TES ruling raises uncertainty for all sectors

The Labour Appeal Court (LAC) recently delivered a judgment which could have significant implications for the South African labour market. The judgment specifies that employees of labour brokers who earn below the threshold for vulnerable employees, will become the permanent employees of the client at which they are placed after a period of three consecutive months.

5 Feb 2018 2 min read Article

In terms of the 2015 amendments of the Labour Relations Act (LRA), a temporary employment services (TES) employee earning under the prescribed threshold placed at a client is deemed to be the employee of the client if that employee has been working for the client for longer than three months and is not employed for any other reason outlined. This places a duty on the client to, among other things, remunerate these TES employees on terms no less favourable than its own permanent staff who perform the same or similar work.

"According to the LAC, the client now becomes the new main or statutory employer, which leaves the labour broker out of the picture after three months. It is therefore uncertain who the real employer will be," says Hugo Pienaar, Director in the Employment practice at Cliffe Dekker Hofmeyr, Johannesburg.

Not only does this ruling raise questions about the identity of the real employer, but it could have severe financial implications for the industry as a whole.

If, however, the LAC judgment is upheld, there can no longer be a joint and several liability with the TES. This is the practical effect of the Judgment. “This could surely not have been the intention of the amendments and the judgment is sure to be appealed. The Constitutional Court will undoubtedly be called upon to decide whether the effect of the judgment is not to ban a TES after three months," adds Jose Jorge, Pienaar's fellow Director in Cape Town.

However, apart from the many uncertainties, it provides TES employees with protection from, amongst other things, unfair dismissal through the extension of joint and several liability to both the client and the employer.

“It provides for decent work for TES employees by ensuring that they are engaged on terms and conditions of employment, on the whole no less favourable than those enjoyed by the client's employees performing the same or similar work,” maintains Jorge.

Due to the many uncertainties raised, Pienaar stresses that clients and labour brokers who wish to continue their relationship, should consider alternative models, such as the Management Service Provider (MSP) model.

“This significantly increases the productivity, sales and efficiency of the employer because the MSP has access to a wide variety of service providers whom can provide competitive prices for their services,” concludes Pienaar.

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