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Is there a difference between a temporary employment service (TES) and a service provider for purposes of section 198?

  • Written by Dumisani Mavundla
  • Published in Articles
  • Amendments to Section 198 and the insertions of sections 198A-C of the LRA came into operation on 01 January 2015.
  • One of the most crucial impacts of these amendments is the deeming provision in terms of section 198A(3)(b)(i), which provides that an employee engaged by a temporary employment service (TES) (otherwise known as a labour broker), for the purposes of rendering services to a client (excluding a temporary service), is deemed to be an employee of that client, and the client is deemed to be the employer of such employee, after 3 months. 

 

In CHEP South Africa (Pty) Ltd v Shardlow NO and Others [2019] 5 BLLR 450 (LC), 201 workers were employed by Contracta-Force Corporate Solutions (Pty) Ltd (C-Force) to repair wooden pallets on behalf of CHEP South Africa (Pty) Ltd (CHEP). The workers, claiming that C-Force was a temporary employment service (TES) (otherwise commonly known as a labour broker), referred a dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA) in which they sought to give effect to rights contained in s 198A(3)(b) and (5) of the Labour Relations Act 66 of 1995 (the LRA), namely, to be deemed to be employees of CHEP for purposes of the LRA and to be treated on the whole not less favourably than an employee of CHEP performing the same or similar work.

 

The legal issue in dispute between the parties was whether C-Force was a TES as defined in the LRA. The workers contended that C-Force was a TES. CHEP, on the other hand, argued that C-Force was not a TES, but rather a service provider rendering services to CHEP as an independent contractor in terms of a service level agreement for the condition of pallets. In order for the workers to access both the right to be deemed permanent employees of CHEP in terms of s 198A(3)(b) and the right to be treated no less favourably than other employees in terms of s 198A(5), they must be working for a TES.

 

The CCMA commissioner ruled that C-Force was a TES and that the employees were deemed employees of CHEP. CHEP took the decision of the CCMA Commissioner on review.  The Labour Court (LC) held that the applicable test on review was whether the CCMA’s ruling was right or wrong, rather than whether it was reasonable. However, it could still be attacked on the basis that it was unreasonable. The issue for determination lay in the interpretation of the definition of a TES in s 198(1) of the LRA.

 

Definition of a TES in terms of section 198(1):

  • Section 198(1defines a TES as a person who, for reward, procures for or provides to a client, the services of workers whom it remunerates.
  • Section 198A of the Labour Relations Act, 1995 (the "LRA") provides that a person assigned to a client by a temporary employment service ("TES") for a period of more than three months, and who earns less than the threshold amount, is deemed to be the employee of the client for the purposes of the LRA.

 

There are two exceptions to this deeming provision, namely: -

  • The first is if the assignee is placed with a client as a substitute for an employee employed by the client who is temporarily absent from work.
  • The second is if the work done by the assignee for the client is permitted by a collective agreement concluded in a bargaining council, a sectoral determination, or a notice published by the Minister of Labour in accordance with the provisions of section 198A.

 

An independent contractor is not an employee of a TES. With reference to this definition, the commissioner was required to determine whether C-Force provided CHEP with ‘other persons’, that these persons ‘performed work for’ CHEP, that these persons were remunerated by C-Force, and that C-Force provided these persons labour to CHEP ‘for reward’. A reward in this context means a fee payable for the work performed by the hired persons.

 

In interpreting the definition of a TES, the LC held that the issue was not whether a placed worker is an employee of the TES, what mattered was the relationship between the workers and the client, CHEP. The notion of ‘performing work’ means that the workers become part of the client’s organisation to pursue the client’s business interests. The TES is, in a sense, merely the third party that delivers the employees to the client. The employees do not contribute to the business of the TES except as a commodity. Accordingly, C-Force cannot be regarded as a TES if it did not ‘provide or procure’ the individual employees for reward to CHEP. The finding of the commissioner to the contrary constitutes a material error of law that cannot be correct.

 

Turning to the facts, the LC found that C-Force was not providing CHEP with ‘other employees’, but rather providing it with a specified product, namely wooden pallets. Further, C-Force was not receiving a reward or fee for providing employees to CHEP, but was pursuing its own business for profit. C-Force was a service provider, receiving an agreed price for a specified product. This arrangement fell outside the statutory definition of a TES.

 

There was also no evidence that indicated that the relationship between CHEP and C-Force was an arrangement designed to evade s 198A of the LRA. The LC accordingly held that the commissioner’s finding that s 198A(3)(b) applied amounted to an error of law that rendered the ruling reviewable.

 

C-Force was declared not to be a TES as defined in s 198(1) of the LRA and its employees not to be deemed employed by CHEP.


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