Will labour broking be banned?

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In a labour broking scenario, a temporary employment service (labour broker) employs people who then provide services to a client (person for whom the work is being done).  For example, ICT Labour Broker employs Joe Soap (a computer programmer), who then provides ICT goods or services to Acme Bank Limited (the client).

Another example is outsourcing – Acme Bank outsources the support of a specific application to an ICT vendor and the ICT vendor then employs Joe Soap to provide those services.

Recently there has been much talk in the press that labour broking is going to be banned or that outsourcing is going to be outlawed.  If it happens it would have a major impact on many industries, especially the labour broking industry.

It seems highly unlikely that the Minister will prohibit or ban “clients” from receiving the services of persons employed by labour brokers

This issue is especially important for ICT vendors.

I attended the annual Labour Law Conference held in Johannesburg last week and the Minister of Labour indicated that the Department of Labour intended to align various employment laws and clearly define what is meant by an “employer“.  In our example, ICT Labour Broker is generally the employer not Acme Bank.

It seems highly unlikely that the Minister will prohibit or ban “clients” from receiving the services of persons employed by labour brokers, but it may cost “clients” more and the law may impose joint and several liability on “clients” to ensure compliance with all the employment laws.

Occupational Health & Safety Act

Currently only the Occupational Health & Safety Act 85 of 1993 (“OHSA”) defines an employer as any: “person who employees or provides work for any person and remunerates that person or expressly or tacitly undertakes to remunerate him, but excludes a labour broker as defined in s1(1) of the Labour Relations Act” (“LRA”)“.

OHSA s1(2) allows the Minister of Labour to declare that a person belonging to a category of persons specified in the notice will for the purposes of OHSA be deemed to be an employee, and: “thereupon any person vested and charged with the control and supervision of the said person shall for the said purposes be deemed to be the employer of such person“.

The Basic Conditions of Employment

There is a similar provision is section 83 of the Basic Conditions of Employment Act 75 of 1997 (“BCEA”).  Although the BCEA does not define an “employer“, it does provide in s82(3) that the temporary employment service (labour broker) and the “client”  are jointly and severally liable if the labour broker, in respect of any employee who provides services to that client, does not comply with the BCEA or a sectoral determination.

Jointly and severally liable

So effectively Acme Bank may also become the employer and have all the obligations that go with it

Because there is no similar provision in the LRA it seems that the Minister is intent on amending the LRA, and possibly the Employment Equity Act 55 of 1998(“EEA”), to ensure that “clients” who receive the benefit of the services of employees of labour brokers are held jointly and severally liable for any breaches of the LRA and possibly the EEA.  So effectively Acme Bank may also become the employer and have all the obligations that go with it.  This makes using labour broker less attractive, as one of the main benefits are removed.

The benefits for person employed by labour brokers

Another point made by the Minister at the Conference last week was that the “clients” are scoring at present because the persons provided by the labour broker do not receive the same benefits as the true employees of the “client” doing the same or similar work. In other words, the “client” may be forced to compensate those persons by paying an additional cost to cover benefits to be provided by the labour broker for the services of those persons. The Minister also expressed concern that labour brokers were not passing on all the benefits to those persons. It seems the Minister intends to ensure that “clients’ will be obliged to make up the difference between what their true employees earn and what is received by the persons employed by the labour brokers and doing the same or similar work.

By | 2017-03-30T13:22:38+00:00 August 18th, 2009|Categories: Labour Law|Tags: , , |