Can a client demand an Outsource Provider or Labour Broker remove their resources from site? Actually, no!.

Firms enter into outsourcing contracts with clients, providing resources to perform services on site. On occasion, and perhaps increasingly, clients demand the removal of such firm’s resources from site, normally in accordance with a contractual term. Generally the demand is based on lawful and fair grounds such as dishonesty and can be dealt with by way of a disciplinary enquiry.

However, often the demand is not lawful or fair and is based upon a comment such as “incompatibility”. Sometimes, the enquiry decides, in terms of company policy, facts of the matter, or mitigating features, that dismissal is too harsh and a warning is sufficient; still the client demands their withdrawal. Because of the power of the client, the employee is withdrawn but no other position is available and that leads to retrenchment.

My conclusions in this matter are largely drawn from case law and, in particular, Nape v INTCS Corporate Solutions [1].

In that matter Nape was employed by a labour broker but deployed to a client, Nissan. The client accused Nape of misconduct (relating to offensive emails) and, in terms of the contract between Nissan and INTCS, ordered Nape’s removal from site. INTCS held a disciplinary enquiry and awarded Nape a final written warning. The client, however, refused to take Nape back and this led to his retrenchment and dismissal. The labour court held his dismissal had been unfair and awarded, in that instance, compensation.

Whilst the above deals with a labour broker there are a number of similarities between that case and those faced by a business providing outsource services (“Outsource Provider”). In both instances an employee is deployed at a client’s premises; in both instances there are normally contractual terms allowing the client to demand such employee’s removal; in both instances the client generally has considerable power and influence over the supplier; with or without a disciplinary enquiry the client refuses to take the employee back.

On that basis I consider the opinions of the Nape decision to be binding upon both labour brokers and Outsource Providers.

CONCLUSION

An Outsource Provider’s client cannot insist on a resource being removed from the client’s site without justification. There is a requirement to ensure the employee’s labour rights are protected and pursued. Any contractual clause to allow removal without justification is against public policy and requires a proper procedure (such as a disciplinary enquiry).

Where a proper procedure is followed and dismissal is not warranted, an Outsource Provider is bound to take all reasonable steps to persuade its client to withdraw its request. Where the Outsource Provider’s efforts at persuasion are futile, it is entitled to refuse to comply with the client’s unlawful demand and it may, should it wish, approach the Labour Court to order the client to refrain from making or acting upon unlawful demands.

Outsource Providers need to re-examine their contracts with clients to ensure demands for removal of resources may only occur where lawful and fair and following a fair procedure. Outsource Providers should make it clear that resources are not employees of the client and clients are not entitled to impose their employment policies on the employee, where the application of those policies conflicts with the right not to be unfairly dismissed.

ANALYSIS

Dealing firstly with the contractual argument. Whilst the relationship between an Outsource Provider and the client may be a lawful one, not all of the contractual terms may be. A clause that allows the client to demand the removal of an Outsource Provider’s resource is one such term. It is necessary to challenge whether the term is contrary to public policy as evidenced by the constitutional values, in particular, those found in the Bill of Rights [2].

“Ordinarily, constitutional challenges to contractual terms will give rise to the question of whether the disputed provision is contrary to public policy. Public policy represents the legal convictions of the community; it represents those values that are held most dear by the society. Determining the content of public policy was once fraught with difficulties. That is no longer the case. Since the advent of our constitutional democracy, public policy is now deeply rooted in our Constitution and the values which underlie it. Indeed, the founding provisions of our Constitution make it plain: our constitutional democracy is founded on, among other values, the values of human dignity, the achievement of equality and the advancement of human rights and freedoms, and the rule of law. And the Bill of Rights, as the Constitution proclaims, “is a cornerstone” of that democracy; “it enshrines the rights of all people in our country and affirms the democratic [founding] values of human dignity, equality and freedom. [3]“

Further it is stated, “The Constitution provides that everyone and not just employees have a right to fair labour practices. Consequently, even though a person may not be regarded by the law as an employee of the client but of the Labour Broker, the client still has a legal duty to do nothing to undermine an employee’s right to fair labour practices unless the limitation is justified by national legislation.” Again, I contend this equally applies to Outsource Providers.

