5 September 2012 by and

Are we winning on the self-regulation of labour brokers?

The suite of proposed amendments to labour legislation has caused immense controversy. 

According to Aadil Patel, Director and National Employment Practice Head, “One of the topics causing consternation is that of labour brokers.  The trade union movement, on the one hand, called for a complete ban on labour brokers. Business, on the other hand, proposed greater regulation of labour brokers in an effort to curb abuse (whether real or perceived). The most recent bills favour greater regulation and better benefits for labour broker employees.”

Patel notes that businesses' response to the call for the banning of labour brokers is, in essence, that the banning of labour brokers would be unconstitutional and result in substantial job losses.  In support of its legal contention it refers to our Namibian neighbours and the judgment of Namibia Supreme Court of Appeal in Africa Personnel Services (Pty) Ltd v Government of the Republic of Namibia & others [2011] . In the case in point, the Namibia Supreme Court of Appeal held that the banning of labour brokers (in Namibia) was unconstitutional. 

Nedlac appears to have taken notice of the Constitutional requirements.

The latest proposals in the Bills are designed to ensure that labour broker employees are remunerated in accordance with the benefits of permanent employees in the establishment and leave them with recourse against their own employer - the labour broker - and the client.

“The essential features of the legal relationship between the labour broker, the client and the labour brokers’ employees are well-known. The labour broker contracts with the client to provide certain types of labour to perform work for the client, but the persons who are engaged to perform the work are employed by the labour broker and not the client,” he says.

Faan Coetzee in the Employment Practice explains that labour brokering arrangements, arguably, have been utilised to deprive in some instances, employees of the protection accorded to them by the Labour Relations Act No. 66 of 1995 (LRA).  The Labour Court has been active in protecting the rights of employees engaged in labour brokering.

In the case of LAB Brokers (Pty) Ltd v Mandla 2001, the Labour Appeal Court had to determine whether the labour brokering arrangement was a sham.  It found that it was and accordingly set aside the labour brokering arrangement and concluded that the employee was indeed the employee of the client.  A similar approach was adopted in State Information Technology Agency (Pty) Ltd v CCMA and Others 2008

“Over the past three years, trade unions have requested the employers to conclude agreements to prohibit the usage of labour brokers.  In some instances, they have achieved this.  The Bargaining Council Agreements of the Motor Industry Bargaining Council and Metal and Engineering Industries contain provisions for the phasing out of employees of Labour Brokers in certain bargaining units with effect from 1 March 2012.  These clauses, although agreed to by the employer parties and trade union parties to the Bargaining Councils, are under attack in the Labour Court from individual employers as being unconstitutional,” says Coetzee.

In Nape v INTCS Corporate Solutions (Pty) Ltd Boda AJ set the cat among the pigeons.

“The judgment was not concerned with the constitutionality of the labour broking arrangement or the fact that section 198 of the LRA takes away the right of the employee to claim directly from the client in unfair dismissal claims. Instead, the judgment was concerned with the right of the labour broker to rely on section 189 of the LRA (operational requirements dismissals) to justify the termination of the employment relationship after the client, for unfair reasons, insisted that the employee be removed from its premises,” says Coetzee.

“In this matter, the client demanded its labour broker to remove the employee from its premises. The labour broker then suspended the employee and, after a disciplinary hearing, determined that a final written warning was an appropriate sanction instead of dismissal.

“The client, however, refused to allow the employee back onto its premises. The labour broker was obliged, in terms of its contractual relationship with its client, to accede to the client’s demands and accordingly retrenched the employee. In terms of the contract between the labour broker and the client, the latter had the right to request the removal of the employee from its premises for any reason whatsoever.

“The Court held that such an agreement, which provides the client with the power to remove the employee from its premises for any reason whatsoever, is against public policy and an unlawful breach of the employee's right to fair labour practices in terms of the LRA.

Coetzee says the Court held further that the labour broker was not powerless. It could resist the client's unlawful demand by undertaking the following: the labour broker is entitled to approach a Court of law to compel the client not to insist upon the removal of an employee where no fair grounds exist for that employee to be removed; the labour broker is also entitled to resist any attempt by the client to enforce a contractual provision which is against public policy; if a Court were to reinstate an employee into the employ of the labour broker, the labour broker may enforce such an Order against the client to give effect to the employee's rights to fair labour practices; and  the labour broker could in such a case approach either the High Court or the Labour Court for appropriate relief.

Patel notes that similar sentiments were expressed by Judge Van Niekerk in the case of CK Mahlamu v Gubevu Security Group (Pty) Ltd Case. In the case of South African Post Office Ltd v TAS Appointment and Management Services CC, the Court interdicted labour broker employees from engaging in industrial action.  The Court held that the labour broker may be able to withhold their labour but did not have the power to prevent the South African Post Office Ltd (who was not the employer) from employing replacement labour.

Patel says that the pressure around the usage of labour brokers has impacted the labour brokering industry. In the case of Contract Employment Contractors (Pty) Ltd versus the Motor Industry Bargaining Council (‘’MIBCO’’) a labour broker unsuccessfully attempted to interdict the implementation of the MIBCO Bargaining Council collective agreement which is phasing out the usage of labour brokers in the industry. Similarly in Confederation of Associations versus MIBCO and Others employers have approached the Labour Court in Braamfontein to review and set aside the same provisions in the MIBCO collective agreement. This application stands to be decided on whether the clause complies with the Constitution.

The Labour Court in NUM v DB Contracting North CC Case JS463/10 during July 2012 on the facts of the case held that the employer’s retrenchment of a number of employees for operational reasons was nothing else than a retrenchment process for purposes of dismissing its own employees to substitute them with employees of a labour broker: “The real reason for the Second to Further Applicants’ retrenchment was that the Respondent wanted to get rid of them as employees and use employees of labour brokers”. The dismissal of the employees for operational reasons was held to be substantive unfair and they were re-instated.

“Insofar as the policy choice regarding labour brokers is concerned, legislative intervention is required.  If not, a myriad of cases attempting to ensure that a semblance of what is perceived to be fair and just will prevail and thereby creating uncertainty.  It is, however, apparent that the trade union movement is winning the war on labour brokers. Bargaining councils are implementing clauses which limit the use of labour brokers in the future. Courts are passing judgements which ensures that there is fairness in this tripartite relationship.

“The development of the law will ensure that when the amendments are passed an extensive amount of the confusion would have been resolved,” Patel adds.

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