Labour brokers could go broke

Many businesses use labour brokers or ‘temporary employment services’ (TES) as they are called in the Labour Relation Act (LRA). One of the main reasons for this is that the business wants to shift its labour law liabilities on to the labour broker. This is much more difficult now that the LRA has been amended, making the broker’s client liable in most cases for unfair practices perpetrated against broker employees. However, such clients can still negotiate with their labour brokers so that the broker has to bear the costs of litigation and compensation awards.

The business uses the TES staff to do the work that company employees would normally do. While employment agencies and labour brokers can make profits from this business they often pay a very high price for taking over the labour law risks involved. This is because:
•Becoming an employer in South Africa is fraught with legal dangers whether you are a TES or not;
•Agencies and brokers are often at the mercy of their business clients who may mistreat the TES staff and thus incur legal liabilities for the TES;
•Many employment agencies and brokers neither understand our labour law pertaining to TESes nor understand how to protect themselves from the legal liabilities imposed on them due to their client’s actions.

In the case of Jonas vs Quest Staffing Solutions (2003 7 BALR 811) Jonas was employed on a fixed-term contract by Quest, a labour broker, to render services as an insurance agent to Quest’s client. Jonas was charged with misconduct and given a final warning. However, although he did not repeat the misconduct, he was fired because the client ‘no longer required his services’. The broker pointed out to the arbitrator that Jonas’s contract permitted a dismissal if the client no longer required his services.

The arbitrator found that, despite this contractual clause the broker had no right to dismiss the employee without first following the legal procedures laid down in the LRA. The broker was therefore, forced to pay the employee for the balance of the fixed-term contract.

In another recently-decided case (Sibiya & others vs HBL Services cc 2003 7 BALR 796) the employees were employed by a labour broker to provide work to a client. The employees refused to change to a new shift system introduced by the client. When the employees arrived for work the next day to render services under the old shift system the broker’s client locked them out and they referred an unfair dismissal dispute.

The arbitrator found that the employees had been dismissed for refusing to work under the new shift system. As the employees were entitled to refuse the change and as no proper dismissal procedures had been implemented the arbitrator ordered the broker to reinstate the employees with full back pay. If the broker was not able to persuade the client to allow the workers back on to the work site the broker would have been stuck with a number of employees reinstated on to its payroll but with no work to do.

Labour brokers and employment agencies can avoid these legal traps by using labour law experts to draw up TES contracts with clients and workers and to ensure that their employees are hired, disciplined and/or dismissed via legally sound and effective strategies and procedures.

Article written by lvan lsraelstam, Chief Executive of Labour Law Management Consulting.