22 June 2010

Labour brokers - to be or not to be

Historically, labour brokers have played a significant role in the South African labour market, particularly in certain labour intensive industries.

The system of labour broking evokes emotive connotations of abusive racial discrimination. Labour broking arrangements are viewed as depriving vulnerable employees of statutory wage-regulating measures and protections.

The debate currently wages on at NEDLAC about the role and future of labour brokers, specifically whether they should be statutorily regulated or simply banned outright. Trade union federations and business find themselves at opposing ends of the debate.

In the recent decision of Africa Personnel Services (Pty) Ltd v Government of Namibia & others (Unreported Case No. SA51/2008), the Supreme Court of Namibia (the Court) held that the ban on labour brokers was unconstitutional.

In the matter, section 128(1) of Namibia's Labour Act, 2007 (the Act) came under scrutiny. Section 128 of the Act prohibits the practice of labour hire, providing as follows:

'No person may, for reward, employ any person with a view to making that person available to a third party to perform work for the third party.'

Section 128 was enacted to give effect to constitutional imperatives such as the commitment 'to promote and maintain the welfare of the people of Namibia' and to 'further a policy of labour relations conducive to economic growth, stability and productivity'.

Africa Personnel Services (Pty) Ltd, the appellant, sought to have section 128 constitutionally reviewed on the basis that such section impinges the fundamental freedom to carry on a business or trade.

The court a quo dismissed the appellant's application and held that agency work had 'no legal basis at all in Namibian law and therefore [it was] not lawful.'

The matter was taken on appeal. On appeal, the Court was required to decide whether the prohibition against labour broking, a form of agency work, is a reasonable restriction which is necessary to achieve the permissible objective of 'decency and morality' and which is necessary 'in a democratic society'.

Both the appellant and the respondents recognised that agency work was open for abuse. They however differed in their approach to the problem. The respondents addressed the problem by total prohibition of agency work, whereas the appellant maintained that the deleterious aspects of agency work could be curbed by regulatory measures. This would force service providers, who might be guilty of abuse of practices, to comply with acceptable employment standards.

The Court was satisfied that a rational causal relationship was established between section 128 and the objectives of decency and morality relied on by the respondents.

What remained to be decided was whether the prohibition of agency work was reasonable, was necessary to achieve the permissible objectives of decency and morality and was necessary in a democratic society.

In this regard, the appellant submitted that their prohibition was 'hopelessly over broad'. The respondents made no attempt to justify such wide prohibition.

The Court concluded that the prohibition of the economic activity defining section 128 is so over broad, that it is not reasonable and should be struck down as unconstitutional and the ban on labour broking was reversed.

The question that next arises, is whether labour broking should be banned or regulated in South Africa?

On the one side of the debate, trade union federation, COSATU, is a proponent of an outright ban whereas FEDUSA has called for the regulation of labour broking.

A 2008 report commissioned by the Department of Labour proposed outlawing labour brokers who merely act as employers of subcontracted labour, except for those who provide their workers with specialised skills.

On the other side of the debate, organised business is a proponent of regulating labour broking. Effective regulation of labour broking will require the introduction of a regulatory framework, which would include requirements such as registration and licensing, minimum threshold requirements, security and complaints and investigation procedures. It may also be feasible to limit the sectors and types of work in which employees can be placed.

Regulation in the workplace should also be established by addressing hours of work, equal treatment compared to permanent employees, period of placements before presumption of permanency, number of contract renewals etc.

While the issue of regulating the labour broking industry may make inroads in the path towards protection of these vulnerable employees, problems may still exist in the enforcement.

It remains to be seen whether the judgment will prompt the South African Parliament to follow in the footsteps of its Namibian counterpart.

Melanie Hart, Director, Employment Law

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