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Section 198A(3)(b)(i) of the Labour Relations Act 66 of 1995 (LRA) stipulates that:
‘(3) For the purposes of this Act, an employee –
…
(b) not performing such temporary service for the client is –
(i) deemed to be the employee of that client and the client is deemed to be the employer.’
This is called the ‘deeming provision’, and it has sparked a debate on the meaning thereof. The question has been asked whether it was the intention of the legislature that, if this deeming provision were to be triggered, the client would become the sole employer, or whether a dual employment relationship between the employees and the client, and the employee and the temporary employment service would arise (Nokuzola Gloria Khumalo A Critical Analysis of Temporary Employment Services in Contemporary South Africa (LLM dissertation, University of KwaZulu-Natal, 2020) at 41).
The dual employment relationship means that the temporary employment service (TES) employees are considered to be employees of the temporary employment service and are also deemed to be employees of the client for the purposes of the LRA. In simple terms it means that the employees have two employers namely the TES and the client. Temporary employment service gives rise to a triangular relationship where a person performs work for the client and is remunerated by the TES. On the other hand, a single employment relationship considers the TES employees to be the clients’ sole employees for the purposes of the LRA, which means the client is the employer of the TES (Bradley Workman-Davies ‘Labour brokers and their clients are both employers of assigned employees in all respects’ (https://labourguide.co.za, 2-4-2024)).
There is a challenge in the meaning of the concept ‘deemed’ and whether the word supports a sole employment relationship or dual employment relationship. The concept of ‘“deemed” means “actually are”’ in the interpretation of the deeming provision in s 198A(3)(b)(i) of the LRA (Khumalo (op cit) at 25). In the case where the word is ambiguous in any provision, the case of Chirwa v Transnet Ltd and Others 2008 (4) SA 367 (CC) stipulates that such word should be understood in such a way that promotes the most essential objectives of the LRA (Khumalo (op cit) at 25). In the case of Assign Services (Pty) Ltd v National Union of Metalworkers of South Africa and Others 2018 (5) SA 323 (CC) the court held that concept ‘deemed’ is inherently ambiguous and as a result, it should be interpreted in its statutory context Johann Scheepers ‘Interpretation “Deeming Provision” Labour Relations Act’ (https://labourguide.co.za, accessed 2-4-2024) and Ramokgadi Walter Nkhumise ‘Dismissal of an employee at the instance of a client: Revisiting Nape v INTCS Corporate Solutions (Pty) Ltd in the context of the Labour Relations Amendment Act 6 of 2014’ (2016) 20 Law, Democracy and Development 106).
The primary purpose of the amendments is to establish a greater protection for persons employed through labour brokers, and to reduce some confusion by explicitly defining the limits of the parties’ obligations. However, it is debatable whether specific objectives are accomplished. The person who works for more than three months for the same client is excluded from the definition of a labour broker. In the case where the permanent employee is not available to render his or her employment duties, the labour broker may be assigned to provide such duties temporarily which is classified as temporary work as defined by a collective agreement or notice by the Minister of Labour. The deeming principle is only applied to workers who are remunerated below the threshold of R205 433 per year (Khumalo (op cit) at 28). Anyone who does not conduct temporary service for the client is deemed to be employed by that client and the client is deemed to be the employer (Aadil Patel ‘Judgment on the interpretation of the “deeming provision”: sole or dual?’ (www.cliffedekkerhofmeyr.com, 3-4-2024)).
In the case of General Industries Workers Union of South Africa obo Mgedezi and Others v Swissport SA (Pty) Ltd and Another [2019] 9 BALR 954 (CCMA) the court had to consider whether the applicants were permanent employees considering the impact of the deeming provision in s 198A(3)(b)(i) of the LRA. The applicant was employed by the Workforce Group from 2014 to 2017 to perform work for Swissport who was the client. The applicants were remunerated below the Basic Conditions of Employment Act 75 of 1997 threshold. The applicants worked at the Swissport’s workplace where they were under supervision of Swissport. According to the written agreement between the client and Workforce Group it was agreed that the applicants would remain on the books of the Workforce Group.
