Labour broker wings clipped
The Constitutional Court does not ban labour broking in its entirety, but aims to ensure that the provision of temporary services is truly temporary and after three months is classed as permanent under the LRA
Labour brokers are apprehensive after a Constitutional Court ruling last week that went to the heart of their operations.
The court ruled that brokers cease to be co-employers once the temporary workers they place with client companies become permanent after three months with the client company.
Labour brokers account for close to 14% of all employment in SA and the majority of the staff they provide are considered vulnerable. Close to half of all workers in SA earn below R3,500 a month.
The impact of the ruling was seen on Friday when JSE-listed labour-broking firm Adcorp’s share price fell as much as 10%.
Some of the sector’s major companies had predicted they would feel the impact if the court ruled as it did. Workforce Holdings in its 2017 annual report described the case, driven by the National Union of Metalworkers of SA (Numsa), as a "significant external factor affecting our staffing and outsourcing segment".
The Constitutional Court ruling means companies that use labour brokers to find staff can end their contracts with the brokers once the temporary workers have become permanent in terms of the Labour Relations Act (LRA). This means the brokers will lose business.
In 2014, amendments to section 198 of the act compelled clients of labour brokers who employ low-skilled workers at less than R205,433 a year to make them permanent after three months.
This caused confusion: brokers insisted they would remain in the picture as co-employers, while unions interpreted the clause to mean the brokers lost their co-employer status.
Numsa and labour broker Assign Services battled it out three years ago at the Commission for Conciliation, Mediation & Arbitration, which accepted Numsa’s "sole employer" interpretation.
After Assign successfully appealed to the labour court in 2016, workers were in limbo because brokers refused to enforce the law until clarity had been obtained.
Numsa then went to the labour appeal court, which ruled in favour of the union. But an organisation representing brokers, the Confederation of Associations in the Private Employment Sector (Capes), insisted its members did not have to adhere to this interpretation until the Constitutional Court ruled on the matter.
Capes says the financial impact on labour brokers and the economy as a result of the judgment last week will depend on the reaction of stakeholders to the changes. "Should there be a knee-jerk reaction rather than a considered response … similar to what happened in 2015 when the LRA amendments were first implemented, there will likely be negative financial consequences," it says.
Assign’s lawyer Craig Kirchmann said the Constitutional Court ruling changes very little. "It merely confirms that after three months employees have labour relations rights against the client [where they work]. Ordinarily‚ the labour broker will remain the employer of the placed worker in terms of contract."
Adcorp says companies like itself will continue to play an important role in the labour market.
Other legislation such as the Basic Conditions of Employment Act recognises labour brokers as employers.
Adcorp declines to say what impact the law will have on its business, but it did say in its 2018 annual report that the ruling, then pending, had already shrunk its support-service business, which provided temporary jobs for more than 62,000 workers.
Law firm Cliffe Dekker Hofmeyr says in a statement: "While the court does not ban labour broking in its entirety, it aims to ensure that the provision of temporary services is truly temporary. Part of this protection entails that placed employees are fully integrated into the workplace as employees of the client after the three-month period."
Werksmans Attorneys director Jacques van Wyk tells the FM that while the ruling will bring greater certainty to the labour market, it exposes both labour brokers and their client companies to risks. The clients will have to ensure they have the human resources capacity to retain the staff in question and adhere to labour laws.
"There will be an impact on industry but we have lived with the decisions of the other courts for a while. I don’t think people have not made adjustments, so it’s not a shock to the system," he says.
The changing nature of work being brought about by the fourth industrial revolution could entrench the need for labour brokers as more workers lean towards independent contracting and other forms of freelance work.
"As the world adapts to new workplace realities, more is required to help workers and employers understand the labour dynamics and skills demands of the 21st century," says Adcorp CEO Innocent Dutiro.