The judgment provides clarity on the interpretation of the ‘deeming provision’, contained in the section. This provision provides that the client of a TES is deemed to be the employer of the TES employees, earning less than the Basic Conditions of Employment Act, 1997 earnings threshold (currently R205,433.30 per annum), who have been placed at the client for more than three months.
Prior to the Labour Appeal Court’s judgment in NUMSA v Assign Services and Others, the debate on whether the deeming provision means that the client of a TES becomes the sole employer or the dual employer of the TES employees, was settled by the Labour Court in a previous round of this matter. The Labour Court interpreted section 198A to mean that there was a dual employment relationship between the TES and the client of the TES.
However, the Labour Appeal Court has now overturned this ruling and has found that the deeming provision means that the client of the TES becomes the sole employer of the TES employees.
In determining whether employment rights and obligations vest concurrently in both the TES and the TES’s client once the deeming provision takes effect, the Labour Appeal Court considered the purpose of the insertion of section 198A, which is to confine the use of TES employees to circumstances of temporary work.
The Labour Appeal Court found that, bearing in mind that the purpose of the amendment was to have the temporary employment service restricted to one of “true temporary service,” the intention of the section must have been to upgrade the temporary service to the standard employment and free the vulnerable worker from atypical employment by the TES. In addition, the Court noted that there is also no wording in section 198A, which envisages a joint employment relationship. Accordingly, the Court favoured the sole employer approach.
In explaining what this meant practically, the Labour Appeal Court found that:
In summary, the Court found that the TES does not continue to be the employer of the TES employees, even after the application of the deeming provision. Further, there is no reason, in principle or practice, why the TES should not be relieved of its statutory rights and obligations towards the TES employees, as these transfer in total to the client. The deeming provision does not invalidate the contract of employment between the TES and TES employee, but it becomes of no consequence once the statutory employment relationship arises between the employee and the client.
As an aside, the Court stated that the sole employer interpretation does not ban TESs. However, it does regulate them by restricting the TES to genuine temporary employment arrangements, in line with the purpose of the amendments to the LRA.
This is unlikely to be end of the debate and this issue is likely to be explored further by the courts. This judgment leaves questions around a number of issues, including who will be liable for historical liability where the obligation arises to equalise, amongst other things, the remuneration and benefits of the “deemed employees” with their permanent comparators at the client.