Assign Services (Pty) Ltd v Numsa

Cachalia AJ maintains that the sole employer interpretation adopted in the majority judgment forces employees into a new relationship without their consent and on terms of employment to which they have not agreed and brings the deeming provision into conflict with the employees’ rights to fair labour practices in section 23(1) and to choose their trade, occupation or profession freely in section 22 of the Constitution.  “These provisions are of little comfort to employees transferred to a client who has no employees performing the same or similar work, which means that there is no baseline for the determination of an employee’s terms of employment. On the other hand the TES may have agreed conditions of employment with the employee that are more generous than those applying to the same or similar work for the client, in which case the employee is likely to suffer an involuntary downgrade of the terms of her new employment with the client“. [para 102]

Essence

Sole employer interpretation forces the employees into a new relationship without their consent and on terms of employment to which they have not agreed.

Decision

Disallowed appeal against the judgment of the labour appeal court dated 10 July 2017 with Cachalia AJ dissenting.

Judges

(CCT194/17) [2018] ZACC 22 ; [2018] 9 BLLR 837 (CC) (26 July 2018).

Dlodlo AJ (Zondo DCJ, Froneman J, Goliath AJ, Jafta J, Khampepe J, Madlanga J, Petse AJ and Theron J concurring) with Cachalia AJ dissenting.

Related books

Darcy du Toit et al

Reasons

The majority of judges in the ConCourt disallowed the appeal.

Discussion by GilesFiles
Court summary

Media summary

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

“On 26 July 2018 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against an order of the Labour Appeal Court (LAC). The case concerned the interpretation of section 198A(3)(b) of the Labour Relations Act 66 of 1995 (LRA) and whether this deeming provision resulted in a “sole employment” relationship between a placed worker and a client or a “dual employment” relationship between a Temporary Employment Service (TES), a placed worker and a client. The LAC set aside the order of the Labour Court and held that a placed worker who has worked for a period in excess of three months is no longer performing a temporary service and the client, as opposed to the TES, becomes the sole employer of the worker by virtue of section 198A(3)(b) of the LRA.

In 2015, Assign Services, a TES, placed 22 workers with Krost Shelving and Racking (Pty) Limited (Krost), a number of whom were members of the National Union of Metalworkers of South Africa (NUMSA). The placed workers provided services to Krost for a period exceeding three months and on a full time basis. Assign Services’ view was that section 198A(3)(b) created a dual employer relationship, while NUMSA contended that a sole employer relationship resulted from the section. The Commission for Conciliation, Mediation and Arbitration (CCMA) supported NUMSA’s sole employer interpretation.

In the Labour Court it was held that a proper reading of the section could not support the sole employer interpretation. It instead held that section 198A(3)(b) created a dual  employment relationship, in which both the TES and the client have rights and obligations in respect of the workers. In an appeal, by NUMSA, to the LAC it was found that the sole employer interpretation best protected the rights of placed workers and promoted the purpose of the LRA.

Writing for the majority of the Constitutional Court, Dlodlo AJ (Zondo DCJ, Froneman J, Goliath AJ, Jafta J, Khampepe J, Madlanga J, Petse AJ and Theron J concurring) held that the purpose of section 198A must be contextualised within the right to fair labour practices in section 23 of the Constitution and the purpose of the LRA as a whole. The majority found that, on an interpretation of sections 198(2) and 198A(3)(b), for the first three months the TES is the employer and then subsequent to that time lapse the client becomes the sole employer. The majority found that the language used by the legislature in section 198A(3)(b) of the LRA is plain and that when the language is interpreted in the context, it supports the sole employer interpretation.

In the result, the Constitutional Court granted leave to appeal but dismissed the appeal with costs.

In a dissenting judgment, Cachalia AJ found that the dual employer interpretation was correct, as the language of the LRA does not expressly state that the TES would cease to be the employer after three months. The drafters of section 198A(3)(b) could have expressly stated this to be the position but did not. Cachalia AJ concluded that the dual employer interpretation provided greater protection for lower paid workers, in line with the purpose of section 198A(3)(b) and for these reasons would have upheld the appeal.

Quotations from judgment

Note: Footnotes omitted and emphasis added

CACHALIA AJ:

[86] I have had the benefit of reading the judgment of Dlodlo AJ (first judgment) and regret that I am unable to agree that on a proper interpretation of section 198A(3)(b) of the LRA, the client replaces the TES as the employer. I would hold that both continue jointly as employers of the workers. The factual background and litigation history of the dispute has been set out in some detail in the first judgment and needs no repetition. I gladly adopt them.

The nature of the dispute

[87] The dispute between the parties arises as follows: sections 198 and 198A regulate labour brokers, who render temporary employment services. Section 198(1) defines a TES as a person who, for reward, procures for or provides to a client, the services of workers whom it remunerates. The LRA treats the TES as the employer of the employees placed with its clients. That is so firstly because section 213 says so, and secondly, because section 198(2) classifies them as such.

