LABOUR LAW REFORMS – THE END OF LABOUR BROKING?

Debate taking place at a high level is focussing on various sweeping labour law reforms. The government has presented a number of proposals at NEDLAC (the National Economic Development and Labour Council) which will have a significant impact on the way the building industry currently operates.  These proposals include changes to the labour law relating to outsourcing, the use of fixed term contracts, temporary and part-time work and labour broking.  Many of these practices are an integral part of the labour arrangements in the building and construction industries.

There is a widespread view that many South African employers adopt strategies which disguise the employment relationship and that this can have the effect of depriving employees of labour law protection.  It is felt that arbitrators and judges need to be empowered to be able to look beyond the formal content of contractual agreements to ascertain the true nature of working relationships.  Apparently research has shown that labour broking arrangements have become a means by which employees are deprived of various protection mechanisms.  It is recognised, however, that these reforms should not deprive employers of the ability to embark on genuine restructuring exercises implemented to improve the efficiency.

The contractual nature of labour broking 

Labour broking, also known as TES (temporary employment services) involves three relationships. The first is between the employee and the broker, the second is between the employee and the client and the third one is between the broker and the client.  In these arrangements it becomes a question of fact to determine whether the employee is employed by the agency or the client. The test used is to ascertain whether the employee performs work subject to the direction and control of the agency or of the client. 

The protection of workers employed via labour brokers

In terms of the 1995 Labour Relations Act, the general provision is that the labour broker is the employer of the person that it places with its client, provided that it assumes responsibility for remunerating the employee.  However the client is made jointly and severally liable for breaches of the Basic Conditions of Employment Act, sectoral determinations, collective agreements and arbitration awards.  In general, however, the employee is not protected by the Labour Relations Act and the clients are able to request that the labour broker withdraws certain employees from duty.  This is in terms of a commercial arrangement between the client and the labour broker and the employee is not protected in terms of unfair dismissal.  

Research apparently also shows that employees engaged through brokers are paid significantly less than the employees they work alongside with and who are performing the same work.  It is therefore felt that these arrangements allow employers to pay less and not be burdened with the costs of providing security of employment. It has been discovered that employers do sometimes set up “shell” labour brokers in order to limit their liabilities.    

Government and labour are now driving to ensure that workers employed via labour brokers are offered similar protection as that enjoyed by directly contracted employees. 

Recommendations for reform

It is therefore recommended that all labour brokers should be required to register subject to certain minimum requirements (including being a registered legal entity, maintaining records and disclosing fees). It is further recommended that:

• The Minister of Labour should have regulatory powers prohibiting labour broking in specific sectors of the economy. 
• The joint and several liabilities of the labour broker and the client for compliance with legislative and contractual obligations towards the employees should be retained. 
• An employee should be able to institute proceedings against both the broker and the client, or both of them in the CCMA or the labour court or any other court having jurisdiction.  This liability should be extended to cover compliance with the employees’ obligations under the Labour Relations Act and in term of their contract of employment.   

There are further recommendations that employees who are placed by a labour broker should have the following core rights in respect of the labour broker:

• Employees of a broker should remain employees during periods in respect of which they are not placed with a client.
• A broker should be required to conclude a written contract with each employee who it proposes to place with a client.
• A broker should be required supply an employee with written particulars for each placement it makes.
• Employees paid by a broker and employed with the client should have unfair dismissal protection in respect of the termination of their services by the client.
• Probation should be regulated by legislation specifying a qualifying period during which ordinary unfair dismissal should not apply to new employees. During this period employees would be protected against automatically unfair dismissal. The qualifying period should be six months with scope for variations in light of the concerns of the particular sectors or professions.
• All contracts of employment concluded with employees earning below a defining threshold should be presumed to be of an indefinite duration, unless the employer can demonstrate that the contract was concluded for a fixed term, defined in the contract, and the employer had operational justification for doing so.

Organisational rights, collective bargaining and basic conditions of employment for non standard employees

It has been discovered that there is a low level of trade union membership in categories of employment (such as employees placed by labour brokers) due to the difficulties involved in organising these workers.  It is therefore felt that these employees are unable to exercise their right to obtain organisational rights and engage in collective bargaining.  In order to overcome this, the following recommendations have been made:

• Legislative changes should be made to enable employees placed by labour brokers to gain organisational rights and engage in collective bargaining.
• Sectoral determinations should provide for trade unions that meet representivity thresholds to obtain rights at workplaces within the sector.
• The extent to which employees are placed by labour brokers should be a factor in determining the representivity of trade unions for the purposes of extending bargaining council agreements.
• The Minister of Labour should be able to enact a sectoral determination applicable to a low-skill workers not covered by any other sectoral determination or a bargaining council agreement.
• The Minister of Labour should be able to enact a sectoral determination applying to employees within the registered scope of a bargaining council but not covered by a bargaining council agreement.

Conclusion

It can therefore be seen that there are serious changes afoot to reform the labour law to a degree that would impose sweeping changes to the building industry and the economy generally.  The building industry particularly has become accustomed to utilising the services of labour brokers and, if these reforms are implemented, may find that such arrangements are no longer advantageous, or may even perhaps be more onerous.  The issue is complicated by the fact that the labour broking scenario is particularly suitable for the building industry with its cyclical nature and the fact that most contracts have a predetermined life span.

Should you have any comments or input to make on the on this matter, kindly post them on our masterbuilders.co.za forum, or contact me directly on 031 266 7070. Through our Master Builders South Africa (MBSA) membership we have the opportunity to feed these comments up to Business Unity South Africa (BUSA) to be included in the debates taking place between business, labour and government.

Brandon Abdinor | Executive Director

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