Labour Law - When a Labour Broker is Not Performing a Genuine 'Temporary Service', Who is the Employer?
Amendments to the Labour Relations Act, 66 of 1995 (“LRA”) introduced provisions dealing with temporary employment services (“TES”), commonly known as labour brokers. The most important of these provisions is found in section 198A, which sets out the circumstances when a TES may be used without any risk to the client. These circumstances include:
• When a TES employee is assigned to a client for a period of less than three months;
• When a TES employee is assigned to a client as a substitute for an employee who is temporarily absent from work;
• When a TES employee is assigned to a client to perform a category of work which is determined to be a temporary service by a collective agreement concluded in a bargaining council, a sectoral determination or a notice published in the Government Gazette by the Minister of Labour.
Section 198 A goes on to "deem" the TES employee to be the employee of the client if it is found that the TES is operating at the client in circumstances other than those listed above.
The recent case of United Chemical Industries Mining Electrical State Health and Aligned Workers Unions obo Mbombo / Primeserv and another (2017) dealt with the principle that if a Temporary Employment Service ("TES") employee is not performing a genuine 'temporary service' as defined in the LRA, then the TES client is deemed to be the employer. The court found that "deeming" should be interpreted as an augmentation as opposed to a substitution, and therefore, the TES retains the employment contract and the TES client is viewed as a parallel employer. This has significant consequences for the client.
Facts of the case
Mr Mbombo was employed by a TES as a driver and claimed that he did not know the reason for his dismissal. The TES alleged that Mr Mbombo was employed on a fixed duration contract which had expired. A dispute was declared and the TES client was joined to the proceedings because it had an interest in the dispute.
The facts were that Mr Mbombo was assigned to the TES client for a period exceeding 3 months and that his services were not as a substitute for an employee of the client who was temporarily absent nor was it in a role determined to be a temporary service by collective agreement. Mr Mbombo was also earning below the Basic Conditions of Employment Act (“BCEA”) threshold of R205 443.30 per annum. This is important to note, because section 198A (1) of the LRA that introduces the deeming provision, applies only to employees earning below the prescribed earnings threshold. The Commissioner found that Mr Mbombo was not performing a temporary service as defined in the LRA and as a result, Mr Mbombo was "deemed' to be an employee of the TES client.
The Commissioner also found that Mr Mbombo was not employed by the TES for a limited or definite duration as alleged by the TES. Reference in the contract to work commencing "as directed" did not satisfy the definition of a fixed term contract. Section 198B(15) of the LRA provides that if employment of a person on a fixed term contract is longer than 3 months and there is no justifiable reason for the fixed term contract, that employee is deemed to be employed for an indefinite duration and is no longer employed for a fixed term.
The Commissioner therefore found that Mr Mbombo's contract of employment was not terminated for a fair reason nor was it done in accordance with a fair procedure. As the TES client was deemed to be Mr Mbombo's employer, he Commissioner ruled that both the TES client and the TES had to reinstate Mr Mbombo and both had to pay him retrospective remuneration.
The award is far reaching. Not only is Mr Mbombo now reinstated into the employ of the TES client on an indefinite basis, he must, in accordance with Section 198A(5), be treated overall not less favourably than any permanent employee of the TES client performing the same or similar work unless a justifiable reason exists for the different treatment. This must be seen in the context of employment benefits and opportunities for advancement within the TES client's business.
Other problems that arise from this award is what happens to Mr Mbombo when the TES client terminates its contract with the TES? Will this mean that Mr Mbombo is dismissed by the TES client? If so will the disciplinary enquiry be convened by both the TES and the TES client? Furthermore, If the TES client no longer requires the services of Mr Mbombo, is it obliged to conduct retrenchment consultations with him and offer severance pay before the contract of employment can come to an end?
These questions need to be resolved before steps are taken against those "deemed" to be employed by the TES client and professional advice should be considered to avoid unexpected surprises.