[88] Section 198A was introduced in 2015 to provide additional protection to vulnerable lower paid employees, who continue working for a client beyond three months. Section 198A(3)(b) provides that these employees are “deemed” to be employees of that client, who in turn is deemed to be their employer. The issue is whether this deeming provision has the effect of making the client an employer in addition to the TES or in substitution for the TES as the employer. In the industry the debate is characterised as being over the sole employer interpretation or dual employer interpretation.

[89] Assign, the labour broker, contends for the dual employer interpretation whilst NUMSA, the trade union, argues for the sole employer interpretation. Intuitively, one may be tempted to think that because a union is more likely to advance the interests of vulnerable workers than labour brokers would be, then the union’s interpretation must be correct. This is more so because unions have waged a consistent battle to curb labour broking. Conversely, because there has been reported abuse of vulnerable employees by labour brokers, one’s instinct is that their interpretation may be wrong.

[90] But statutory interpretation eschews any intuitive responses. It is an objective exercise that requires, instead, a proper analysis of the language, context and purpose of the relevant provision. In addition, and where appropriate, its alignment with other statutes and constitutional implications of the meaning attributed to it must be part of the equation.

The language

[91] The TES usually engages the worker under a common law employment contract. The applicant refers to this as an innominate contract, and for present purposes I accept this nomenclature. Sections 213 and 198(2) render these workers employees of the TES, with the full protection of the LRA. Section 198A was enacted to give vulnerable employees additional protection, which is the section’s primary purpose. Section 198A(3)(b) does so by “deeming” the client to be their employees’ employer indefinitely after three months has elapsed. This is common ground between the parties.

[92] Deeming provisions are often used in statutes to give the subject-matter a meaning not ordinarily associated with it. What section 198A(3)(b) does, therefore, is to recognise that the TES is ordinarily the employer as stipulated in section 198(2) but that the client is also regarded as the employer after the three month period has elapsed. If the object was to make the client the sole employer after the effluxion of this period, section 198A(3)(b)(i), instead of the deeming provision, could have been drafted quite simply to read

“(3) For the purposes of this Act an employee—
. . .
(b) not performing such temporary service for the client. . .—
(i) ceases to be the employee of the temporary employment service and is deemed to be the employee of the client.”

[93] Alternatively, section 198A(3)(b) could equally easily have been drafted to override or qualify the worker’s status as an employee of the TES in terms of sections 213 and 198(2). The choice of language used – or rather, not used – in the section is therefore consistent with the dual employer meaning. But I accept that, read in isolation, this may not be conclusive.

As the first judgment observes, another plausible interpretation is that the section distinguishes between employees employed by the TES and those deemed to be employees of the client, which also tends to support the sole employer model. It is therefore necessary to also examine whether the contextual indications point in either direction.

Purpose and context

[94] Sections 198(4) and 198(4A), which the first judgment freely admits creates some difficulty for the sole employer model, are critical in this analysis. Section 198(4) renders the TES and the client jointly and severally liable for certain TES contraventions “in respect of any of its employees”. Under the dual employer interpretation, the vulnerable employees continue to enjoy this provision’s protection. But under the sole employer interpretation, they lose it when they pass the three month mark because they cease to be employees of the TES under the deeming provision. This is plainly at odds with the purpose of giving placed employees additional protection.

[95] Section 198(4A), was introduced at the same time as section 198A and cross refers to the deeming provision. It says expressly that if a client “is deemed to be the employer” of an employee in terms of section 198(A)(3)(b), certain employer duties may be enforced against either or both the TES and the client. In other words, the employee may sue either or both. A labour inspector may enforce compliance with the BCEA. An order or award made against the one is enforceable against the other.

[96] The applicant contends, in my view persuasively, that these provisions proceed from the premise that, if the deeming provision is triggered, that is, if the client is deemed to be the employer in terms of section 198A(3)(b), both the client and the TES are deemed to be the employers of the workers.

It is only on this basis that the section may render the duties of an employer enforceable against both the TES and the client. This gives the employees added protection by allowing them to enforce their employment rights against two employers. The section makes no sense otherwise.

[97] The first judgment, however, asserts that section 198(4) creates a “substantive and statutory form of joint and several liability”, which does not equate to joint or dual employment, but is merely a statutory accessory liability for the client.

[98] But this is not so. Section 198(4) does not create an accessory liability – akin to a suretyship obligation – for the client. It says explicitly that the TES and client are jointly and severally liable in solidum (in the whole), which means that the worker can sue either or both. Put differently, the worker has a right of action against either or both and they have a corresponding joint obligation towards the worker. This is why the section, as the applicant correctly contends, renders the duties of an employer enforceable against both the TES and the client.

