According to a recent comparative analysis of employment legislation in various jurisdictions around the world, Baker McKenzie's Employment and Compensation teams found that in the face of rising labour costs and an uncertain global economy, many employers were looking beyond the direct employer-employee model and increasing their reliance on third parties and independent contractors.
The firm found that global employers, in their efforts to control costs and enhance agility, were looking for opportunities to close local entities and outsource their labour needs to third parties and agents. For similar reasons, employers were also found to be increasing reliance on independent contractors and temporary workers to avoid hiring additional full-time employees in non-integral segments of the business.
However, as reliance on third parties continues to grow, the risks associated with doing so are also escalating. In 2016, there was an increase in global government regulation of third-party relationships. Legislators around the world have begun pushing companies to accept responsibility for the acts of third parties in complying with their regulatory responsibilities. The risk of being found a joint employer by the labour authorities is also greater now than in the past. And, in the past year, many countries, including South Africa, through case law or legislation have demonstrated a greater willingness to crack down on the use of independent contractors and/or temporary employees in place of full-time, permanent employees.
As such, the amendments to South Africa's framework legislation on the issues of temporary employment services and limited duration contracts, implemented in 2015, have received a lot of attention in South African courts and employment tribunals in the past year.
When it was enacted on 1 January 2015, the Labour Relations Amendment Act (LRAA) sought to regulate non-standard employment (staff employed through labour brokers and fixed-term contract employees) more actively. A Temporary Employment Service (TES) means, in terms of the South African Labour Relations Act (LRA), any person who, for reward, procures for, or provides to, a client other persons to perform work for the client. For a person providing or procuring employees who fall within the definition of a TES, two elements must be present - the person or business must provide employees to a client; and the person or business must remunerate those employees (they are not remunerated by the client).
A TES that procures or provides a person's services for a client is the employer of that person and that person is the employee of the TES. Notably, however, the TES and the client are jointly and severally liable if the TES, in respect of any of its employees, contravenes a collective agreement concluded in a bargaining council that regulates terms and conditions of employment. They are also jointly liable if the TES does not comply with a binding arbitration award that regulates terms and conditions of employment, or if it does not comply with the Basic Conditions of Employment Act (BCEA) or a sectoral determination made in terms of the BCEA.
If the client of a TES is found to be jointly and severally liable or is deemed to be the employer, then the employee may institute proceedings against either the TES or the client, or both. In addition, a labour inspector acting in terms of the BCEA may secure and enforce compliance against the TES or the client as if it were the employer, or both. In addition, any order or award made against a TES or client may be enforced against either.
If a TES employee earns below the Earnings Threshold (currently R205 433,30 per annum), then s189A of the LRA regulates the relationship between the employee, the TES and the client. In terms of s198A of the LRA, a "temporary service" means work for a client by an employee for a period not exceeding three months; as a substitute for an employee of the client who is temporarily absent; or in a category of work and for any period which is determined to be a temporary service by a collective agreement concluded in a bargaining council, a sectoral determination or a notice published by the minister.
The protection of temporary workers is not just a priority for the South African legislature. According to our global Baker McKenzie Employment & Compensation lawyers, there are several countries currently assessing or implementing laws that govern aspects of the temporary worker's employment relationship. For example, Australia recently established the Migrant Workers Taskforce following complaints regarding the exploitation of migrant workers, particularly in industries dependent upon contract labour providers. Japan has focused on implementing reasonable working conditions for fixed-term employees - the country's Labour Contract Act provides that any difference in working conditions for fixed-term employees and permanent employees must not be unreasonable. Singapore recently released the Tripartite Guidelines on The Employment of Term Contract Employees to encourage employers to provide benefits such as leave and notice periods (where applicable) to maximum term and fixed-term contract employees. The German parliament passed new legislation on labour leasing in April, 2017 and Russia prohibited staff leasing in 2016. In Spain, there is an obligation to compensate fixed-term employees for termination of employment as if they were permanent employees being made redundant. A 2016 decision in Spain held that treating fixed-term employees differently from indefinite term employees for severance purposes was contrary to the European Framework Agreement on Fixed-term Workers. In addition, the UK government has launched several initiatives looking at the rights of workers in the rapidly evolving "gig" economy.
Employers in South Africa thus join global employers around the world in assessing their exposure to temporary employment services and limited duration contracts; and considering how they could reorganise staffing requirements to reduce risk.
Botes is a Partner and Head of Employment and Compensation, Baker McKenzie (South Africa).