first published in Business Day Law & Tax Review

by Jonathan Goldberg and Grant Wilkinson

The case of NTM obo Makwoeba, John and 3 500 others and Adfusion (ACMS) settles the Temporary Employment Services (TES) Constitutional Court matter which was debated in Assign Services (Pty) Limited v National Union of Metalworkers of South Africa and Others (CCT194/17). The case provides a brilliant guide for all parties.

The issue to be determined was if the obligation to remunerate TES employee rests with the TES or the deemed employer. In addition, the question that had to be answered was if the administration of discipline of the deemed employees can be outsourced to the TES.

Facets of the case

Adfusion is a management company that manages the warehouse on behalf of Shoprite. It enlisted the services of different TES providers to help them to fulfil this function. Adfusion sourced employees from different service providers and it is common cause that a number of these employees were in the service of the Adfusion for a period which exceeded three months. As such these employees were deemed – as per the provision of s198A (3) of the Labour Relations Act of 1995 as amended – to be the employee of the client. The TES providers were continuing to remunerate and administer discipline to the deemed employees.

The arbitrator found that in the Assign Services judgement, at paragraph 75 stated that section 198 (2) of the LRA institutes a statutory employment contract between the TES and the placed worker, which is altered if section 198A (3)(b) is triggered (the deeming clause). This is not a transfer to a new employment relationship but rather a change in the statutory attrition of responsibility. This is because the employer is within the same triangular employment relationship. This relationship then continues for as long as the commercial contract between the TES and the client remains in force and requires the TES to remunerate the workers.

The commercial relationship between the TES provider and the client – and its existence after deeming has come into operation – may persist for different reasons. In terms section 213 of the LRA, the right to remuneration rises after working for another person, including the State. Significantly, the court accepted that post-deeming the TES can continue to play this role as per the commercial contract and allow the deemed employer to directly handle the employment affairs of the deemed employee.

As a result of this, the deemed employer can be held liable in law for fairness of the administration of discipline. It was common cause that the deemed employees remain employees of the TES in terms of contract and statutes (other than LRA). The deemed employer’s legal obligations are to ensure that procedural and substantive fairness of the disciplinary process is observed. The employees have recourse in law should this not be the case against the deemed employer, and it is only then that the arbitrator can enquire into the role of the deemed employer.

With regards to remuneration it is trite law that the deemed employer can retain the relationship with the TES for post deeming. If there is a dispute pertaining to incorrect calculations of non-payment of remunerations, which are made in terms of the Basic Conditions of Employment Act (BCEA) the employer for the purposes of the BCEA is the TES. There was therefore no dispute as to who the deemed employer is and therefore there is no live dispute between the parties at this stage.

The arbitrator found that the employee’s inability to demonstrate prejudice suffered as a consequence of the TES continuing to pay remuneration for the deemed employees – and administer discipline on behalf of the client – has shown that there are no requirement for legal intervention. The outsourcing of the function of payment of remuneration to the TES does not affect the deeming of employees. The deemed employees remain the employees of the deemed employer and prejudice the requirement for the interference of the arbitration.