Since the amendments to the Labour Relations Act 66 of 1995 (the LRA) came into effect on 1 January 2015, the deeming provisions contained in section 198A(3)(b) of the LRA defines temporary services (TES), commonly referred to as labour brokers in South Africa as “… any person who, for reward, procures for or provides to a client other persons who render services to, or perform work for, the client and who are remunerated by the temporary employment service.” This is an employment relationship whereby the employee works for the client for a period not exceeding three months or fulfils work specifically determined to be a temporary service.
Section 198A of the LRA protects employees of labour brokers who earn below the prescribed earnings threshold. In terms of TES relationships, the deeming provision needs to be understood in two aspects. Firstly, employees will be deemed to be employees of the client for purposes of the LRA if they do not perform “temporary services”; and secondly, unless there is a genuine fixed-term contract in place with the employee in question, the employee will be deemed to be employed indefinitely by the client.
Employees who perform a “temporary service” are placed at the client for less than three months, or when they substitute for a client’s temporarily absent employee. For example, if an employee falls into a category of work that is determined to be a temporary service through a collective agreement concluded at a bargaining council or a sectoral determination, such an employee will not be deemed as an employee of the client in terms of the deeming provision. In addition to the abovementioned, such employees must not be treated less favourably than employees of the client in similar positions.
In the case of General Industries Workers Union of South Africa obo Mgedezi and Others v Swissport SA (Pty) Ltd and Another  9 BALR 954 (CCMA), the Court had to determine three issues in terms of 198A(3)(b) of the Labour Relations Act 66 of 1995 (“LRA “):
- Whether the Applicants were permanent employees of the client.
- If so, whether they are entitled to be “on the books” of the client.
- Whether they were entitled to equal benefits as compared to certain employees of the client?
In this case, the Applicants earned below the threshold of earnings as determined in the Basic Conditions of Employment Act 75 of 1997. Swissport, otherwise known as the client, were responsible for the daily operations and supervision of the Applicants on their site. There was a written commercial relationship between Swissport and Workforce whereby it was indicated that the Applicants would remain “on the books” of Workforce.
The Commissioner’s award in this matter indicated the following. Firstly, the CCMA deemed that the Applicants had worked for Workforce on Swissport’s site for a period of longer than three months and, as a result, were deemed employees of Swissport. The second issue to be determined was whether the Applicants were required to be “on the books” of Swissport or if they could remain on the books of Workforce. The CCMA indicated that the Applicants, in this case, could remain on the books of Workforce who performed an HR and payroll function, as long as they received the same benefits as those employed by Swissport. What the CCMA emphasised was that, for all intents and purposes, there must be uniformity between all employees.
The final issue the CCMA had to consider was whether Swissport employees had received additional benefits such as pension fund, medical insurance, end of year discretionary bonuses and shift allowances for employees who worked on a rotational basis. In this case, the Applicants who were appointed by Workforce did not receive these benefits. The rationale for this difference in benefits was argued on the fact that Workforce provided forklift drivers and acceptance clerks, whereby Swissport did not have such positions in their employ, and therefore there was no comparator of benefits.
The CCMA, in this case, indicated that employees are only entitled to equal benefits if the TES employee performs the same or similar work as an employee of the client. Important to note, however, is that should an employer attempt and argue differentiation in benefits based on positions of a TES vs a client, like in this case, they may give rise to other disputes, for example, claims for discrimination or equal work for equal value under the Employment Equity Act.
In the current and most leading case related to the deeming provision David Victor & 200 Others v CHEP South Africa (Pty) Ltd & Others (2020) JA55/2019 (LAC) C-Force and CHEP South Africa concluded a service level agreement whereby C-Force would provide certain services to CHEP. CHEP would then remunerate C-Force for the actual services provided. The employees of C-Force contended that the relationship between the parties was one of a TES and client and that they should be deemed to be employees of CHEP. The employer contended that it contracted an independent contractor agreement and that the employees can thus, not be deemed to be employees of CHEP. The Court, in this case, however, deemed the employees to be employees of CHEP based on the validity of the service level agreement. On review before the Labour Court, the arbitration award was set aside based on an incorrect interpretation of the law and, in particular, that the degree of control and integration into CHEP’S workplace are not considerations in the determination of deemed employment.
Thereafter, the case went on appeal, whereby the employees contended that the Labour Court had erred in interpreting the relevant provisions of the LRA with insufficient regard to their protective and social purpose. The employees reinforced that the LRA was amended to address more effectively abusive practices and balance important constitutional rights. The LAC found that C-Force did not deliver repaired wooden pallets, its employees were under CHEP’S supervision and control, and refurbished the pallets at CHEP’S premises using raw material and equipment supplied by CHEP.
Ultimately, C-Force did not deliver a product but was driven primarily by the labour costs of employees who refurbished pallets at a rate per man-hour in performing the core businesses of the client. This meant that CHEP was not receiving the output of the employees but rather the employees themselves who performed a function of their core business. A strong message comes through from the Courts. The case should be seen as a cautionary approach to employers who have service level agreements which appear to omit them from the realm of paying for a product, rather than productive capacity. This judgment makes it clear that in interpreting the relationship, the courts will use a purposive approach informed by policy and equality and may even “pierce the veil” of the commercial relationship.
Article by: Preshalia Pandaram
Dispute Resolution Official – Pretoria