The learned Judge concluded, in Napier:

“Accordingly, on the facts of this case, I find that the client’s [Nissan] insistence that the Applicant [Nape] be removed was unlawful and a breach of the Applicant’s right to fair labour practises. The Applicant did not commit an offence for which dismissal was justified. The client had no right to insist upon the application of its own internal policies concerning offensive emails because if it wanted that to apply, it should have employed the employee. It seems to me that the client’s insistence that its policies apply contradicted the very structure of the relationship. The client had no right to impose its employment policies on the Labour Broker, where the application of those policies conflicted with the right not to be unfairly dismissed. Furthermore, insofar as the contract between the Respondent (INTCS] and its client allowed the client to arbitrarily require the removal of an employee from its premises, such provision was unlawful and against public policy as it took no account of the right of the employee not to be unfairly dismissed.”

As stated previously, it is contended the comments equally relate to an Outsource Provider. The mere fact that a third party demands the dismissal (or removal of an employee) would not render such a dismissal (or removal) fair.

What is the Provider to do?

In Mnguni [4] the client alleged dishonesty by the labour broker’s employee, although, in fact, he had not stolen anything. The client insisted on removal, the labour broker was “forced” to retrench and the Court found the retrenchment illegal. The Court held that the employer had to take all reasonable steps to persuade its client to drop the request. It also ruled the right of the labour broker to request the client to drop its demand extends further to any demand that infringes the employee’s right to fair labour practices and that cannot be justified.

Returning to Nape, it was stated, “But it seems to me that once it is recognised that the Labour Broker has a right of recourse against the client, the principle difficulties with reinstatement, may in appropriate circumstances, fall away. There may be civil procedure inconveniences to give effect to this right of recourse, but the law caters for those issues by allowing a respondent Labour Broker for example to issue a third party notice if the facts and issues are the same. Or even the Applicant, employee to join an interested party, the client, where reinstatement is claimed. As I have mentioned, a Labour Broker may avoid a dismissal altogether if it acts expeditiously and refuses to comply with the client’s requests. A Court of law may grant a mandamus against the client in order to enable the employee to continue working.”

However unpalatable that might be, the employer does have civil rights that may be entertained should negotiation or mediation fail. The employee most certainly does.

At the very least, Outsource Providers should reconsider their contracts with clients to enable wording that is more consistent with the Constitution and labour rights.

Following my first draft of this paper, Sandro Milo, a partner with Mahons Attorneys, kindly referred me to Tiyo & others / Alphabet Street Properties 95 (Pty) Ltd t/a Retail Risk Specialists
[2011] JOL 27940 (CCMA), a matter before the CCMA in Bloemfontein.

The Commissioner specifically referred to the Nape judgement and stated, “In this case, the employer is not a labour broker. However, the effects of client’s conduct in respect of the employment relationship are exactly the same as those used by certain labour brokers. They use such tactics to escape their legal responsibilities under the LRA.”

This CCMA decision indicates the Nape decision can and should be extended beyond the relationship between just Labour Brokers and their clients.

As the Outsource Provider is held liable for claims of unfair dismissal or unfair labour practices, the risk to such provider is high.

Graham Nicholls is the owner of Focussed Outcomes cc, specialising in labour consultation and alternative dispute resolution, holding an MBA (Wales) and a PG Diploma in Labour Law (UJ) amongst other bits of paper. He chairs disciplinary enquiries in an independent and unbiased capacity for a number of clients. His website is www.focussed-outcomes.co.za and he can be contacted via graham@focussed-outcomes.co.za – Graham is also a member of the South African United Employers Organisation.