Companies may find itself in a position where it is necessary to contract with third parties in overseeing and/or finalising projects or delivering certain goods or services. In order to remain competent and relevant in its field of business, it can be highly beneficial to outsource work in order to meet a deadline for delivery. It enables the main contractor to obtain the exact type of labour for the exact period needed. The main contractor is thus also not engaged in the legal duties associated with legal employment.


With the question of the deeming provision now having been put to rest, we are receiving a number of disputes where the question of whether the parties of a relationship as mentioned above, are indeed contractors or in a TES (labour broking) arrangement.


Employers are urged to ensure that a valid and binding Service Level Agreement is in place with any contracting party. This agreement should, inter alia, stipulate the relationship between the contracting parties as well as the conditions and obligations of each, relevant to the project in question. In the absence of such an agreement, the parties expose themselves to being deemed a TES and consequently subject to Section 198A of the Labour Relations Act.


Section 198 (1) of the LRA provides the definition for a TES 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 definition and its application were considered in CHEP South Africa (Pty) Ltd v Shardelow N.O. and Others 2019 JOL 40990 (LC).

In case, 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 Labour broker and client and that they should be deemed to be employees of CHEP. It was the employers’ contention that it contracted an independent contractor agreement and that the employees can thus not be deemed to be employees of CHEP.


Based on the Service Level Agreement presented, the court found in favour of the employer, based on the following grounds:

1) In terms of the definition of a TES, it is transparent that persons should be provided to or procured for a reward. The TES should thus be reimbursed for the actual persons provided to the client of that TES;

2) In addition, the court held that the employees did not contribute to the business of the main contractor (CHEP). They only furthered the interests of their employer (C-Force) by delivering a service for which C-Force was paid specifically for the service delivered;

3) The SLA specifically provided for the delivery of a specified product, and no mention was made of a reward for the provision of persons.

4) The court held that the SLA could not be otherwise interpreted as being a genuine agreement between the parties with no purpose of avoiding any labour legislation.


In conclusion, it is strongly advised that companies obtain legal assistance in the compilation of a Service Level Agreement prior to engaging in any form of contractor/client agreement. Such agreement should, at least, stipulate the contractual relationship between the parties, service to be rendered, and the basis wherefore remuneration will be affected. It is further advised that the contractor takes full control of all disciplinary procedures as well as the day-to-day management of their employees.


Article by: Juan van Schalkwyk

Dispute Resolution Official – Cape Town