The intention of the changes was to regulate temporary employment after labour unions campaigned for the removal of brokers due to the exploitative conditions low-paid workers. Picture: THE HERALD
The intention of the changes was to regulate temporary employment after labour unions campaigned for the removal of brokers due to the exploitative conditions low-paid workers. Picture: THE HERALD

More litigation challenging the country’s labour laws should be expected following Thursday’s landmark ruling that found that the clients of labour brokers are the sole employers of workers, dealing a blow to brokers.

In a majority judgment, the Constitutional Court found in favour of the National Union of Metalworkers of SA (Numsa), dismissing with costs an appeal application brought by labour broker Assign Services, which had argued that the Labour Relations Act deemed them "dual employers".

Dual employment means the absorbed temporary workers would be in an employment relationship with both the labour brokers and the broker’s clients.

The ruling follows years of disputes between employers and labour unions on the interpretation of section 198A of the act, which was amended in 2014 to force companies to permanently hire contract workers earning less than R2,500 a month, after three months of continuous service.

The intention of the changes was to regulate temporary employment after labour unions campaigned for the removal of brokers due to the exploitative conditions low-paid workers were being subjected to, with some serving as perpetual contract workers.

While the ruling brings clarity to workers and business, it is unclear how it will function in relation to other labour laws.

Labour experts said provisions in the Basic Conditions of Employment Act, among others that still recognise labour brokers as employers, were likely to lead to more disputes.

"We will see litigation seeking to align the Basic Conditions of Employment Act and other laws with the Labour Relations Act amendments," said Hogan Lovells partner Jean Ewang.

Other far-reaching implications meant companies would now pick up the financial burden of having to employ contract workers permanently, while labour brokers would ultimately feel the financial impact as their clients would be free to end their agreements after the workers are absorbed.

Delivering the ruling, Acting Judge Daniel Dlodlo said: "When interpreted in context, [the contested section] supports the sole employer interpretation. It certainly is also in line with the purpose of the 2014 amendments, the primary object of the LRA [Labour Relations Act] and the right to fair labour practices in section 23 of the Constitution."

Constitutional Court Judge Azhar Cachalia was not in agreement with the bench on the ruling, saying that by declaring labour brokers as dual employers, workers would enjoy added benefits.

He argued that while the amended sections were clear that the client "is deemed to be the employer" of an employee, "certain employer duties may be enforced against either or both the temporary employment services (TES) and the client.

"This gives the employees added protection by allowing them to enforce their employment rights against two employers. The section makes no sense otherwise."

Craig Kirchmann, the attorney representing Assign Services, said while they were disappointed by the ruling, labour brokers were still a significant contributor to the country’s economy, as was the case elsewhere across the world.

A 2016 Human Sciences Research Council report on the economic contribution of temporary employment services found that it contributed about 9% to GDP in 2013.

mahlakoanat@businesslive.co.za