LRA AND DEEMING PROVISION (Business Day July 2019)

7 August 2019
LABOUR BRIEF NO. 419

In the first quarter of 2019 the unemployment rate was 27.6%. At the end of the fourth quarter of 2018 it was 27.1%.
As can be seen, the number of people without jobs is remaining static around the 27% mark
The Temporary Employment Services (TES) market has provided access to jobs to hundreds of thousands of SA’s workforce over the past number of years. Although there is a negative perception owing to its alleged exploitation of workers, the sector’s value to the economy cannot be ignored.

In Assign Services (Pty) Limited v National Union of Metalworkers of SA and Others, section 198A(3)(b) of the Labour Relations Act (LRA) was debated and the very narrow question of if it results in a “dual” or “sole” employment relationship after the three month deeming period for the purposes of the LRA.

The Constitutional Court judgement clarified that TES employees who earn under the Basic Conditions of Employment Act threshold (currently R205,433 per annum) and work longer than three months would be deemed to be solely employed by the TES client (in other words where they are placed) only for the purposes of the LRA.

The case was not about if deeming is applicable to the assigned employee and/or acquires rights to receiving pay equal to that of permanent employees of the organisation. These issues are not contentious and are addressed by other sections of the LRA, not s198A(3)(b), which was the subject matter of the case.  This important point seems to have been missed by many commentators.

The matter of Amitu obo Members/National Brands Snackworks and Adcorp BLU (KNDB16915-17) is a recent case that dealt with the interpretation of the deeming provision. Both parties agreed that deeming applied; however, what “deeming” meant was called into question. The issue decided was whether the deeming provision was to be interpreted in such a manner that the TES was not permitted by law to render services such as payroll management, payment of wages, leave and bonuses as well as whether all such responsibilities had to be performed by the company (Snackworks).

The CCMA commissioner referred to the outcome of the Constitutional Court (Assign Services). The commissioner concluded that the client becomes the sole employer of the TES employees after three-month period for the purposes of the LRA. Further the commissioner found that the TES’s liability only lasts as long as their commercial relationship with the client. In other words, if there is a commercial contract that is still binding on the parties.
The commissioner then emphasised the fact that there is a change for the statutory attribution of liability (for the purposes only of the LRA) and that in fact no transfer of employment takes place.

The commissioner then referred to two matters:

  • KNDB 10748-18 Khumalo and Another v Adcorp BLU and Another where another commissioner had to consider whether the triangular relationship between TES, client and worker continued after deeming has occurred.
  • The commissioner referred to the conclusions reach by the Constitutional Court at para 83 of Assign Services as well as its comments at paras 71, 72 and 73. It was found that the triangular relationship was not prohibited or terminated by the coming into effect of the deeming provisions of s198A.  The commissioner found that this was in line with the Constitutional Court specifically referring to paragraph 61 of the outcome as well as paragraph 73 and – more particularly – paragraph 75. The Commissioner emphasised the portion of the paragraph which states this is not a transfer to a new employment relationship but rather a change in the statutory attribution of the responsibility of the employer within the same triangular relationship.
    The commissioner found nothing in the Constitutional Court outcome prevents the commercial relationship and for the TES to play the same role that it played prior to deeming except for the obligations expressly referred to in the LRA.
    The commissioner then went further to indicate that there can be no order for the TES’s services to be terminated by the company nor can the TES be forced to insource services and functions performed by the TES and likened it to a practice of outsourced labour consultants and accountants.
    An award clearly setting out what we have been saying since the Constitutional Court outcome. The TES triangular relationship and the commercial agreement continues post deeming and if deeming is applicable it is for rights and obligations only under the LRA

K. Cowley
(Chairperson – (CEA – LBD)