Page 93 - Q&A

Service provider or labour broker?

October 2020
“Our company wants to help out one of our oldest clients by allowing some of
our labourers to work for a few months for the client on a project at the client’s
site. The client has had to lay-off staff during Covid-19 and we would temporarily
help him out with our labourers. We would continue to pay our staff with the
client paying us a service fee for the labourers and other support services.
Our human resources manager however is concerned that we could be seen
as labour brokers should we move forward with this arrangement. Would this be
the case?”

The Labour Relations Act 66 of 1995 (LRA) refers to labour broking as Temporary
Employment Services (TES) and pertinently regulates such services to protect
vulnerable employees that have in the past been vulnerable to abuse through
labour broking arrangements.
The LRA defines TES as any person who, for reward, procures for or provides
to a client other persons. (a) who perform work for the client and (b) who
are remunerated by the TES. Once a business is seen to be a TES, important
consequences flow from this for both the TES and the client with whom such
persons are placed. For example, employees earning below R205,433.00 and
who are placed with a particular client for a period longer than 3 months,
automatically become employed by the client and may after 3 months
automatically fall within the same terms and conditions as the client’s employees
in relation to employment benefits and job security.

In your situation the question is whether a service agreement in terms of which Labour
you contract with a client to provide services, including staff, would amount to
labour broking?

Our Labour Appeal Court (LAC) recently had to consider such a situation.
Here the LAC looked at a number of factors and also held that it would
always be necessary to consider a range of factors when deciding whether a
TES relationship existed. Factors such as whether the client could discontinue
the services of the employees, was responsible for their working conditions,
whether staff were placed at the client’s premises, whether the client had full
control over the manner of their work etc. could all weigh in favour of a TES
relationship even though the client did not directly pay the employees but paid
a contractual service fee.
Accordingly, from the above it does appear as if there could be a risk that
your arrangement could be seen as labour broking. There is nothing inherently
wrong with this, provided the consequences in terms of the LRA for you and
your client is clearly understood. We would therefore advise that you consult a
labour specialist before you proceed with the arrangement to help you ensure
that your actions and consequences are clearly understood and planned for.

86