Brief on proposed section 198 of the LRA

Labour Relations Amendment Bill, 2012

The above Bill is before Parliament and may be further amended.  The comments below are based on the Bill before such amendments, if any.

The Bill proposes amendments to section 198 of the Act dealing with temporary employment services (“TES”), commonly referred to as “labour brokers”,

The Bill also proposes three new sections:

198A – Temporary services

198B – Fixed Term Contracts

198C – Part-Time Employment

It is important to note that these proposed sections refer only to employees earning less than the threshold established in terms of section 6(3) of the Basic Conditions of Employment Act.  Any employee earning above the threshold is subject to legislation as currently established.  As at 1^st July 2012 the threshold is R183 000.

Section 198 – Temporary Employment Services.

Section 198 applies, as before, to all employees and retains the general provisions that a TES is the employer of persons whom it employs and pays to work for a client, and that a TES and its client are jointly and severally liable for specified contraventions of employment laws.

A number of further general protections are introduced:

An employee bringing a claim for which a TES and client are jointly and severally liable may institute proceedings against either the TES or the client or both and may enforce any order or award made against the TES or client against either of them.

•  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.

• A TES may not employ an employee on terms and conditions of employment not permitted by the LRA, a sectorial determination or a collective agreement concluded at a bargaining council that is applicable to a client for whom the employee works.
• The Labour Court or an arbitrator may now rule on whether a contract between a TES and a client complies with the LRA, a sectorial determination or applicable bargaining council agreement and make an appropriate award. There have been rulings that these agreements lie beyond their jurisdiction.
• A TES must be registered to conduct business, but the fact that it is not registered is no defence to any claim instituted in terms of the section.
• A TES must provide an employee assigned to a client with written particulars of employment that comply with section 29 of the BCEA.

Section 198A – Application of section 198 to employees earning below earnings threshold.

In essence:

Employees in this category are employees of the TES for the purposes of the LRA only if they are employed to perform genuinely temporary work, defined as “temporary services”.

Temporary service means a period not exceeding six months where someone is substituting for an employee who is temporarily absent or in a category of work where the period of time is determined via a collective agreement concluded in a bargaining council or a sectorial determination published by the Minister.

If they are not employed to perform temporary services, they are deemed for the purposes of the LRAto be employees of the client and not the TES.  This means that, for the purposes of the LRA, employees are treated as the employees of the client if they work for a period in excess of six months. The only exception to this is employees who work as a substitute for an employee of the client who is temporarily absent.

Employees deemed under this provision to be employees of the client must be treated on the whole not less favourably than employees of the client who perform the same or similar work, unless there is a justifiable reason for different treatment.

This means, for example, that if an employee is procured by a TES for a client for six months, but is kept on after the expiry of the six month period, then that employee must, unless there is a justifiable reason for different treatment, be paid the same wages and benefits as the client’s other employees who are performing the same or similar work.

The amendments set out in section 198D [see below] indicate what may constitute a justifiable reason for this purpose.

To prevent abuse of the six-month period that constitutes temporary work, the section provides that a termination by a TES of an employee’s assignment with a client for the purpose of avoiding deemed employment by the client constitutes a dismissal. This means that the fairness of the termination of an assignment may be challenged in terms of the LRA.

Section 198B – fixed term contracts for employees earning below earnings threshold.

In essence:

It is also intended to amend section 186 of the Act [Meaning of dismissal and unfair labour practice] to provide further protection against dismissal for all employees employed on fixed term contracts.   Such employees (and regardless of the threshold) may claim dismissal if they reasonably expected a fixed term Contract (“FTC”) to be continued but also if they reasonably expected to be retained in indefinite employment.

In order to accommodate new and small businesses, the section does not apply to an employer that employs less than ten employees; an employer that employs less than fifty employees and whose business has been in operation for less than two years; provided the employer does not conduct more than one business and the business was not formed by the division or dissolution, for any reason, of an existing business.

An employer would be permitted to employ an employee on an FTC or successive FTCs for up to six months.