[99] In the same vein section 198(4A) creates substantive rights for vulnerable employees against both the TES and the client. It recognises that they assume joint obligations towards the employees as employers. This is why any order or award made against a TES or a client may be enforced against either. There can be no other reason for imposing liability upon both. Once the section is understood in this way, there is no room for attempting to explain away the difficulty posed by its language, as the first judgment does, as merely conferring “a practical solution to placed employees being barred from instituting proceedings if they proceed against the incorrect party”.

On the sole employer interpretation, liability is imposed upon the TES without it having any obligations, as an employer, towards the employees. This cannot be. It follows that section 198(4A) supports the dual employer interpretation.

Adverse consequences of sole employer interpretation

[100] On the sole employer interpretation the deeming provision has the following consequences:

  • the worker ceases to be an employee of the TES for purposes of the LRA;
  • the employment contract between the worker and the TES remains, but without the additional benefits the LRA confers upon workers; and
  • the worker is involuntarily transferred to a client who becomes her employer without her accrued employment rights – such as accrued leave, annual bonus and pension from the TES to the client.

[101] In addition, the employee does not have a contract of employment with her new employer, the client. Her only protection is that she is deemed to be employed by the client on an indefinite basis in terms of section 198A(3)(b)(ii), and that she cannot be treated less favourably than an employee performing the same or similar work under section 198A(5).

[102] These provisions are of little comfort to employees transferred to a client who has no employees performing the same or similar work, which means that there is no baseline for the determination of an employee’s terms of employment. On the other hand the TES may have agreed conditions of employment with the employee that are more generous than those applying to the same or similar work for the client, in which case the employee is likely to suffer an involuntary downgrade of the terms of her new employment with the client.

[103] Another obvious consequence of the single employer model is that employees will be left more vulnerable in the event of a client’s liquidation. The employee will, in that event, not be able to look to the TES to be protected from the consequences of a loss of employment.

[104] These adverse consequences of the sole employer interpretation are all antithetical to the primary purpose of the enactment of section 198A(3)(b), which is to give protection to vulnerable employees, in addition to the protection already enjoyed as employees of the TES. Instead, the sole employer interpretation unavoidably places vulnerable employees in an even weaker position in some instances. Neither NUMSA, nor the amicus curiae, who support the sole employer interpretation, have advanced cogent reasons to demonstrate that their interpretation grants additional or better protection than the dual employer interpretation. The sole employer interpretation is therefore clearly wrong.

[105] This conclusion is fortified by the fact that there are no transitional provisions that cater for the transfer of the employee from the employ of the TES to the client in section 198A. Nor is there any language in the section saying that the workers are deemed to be transferred to the client after three months. The unavoidable inference is that the section does not envisage a transfer. The lawmaker intended both employment relationships to continue in tandem. It did not enact any transitional arrangements because none were necessary.

Alignment with the BCEA

[106] It is apparent that the lawmaker has aligned the provisions of the LRA and the BCEA so that they work together. Section 1 of the BCEA defines an “employee” and a “temporary employment service” in the same terms as the LRA. Section 82(1) of the BCEA is identical to section 198(2) of the LRA. The two statutes are therefore perfectly aligned to reflect that the TES is “employer” of its employees placed with the client. The dual employment interpretation is consistent with this alignment.

When the deeming provision is triggered, the TES remains the employer under both the BCEA and the LRA, except for the limited purpose of section 198A(3)(b) of the LRA, where the client is also deemed to be the employer of the employee.

[107] The sole employer interpretation disturbs this alignment. Once the deeming provision is triggered, the client is the only employer for purposes of the LRA while the TES remains the employer for purposes of the BCEA. The sole employer interpretation thus offends the principle that where statutes cover the same terrain, they should, unless the difference is clear and unambiguous, be construed in a manner that is consistent. The Labour Appeal Court has endorsed this principle. It has also applied the rule specifically to interpret the BCEA and the LRA harmoniously.

Constitutional implications

[108] Having analysed the purpose, language and context of the deeming provision, and having also considered its alignment with the relevant sections in the BCEA, there is no room for any ambiguity – the dual employer interpretation is the only interpretation that can reasonably be ascribed to it.

But to the extent that the section is arguably reasonably open to the alternative sole employer interpretation, this is also inconsistent with the Constitution.

It forces the employees into a new relationship without their consent and on terms of employment to which they have not agreed. This brings the deeming provision into conflict with the employees’ rights to fair labour practices in section 23(1) and to choose their trade, occupation or profession freely in section 22 of the Constitution.

And, as this Court has made clear, where a statute is capable of being reasonably read in a manner that is consistent or not in conflict with the Constitution, that is the interpretation that must be given. The sole employer interpretation therefore falls to be rejected for this reason as well.

Conclusion

[109] For all these reasons I conclude that the dual employer interpretation is the correct one. The deeming provision creates a statutory employment relationship between the employee and the client. But it does so in addition to the existing employment relationship between the employee and the TES and not in substitution thereof. I would accordingly uphold the appeal.