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Labour Appeal Court ruling on Temporary Employment Services explained

Labour Appeal Court ruling on Temporary Employment Services explained

 

The employment relationship between the Temporary Employment Services (TES) and the temporary employee will transfer to the client of the TES if the temporary employee’s employment exceeds three months, was the most important part of the ruling handed down in the Labour Appeal Court on 10 July 2017.

And here is why.

In NUMSA v Assign Services and Others (JA96/15) the Labour Appeal Court ruled that the TES is technically not the employer anymore – through their actions and deviation from the term “temporary”. The purpose and intent of the inclusion of the “jointly and severally liability” in Section 198A of the Labour Relations Act (LRA) is to discourage any further involvement from the TES. By exceeding the 3 months of temporary employment, the employment relationship between the TES and employee is not temporary anymore and will, for all intents and purposes, cease to exist and transfer over to the client of the TES.

Subsequently, a new principle enters the workplace: equal work for equal pay. This encourages the client to fully integrate the newly titled permanent employees within the employment structure of the company. Whatever working conditions there were for the already working permanent employees, will now be applicable to the new permanent staff.

There are a few mechanisms in labour law that now become relevant through the above verdict.

By referring to the employment relationship as transferring from the TES to the client of the TES, it could ring the Section 197 alarm bells. A transfer of a going concern is not applicable as this is an implied transfer. The temporary to permanent conversion does not need a separate process.

The TES is still the party that negotiated the contract of employment with the employee, and would practically and logistically be the custodian of the physical contract of employment (should there be any). This makes the TES relevant only in the administration of the contract of employment. If these conditions of employment are different from the current working conditions, the “equal work for equal pay” principle initiates again. The working conditions must be the same. Anything from collective bargaining, industrial actions and termination of employment becomes the new employer’s responsibility. However, nothing prohibits the TES in assisting the employer.

The constitutional court will most probably have the final say in this matter.

Let’s create a scenario as a practical example to clarify the above:

Firstly, let’s create an employer. This employer provides a general service. The employer markets his service and soon enough attracts a client. The employer signs a commercial contract with the client to provide general services for a year. The employer employs a few employees from the free market on a fixed-term contract subjected to the commercial contract with the employer’s client. This contract of employment with the employees are fixed to a year.

In the above scenario we’ll assume the terms and conditions of the commercial contract with the employer and client are irrelevant.

If the employer procures employment through a TES, and the employees work for a period exceeding 3 months for the client of the TES (the employer in the above scenario), they will become the employees of the employer (transferred from the TES) in the above scenario. Albeit on a fixed-term contract. It is crucial for employers to understand that if employees work for a period exceeding 3 months that they do not become permanent employees, if there is a justification for the fixed term. The TES will simply become irrelevant and the new employer (the employer in the above scenario), will employ these employees on a fixed-term contract, not the TES.

 

ABOUT THE AUTHOR

Gert Brink obtained his LLB degree from the University of Pretoria in 2013 and was admitted as an attorney in 2015. He joined SEESA Labour in 2015 as a legal advisor at the Pretoria office.

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