An employee may be employed on a FTC for a longer period if the nature of the work for which the employee is engaged is of a limited or definite duration or the employer can demonstrate any other justifiable reason for fixing the term of the contract.  Employment in terms of an FTC concluded or renewed in contravention of subsection (3) is deemed to be of indefinite duration.

Justifiable reasons specifically covered by the Bill include the following:

• Replacing another employee who is temporarily absent from work;
• Engaged on account of a temporary increase in the volume of work that is not expected to endure beyond twelve months;
• Student or recent graduate who is employed for the purpose of being trained or gaining work experience in order to enter a job or profession;
• Engaged to work exclusively on a genuine and specific project that has a limited or defined duration;
• Has been engaged for a trial period of not longer than 6 months for the purpose of determining the employee’s suitability for employment;
• A non-citizen who has been granted a work permit for a defined period;
• Engaged to perform seasonal work;
• Engaged on an official public works scheme or similar public job creation scheme;
• Engaged on a position which is funded by an external source for a limited period;
• Has reached the normal or agreed retirement age applicable in the employer’s business.

An employee to whom the section applies who is employed for a period longer than six months is deemed to be employed for an indefinite period unless the nature of the work is of a limited or definite duration or the employer can demonstrate any other justifiable reason for fixing the term of the contract.

An employer who employs an employee to whom the section applies on an FTC or who renews or extends an FTC must do so in writing and must state the reason that justifies the fixed-term nature of the employment contract.

An employer bears an onus to prove in any relevant proceedings that there is a justifiable reason for fixing the term of the contract and that the term was agreed.

The new section contains additional protections for employees to whom it applies:

•  An employee employed on FTC for more than six months (or whatever period is determined by a sectorial determination or collective agreement concluded at a bargaining council) must be treated on the whole not less favourably than an employee on an indefinite contract performing the same or similar work, unless there is a justifiable reason for treating the employee differently. What may constitute a justifiable reason for this purpose is dealt with in section 198D [see below].
• An employer must provide an employee employed on an FTC with the same access to opportunities to apply for vacancies as it provides to an employee employed on an indefinite contract of employment.
• If a fixed term of longer than 24 months can be justified under the section, the employer must, on expiry of the contract and subject to the terms of any collective agreement regulating the issue, pay the employee one week’s remuneration for each completed year of the contract.  The employer is not obliged to make this payment if, prior to the expiry of the FTC, it offers the employee employment or procures employment for the employee with a different employer which commences no later than 30 days after expiry of the contract and on the same or similar terms.

Section 198C Part-time employment of employees earning below earnings threshold

In essence:

This section does not apply to employees who ordinarily work less than 24 hours a month, or during the first six months of employment.  The same exclusions in section 198B apply to this section.

A part-time employee is an employee who is remunerated wholly or partly by reference to the time that the employee works and who works fewer hours than a comparable full-time employee.  This does not include a full-time employee whose hours of work are temporarily reduced for operational requirements as a result of an agreement.

The new section requires employers to:

• Treat part-time employees on the whole not less favourably than comparable full-time employees doing the same or similar work, unless there is a justifiable reason for different treatment.  What constitutes a justifiable reason for differentiation is dealt with in section 198D.
• Provide part-time employees with access to training and skills development that is on the whole not less favourable than the access applicable to comparable full-time employees.
• Provide part-time employees with the same access to opportunities and vacancies as full-time employees.

Section 198D – General provisions applicable to sections 198A to 198C

(Disputes arising from the new section are subject to the normal CCMA or bargaining council process; that is, conciliation and arbitration).

For the purposes of sections 198A (5), 198B(3) and 198C(3)(a), a justifiable reason includes that the different treatment is a result of the application of a system that takes into account – seniority, experience or length of service; merit; the quality or quantity of work performed; any other criteria of a similar nature not prohibited by section 6(1) of the Employment Equity Act, 1998 (Act No. 55 of 1998).

Should you require clarification, or would like a briefing (individual or team) on the above aspects, please contact graham@focussed-outcomes.co.za.