The Commission for Conciliation, Mediation and Arbitration (CCMA) held that the applicants have been performing work for Swissport for more than three months, as a result, the client is deemed to be the employer of the applicants and the applicants are deemed to be the employees of the client according to s 198A(3)(b) and there was no evidence showing that the applicants provided temporary services. The applicants were entitled to be treated on the whole not less favourably than an employee of the client performing the same work and received benefits, such as pension fund and medical insurance, unless there was a valid justification for the different treatment (TM Moeketsi The interpretation of the ‘deeming provision’ in terms of section 198A(3)(b) of the Labour Relation Act 66 of 1995: Who is the employer? (LLM Dissertation, North-West University, 2020)).
In the case of Assign Services, the legal question was whether s 198A(3)(b) of the LRA creates a dual employment relationship or a sole employment relationship. Twenty-two employees who were members of National Union of Metalworkers of South Africa (NUMSA), were employed by Krost Shelving and Racking (Pty) Ltd in 2015 via Assign Services, a TES. These employees worked for the company for longer than three months where they provided full-time services. According to Assign Services, s 198A(3)(b) of the LRA resulted in a dual employment relationship. However, according to NUMSA, it only gave rise to a sole employment relationship. It argued that a dual employment relationship created huge confusion and disadvantage for vulnerable employees. The CCMA agreed with NUMSA’s interpretation that s 198A(3)(b) gives rise to a sole employment relationship.
The matter was taken to the Labour Court. In that court it was submitted that s 198A(3)(b) of the LRA gives rise to a dual relationship and further the CCMA judgment created a material error of law. The source of control in the work relationship, according to the court, was the employment contract between the TES and the employee. Consequently, regardless of any new formal connection between the employee and the client, the TES maintained control. The common law contract between the TES and the employee remained in force, and the client was merely an employer for the purposes of the LRA.
On the other hand, the Labour Appeal Court was in favour of sole employment relationship, arguing that a sole employment relationship provides a greater protection and advantage to TES employees. It upheld the purpose and objects of the LRA and the 2014 amendments. Only an individual who renders temporary services, should be employed by a TES. By virtue of s 198A(3)(b), an employee who renders services for more than three months is no longer performing a temporary service, and the client is now the only employer.
The Constitutional Court compared the benefits of dual and sole employment relationships and concluded that the former is preferable and offers more protection to employees because the latter results in employment instability and uncertainty and would give rise to different claims and different employers emerging from the similar facts. The TES employee’s temporary employment must last longer than three months while employed by the same client. In conclusion the deeming provision gives rise to a dual employment relationship. The deeming provision creates a statutory employment relationship between the employee and the client. However, it complements and does not replace the employee’s current employment relationship with the TES.
In conclusion, it is evident, considering the above-mentioned provisions, and case law, that the purpose of the Labour Relations Amendment Act 6 of 2014, which introduced the ‘deeming provision’ is to ensure that the client does not exploit the placed employee, enabling them to work more years in its organisation without receiving any employment benefits, and without receiving equal treatment received by permanent employees of the client performing similar work with the labour brokers. However, s 6(1) of the Employment Equity Act 55 of 1998 provides that in the situation where the employer treats employees differently on the grounds of qualification, experience and training, the differentiation will not amount to unfair discrimination. The deeming provision gives rise to several suggestions. For instance, the TES employment agreement between the labour broker and the employee is terminated, while the new employment contract is created between the client and the employee. There is an automatic transfer of the contract of employment from the labour broker to the client (James Horn, Rod Harper and Tanya Mulligan ‘Where to for Labour Brokers – Third Option for Constitutional Court by “Deeming” Section 198A(3) Unconstitutional’ (www.chmlegal.co.za, 5-4-2024)).
The primary problem of the deeming provision is an ambiguous impact that the client’s employer status would have on the employment contract that was still in place between the labour broker, employee and the TES. The TES and the employee could continue to be parties to the employment contract. The provision only assists the employee to assert his labour rights directly against the client, since the client will be deemed as the employer. The deeming provision should include all labour legislation to its interpretation and not only to the LRA. Section 198A(3)(b) should be amended to clarify when the TES employment relationship ends after the three months.
Realeboha Esther Marake LLB LLM (NWU) is a Mineral Law Administration Intern at the Department of Mineral Resources and Energy in Kimberley.
This article was first published in De Rebus in 2024 (November) DR 24.
