How does the LRA’s ‘deeming provision’ actually work in practice?

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In 2018 the Constitutional Court made a ruling regarding the deeming provision referred to in section 198A of the Labour Relations Act (LRA). This ruling stated that the client of a Temporary Employment Services (TES) provider is deemed to be the sole employer of assigned temporary employees earning R 17 119 or less per month, following three months of employment. However, understanding what this ruling actually means for a business can be a daunting task.

Here is a hypothetical example to illustrate how the new deeming provision may work – take for example a case where TES provider employees, who have been working at one of the TES Provider’s clients’ businesses for a number of years, are now seeking to be deemed permanent employees.

The LRA defines a temporary service as one where the employee works for the client for a period not exceeding three months, or fulfils work specifically determined to be a temporary service. The employees, having been employed in the service of the client for a number of years, cannot be defined as temporary employees. The deeming provision is therefore applicable and the client is deemed to be the employer for the purposes of the LRA.

This does not mean that they must be employed directly by the client, or “put on the client’s books”.  If temporary employees are employed for a period longer than three months, it does not result in a transfer to a new employment relationship, simply a change in the statutory attribution of who the ‘employer’ is according to the LRA. It also does not mean that they are entitled to permanent employment, because section 198B makes provision for the use of fixed term contracts of employment exceeding three months, provided the need for such contracts can be justified.  The same relationship between the TES provider, the client and the employee still exist for the duration of the contract and the TES provider is still responsible for remunerating the employee.

Depending on the circumstances of an individual case, employees may be deemed to be either indefinite or fixed term, and for the purposes of liability under the LRA, deemed to be employed by the client. However, regardless of this they still remain employees of the TES provider.

The TES provider may retain the practical roles, including remuneration, as well as a contractual relationship with the employee and the client. The TES provider may also participate in litigation where the employee seeks to pursue a claim seeing that the TES provider is jointly and severally liable. This makes it more important than ever to engage with a skilled and reputable TES provider to ensure you do not fall foul of a risky situation regarding temporary employees.

So what changed?

TES providers’ clients can be held responsible for transgressions under the LRA, such as unfair dismissals and unfair labour practices. In other words, liability now also lies with the TES providers’ clients as well. This affords better protection for workers: a worker who has been unfairly dismissed or has been the victim of an unfair labour practice can now cite both the TES and its client as possible responsible parties. Nothing has changed in respect of the nature of employment, in other words, the deemed employees are not permanent employees of the client.

Can a TES provider still add value to a client’s business?

Absolutely. In terms of the judgment, the TES provider is jointly liable for LRA transgressions along with the client as long as the commercial arrangement between them exists. At the very least, liability is therefore shared, as opposed to the client being solely responsible for LRA compliance. If a company partners with the right TES provider, who is compliant and able to provide adequate commercial indemnities, the company’s risk can be further mitigated, allowing the business to focus on their core business capabilities. 

In assessing their staffing needs, it is therefore crucial for companies to consider potential TES partners’ level of legislative compliance, industrial relations expertise and ability to provide commercial and operational solutions aimed at keeping their clients risk-free and confident in their ability to ensure fair, compliant labour practices.

Tebogo Moalusi is the IR Executive for Staffing and Outsourcing Cluster at Workforce Staffing.