The Labour Relations Act provides that employees, who earn below the earnings threshold (“vulnerable assignees”) and are placed by a Temporary Employment Service (commonly known as a TES or labour broker) with a client for a period of longer than 3 months, are deemed to be the employee of the client.

There are 2 exceptions to this deeming provision:

  • when a vulnerable assignee is placed on a temporary basis with a client as a substitute for an employee of the client (for example, where an employee temporarily fills the position of an employee on maternity leave); or
  • in certain specified categories of work and periods as contemplated by a collective agreement concluded in a bargaining council, a sectoral determination or a notice published by the Minister of Labour.

Meaning of “Deemed to be the Employee of the Client”

On 26 July 2018 the Constitutional Court (“Court”) handed down judgement in the Assign Services v NUMSA and Others case in which it clarified the interpretation of the deeming provision. Previously there had been uncertainty whether a vulnerable assignee has a sole employment relationship with the client of the TES (“client”) or whether a dual employment relationship is created between the TES and the client for purposes of the LRA only (not any other legislation such as the Basic Conditions of Employment Act or the Income Tax Act).

The Court held that for the first 3 months of employment the TES is the employer and after the 3 month period the client becomes the sole employer. Accordingly, after 3 months the vulnerable assignee automatically enjoys the protection of being fully integrated in the client’s workplace as a permanent employee and enjoys, inter alia:

  • protection in terms of the LRA, for example, against an unfair dismissal or unfair labour practice;
  • the same terms and conditions of employees performing the same or similar work;
  • same employment benefits;
  • prospects of internal growth; and
  • job security.

In reaching its decision on the interpretation of the section, the Court took into consideration the constitutional right to fair labour practice and the spirit and purpose of the LRA which is essentially there to protect the vulnerable in the workplace.

The Court went a step further and found that the TES’s liability only lasts as long as its contractual commercial arrangement with the client subsists and while the TES continues to remunerate the vulnerable assignee directly.  Accordingly, the TES and the client could agree to terminate their agreement and the client would then remunerate the vulnerable assignee (now its employee) directly.

In summary the vulnerable assignee will become a permanent employee of the client provided that:

  • he/she is working for the client on a full time basis;
  • he/she earns below the threshold;
  • he/she works for a period of longer than 3 months.

Please click on this link to read the full judgement.

Please do not hesitate to contact our offices should you require further information relating to the implications of this judgement.

KATHLEEN HOLMES / THERESA ACHADA  
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The earning threshold is currently R205 433.30 per annum. The threshold is calculated based on annual remuneration before deductions i.e. income tax, pension, medical and similar payments but excluding contributions made by the employer in respect of the employees. Subsistence and transport allowances, achievement awards and payment of overtime are not included.