Temporary employment agencies and the question, who is really the employer after a three-month period
Section 198A(1) of the Labour Relations Act (hereafter referred to as “the Act”) defines temporary employment as work performed for a client by an employer that does not exceed three months, and where an employer acts as a substitute for an absentee employee.
Temporary employment also applies to work done in the period determined by a collective agreement, a sectoral adjustment or a notice published by the minister.
This form of employment is regarded as true temporary employment.
On 1 January 2015 amendments regarding section 198A of the Act came into force. Section 198A(3)(b)(i) of the Act caused the most controversy. This article determines that, where an employee didn’t really perform temporary work as described in section 198A(1) of the Act, the employee will be regarded as an employee of the client. Furthermore, the client will be regarded as the employee’s employer. The employee is then considered to be indefinitely in service of the client.
NUMSA v Assign Services and Others (JA96/15)  ZALAC 44 is the most recent and relevant case law in connection with the abovementioned legislation. Assign Service (Pty) Ltd, a temporary employment agency (TEA), provided labour to Krost Shelving & Racking (Pty) Ltd, a business working in the storage industry. On 1 April 2015, three months after the amendment of the Act came into force, 22 of the employees placed by Assign was permanently working at Krost.
Some of these employees was represented by the trade union NUMSA. NUMSA argued that after the three-month period, these employees were exclusively in service of Krost for all purposes of deeming provision (namely that the employees are deemed as employees of solely the employer).
On the other hand, Assign argued that when the three-month period expired, the employment agency is still regarded as the employer, which constitutes an interpretation that makes provision for dual employers.
Initially, the Commission for Conciliation, Mediation and Arbitration (CCMA) supported NUMSA’s view, but this opinion was reviewed and set aside by the Labour Court. NUMSA appealed against the ruling and the appeal was successful. The Labour Appeal Court found that the deeming provision (according to which employees are regarded as employees of solely one employer) offers the most protection to vulnerable employees, consistent with the main purpose of the amendment bill.
The Labour Appeal Court further ruled that the “single employer’s interpretation” doesn’t prohibit the temporary employment agency’s functionality. Temporary employment agencies are only limited to matters where actual temporary employment agreements exist. The Labour Appeal Court also found that the relationship between the client and the employee exists through the functioning of the Law, apart from the agreement between the employee and the temporary employment agency.
Assign took this ruling from the Labour Appeal Court on appeal to the Constitutional Court. The Constitutional Court gave more clarity about the interpretation of section 198A(3)(b) of the Act, that the Court follows the “single employer’s interpretation. There was ordered that employees with a gross income below the income threshold (currently R205 433 per year or R17 120 per month) be considered a permanent employee of the client, after three months of temporary employment. Employees with a gross income above the income threshold doesn’t enjoy the same protection. These employees rely on the reasonable expectation created by repeated renewal of the fixed term contract.
Author: Hannes de Kock