – one which does not necessarily do away with the relationship between the placed worker and the TES on any level other than the statutory level, and for any purposes other than for purposes of the LRA.”
There is no doubt that the TES can continue as the only employer for the purposes of other pieces of legislation including BCEA, SDL and PAYE, because the Constitutional Court accepted that post-deeming, the placed worker is deemed to be employed by the client for purposes only of the LRA.
The judgement clearly indicates that the TES and client relationship continues beyond three months. For legitimate TES providers where the provisions of the LRA amendments have already been implemented, this judgement does not affect their ability to operate either in practice or at law.
In the current economic climate there is a real need for organisations, who wish to remain globally competitive, to maintain their flexibility and to focus on their core business. Many organisations choose to use TES providers to leverage their expertise, technologies, cash flow management and HR solutions. They can confidently continue to do so beyond the Constitutional Court judgment.
The judgment also has no impact on legitimate fixed-term contracts longer than 3 months. For example, contracts for projects, seasonality, substitutes for employees who are temporarily absent or in a category of work for any period which is determined to be a temporary service by collective agreement concluded in a bargaining council, a sectoral determination or a notice published by the Minister of Labour, which are longer than three (3) months, are not affected by the judgment.
Following the judgment, many articles have suggested that the case impacts on equal treatment for TES, fixed term and part time employees in respect of remuneration/benefits. However the judgment was not about equal treatment. Equal treatment was addressed in the LRA amendments effective 1 April 2015 and did not form part of this case.
If a TES employee is deemed to be an employee of the client, such employee must be treated on the whole no less favourably than an employee of the client performing the same or similar work, unless there is a justifiable reason for different treatment. Many organisations have justifiable reasons for differentiation.
For TES employees covered by bargaining councils, equal treatment is clearly entrenched in the agreements. Interestingly, research conducted by the Services SETA indicates that approximately 60% of all TES workers in South Africa are covered by bargaining council or sectoral determination and already have full protections in that regard.
The clarification of the sole employer interpretation for the purposes of the LRA confirms the additional protections enjoyed by TES employees. The LRA amendments, as clarified by the Constitutional Court judgement, provide additional protection to those employees under the threshold (R205 433) who work longer than three months in that, in the event of a breach of the LRA, they could take action against either the client directly or the TES or both.
All employees, including TES employees, have always been protected by existing labour legislation. TES employees who experience unfair labour practices and unfair dismissals are is entitled to lodge cases with the CCMA. This is not new.
While the Constitutional Court judgment has made it clear that after three (3) months, the deemed employee is employed solely by the client for the purposes of the LRA, it has also made it equally clear that, for purposes of contract and other legislation, the TES continues to be the employer.
Given the important role that TES’s play in the economy, and the fact that the Constitutional Court judgment recognises their ongoing participation in the triangular relationship, the TES industry will continue to play an important role in the economy.