What does the Constitutional Court Case mean for Employers of TES employees?

26 July 2018 Constitutional Court ruling in favour of sole employment of TES employee by client after three months…
The Labour Relations Amendment Act 6 of 2014 has brought with it much legal debate and new case law has been created in an attempt to assist with interpretation of various new sections.
Amongst these amendments is the new “deeming provision” in section 198A of the Labour Relations Act (LRA) that says that after three months of employment, a temporary employee is deemed to be an employee of the client, and the client is deemed to be the employer. Section 198A only applies to employees who earn below the annual threshold determined by the Minister from time to time, which is currently at R205 433, 30 per annum.
Difficulty in interpreting this section caused confusion as to whether once the three month period had expired the client became the sole employer of the employee, or whether a dual employment relationship was created between the client and the temporary employment service (TES).
CCMA case
The test case to determine the position was the matter of Assign Services (Pty) Limited (Assign) v Krost Shelving & Racking (Pty) Limited (Krost) and The National Union of Metal Workers of South Africa (NUMSA), ECEL1652-15. The Commissioner awarded that s198A(3)(b) should be interpreted that “deemed” means that the client becomes the sole employer of the placed workers once three months had expired. The Commissioner was of the view that this interpretation would provide the greatest protection for employees.
Labour Court case
Assign reviewed the Commissioner’s decision in the Labour Court where it was overturned and it was held that the workers would be deemed to have dual employment with both the TES and the client.
Labour Appeal Court case
NUMSA appealed the decision of the Labour Court, which was subsequently overturned by the Labour Appeal Court on 10 July 2017, who held that a dual employment relationship was not in line with the purpose of the amendments, which aimed to protect “vulnerable” employees. The worker is therefore deemed to be the employee of the client and the client is deemed to be the employer of the worker, amounting to a sole employer interpretation. Workers in this situation are furthermore, after a period of three months, employed by the client on an indefinite basis, subject to s198B.
The Labour Appeal Court held that the sole employer interpretation was not aimed at banning TES’s, but rather limiting their scope to situations of a genuine temporary nature. The TES will therefore remain the employer until the three month period has passed and will up until such time remain responsible for all statutory obligations in terms thereof.
Once the deeming provision has kicked in after three months, workers will become permanent employees of the client and must be subject to the same terms and conditions as employees of the client who perform the same or similar work, unless a justifiable reason exists for deviation there from.
The sole employment interpretation does not affect the contractual relationship between the employee and the TES, and in terms of section 198(4A), for specific contraventions the employee has an election to institute proceedings against the TES, the client, or both.
Constitutional Court case
The judgment handed down by the Labour Appeal Court became the subject of an application for leave to appeal to the Constitutional Court, and judgment in this matter was handed down on 26 July 2018.
The Constitutional Court held that the purpose of section 198A of the LRA must be determined by examining the LRA, as well as the Constitution of the Republic of South Africa.  It was found by the Court that for the first three months of employment, the TES is the employer of the placed employee. Thereafter, the client becomes the sole employer. The client will at this stage become solely responsible for all employment obligations of the employee.
This ensures that placed employees are fully integrated into the workplace as employees of the client after three months. The employee automatically becomes employed on the same terms and conditions of similar employees, with the same employment benefits.
Section 198A(3)(a) therefore provides that when placed employees are performing a temporary service as defined, they are deemed to be employees of the TES as contemplated in section 198(2). Section 198A (3) (b) (i) provides that when placed employees are not performing a temporary service as defined, they are deemed to be the employees of the client.
The Court mentioned that the language used by the legislature in section 198A is plain, and when looking at the section within its context clearly supports the sole employer interpretation. A sole employer interpretation is furthermore in line with the purpose of the amendments to the LRA, as well as the right to fair labour practices as set out in section 23 of our Constitution.
The following applies retroactively, and accordingly, should you have any temporarily placed employees who have been working for you for longer than three (3) months, they will now be considered your employees and not the TES company’s employees.
Please contact Invictus in order to facilitate meetings between yourself and any relevant labour brokers with which you may have relationships with, in order to streamline the process going forward.