Bye, brokers: Hello, service providers

The day after the Constitutional Court’s landmark ruling on labour broking on July 26, workers employed through labour-broking company Ziphi Nkomo at a Clicks distribution centre received a puzzling SMS.

“The latest ruling of the Constitutional Court once again reconfirmed that all Ziphi Nkomo 1 GOC [Group of Companies] employees remainour employees despite confusion that was created by certain external parties … We look forward to a further and fruitful permanent relationship with all our staff members as part of the Ziphi family,” it reads.

The ruling interpreted section 198 of the Labour Relations Act (LRA) to mean that workers employed through labour brokers, after a three-month period, become permanent employeesof the companies they are contracted to. These workers must also be treated “not less favourably” than the client company’s permanent workers. They should earn the same wages and get the same benefits.

Though some have called the ruling an effective ban on labour broking, the sector’s employers’ body, the Confederation of Associations in the Private Employment Sector (Capes), has remained relatively unfazed in the face of these doomsday pronouncements.

The case, which was heard in February, concluded a protracted battle between labour-broking company Assign Services and the National Union of Metalworkers of South Africa over the scope of a 2015 amendment to the LRA.`


The court judgment rejected what became known as the “dual employer” interpretation, which would make a worker an employee of the labour-broking company and the client company after the three-month period.

One Clicks worker, who spoke on condition of anonymity, said Ziphi Nkomo’s SMS is an effort “to swing the Constitutional Court ruling in their favour”.

The workers have not received any clarity on what was meant by the SMS. Ziphi Nkomo did not respond to a Mail & Guardian request for comment.

READ MORE: Court shows employers who’s boss

“I tried to confront my line manager about it. You see, they know that I know more about this thing [section 198] than they want me to. The court ruled in favour of us,” the Clicks worker said. “Ziphi Nkomo is acting like we want to continue as usual. What benefits are we getting out of that? Nothing.”

In January, 84 Clicks workers, employed at the retailer’s distribution centre through Ziphi Nkomo and Adcorp Blu, referred a dispute to the Commission for Conciliation, Mediation and Arbitration to be made permanent Clicks employees.

Though Ziphi Nkomo’s declaration seems out of step with the Constitutional Court’s ruling, it is in line with the official response of labour-broking companies to the judgment.

On the afternoon of July 26, the day the Constitutional Court’s decision was handed down, labour-broking company Adcorp released a statement reiterating that there is no “transfer of the employment relationship” after the stipulated three-month period.

Adcorp cites paragraph 75 of the judgment, which it deems is critical for the industry. The paragraph states that a “triangular employment relationship” still exists for as long as the commercial contract between the labour broker and the client company remains.

This same paragraph is cited in a statement released by Capes.

According to Craig Kirchmann, an attorney for Assign Services, after three months, LRA rights and obligations transfer to the client company. But conditions of employment, specifically payroll services, remain the responsibility of the labour broker.

Imraan Mahomed, a partner at Hogan Lovells, saidthe practical effect of this is that the client company will have to assess whether the triangular relationship adds any real value to the client company’s operations. If it doesn’t, the labour-broking company is rendered redundant. In effectthis equals a ban on labour broking, Mahomed said.

But, Kirchmann said, “the reason that legitimate and compliant labour-broking businesses will continue to thrive is that they add value to the client, over and above merely supplying labour.”

Ronald Wesso, of the Casual Workers’ Advice Office (CWAO), saidthis line of reasoning is merely an effort by labour-broking companies to save their businesses. “What they are presenting is an absolute best-case scenario and saying it is the most likely outcome.”

He saidthe most important victory of the Constitutional Court’s ruling is not that it necessarily addresses the cost-cutting strategies of labour broking but that it seeks to combat the undermining of collective bargaining.

Workers are now able to approach the client company directly on matters of collective bargaining and, if there is mass mobilisation in this regard, this will certainly deal a blow to the labour-broking sector, Wesso said.

According to CWAO, about two million workers are employed through brokers. According to Stats SA the formal sector has a workforce of 11.3-million.

Research by Haroon Bhorat and Adaiah Lilenstein, of the University of Cape Town’s Development Policy Research Unit, suggests that the labour-broking sector has grown in recent years.

Kirchmann saidthat, for the labour-broking industry to thrive, labour brokers will have to ensure that they are experts at managing payrolls and the administration of workers. Another means of survival would be the creation of firms that act as service providers, he added.

Labour lawyer and former trade unionist Jan Theron saidthe inevitable result of the amendments is that companies will seek ways to dissociate themselves from labour broking and rebrand them as service providers, which fall outside of the section 198 regulations.

The consequence of this is that the most maligned elements of labour broking will be able to thrive unchecked, he said.

“I think some labour broking has, in fact, probably all along taken place under a different guise,” Theron said. “There has always been a sort of collusive character that has gone along with this; the client will happily go along with this and redefine the labour broker as a service provider.”

He saidthis and the “fiction” that the so-called triangular relationship continues to exist is an indication that the way the 2015 amendments were formulated leaves much to be desired, as the Constitutional Court itself suggests.

“However, the labour-broking fraternity are going to exploit every bit of legal uncertainty they can,” Theron said.

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Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

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