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Where to for labour brokers - third option for constitutional court by “deeming” section 198A(3) unconstitutional

By Rod Harper, Head; Tanya Mulligan, Senior Associate and James Horn, Employment Law, Benefits & Industrial Relations, Cowan-Harper Attorney 

 

Introduction

The purpose of this article is to discuss whether section 198A(3) of the Labour Relations Act 66 of 1995, as amended (“the LRA”), which deals with the controversial “deeming” provision in relation to the Clients of Labour Brokers, should be referred back to Parliament. The fundamental question is whether the Constitutional Court is being asked to intervene to an extent which is unreasonable in light of the poor quality of the drafting of section 198A(3) of the LRA and whether it would be better to simply remit the section back to Parliament for re-drafting.

 

Judicial Uncertainty

In the recent matter of Numsa v Assign Services (Pty) Ltd and Krost Shelving and Racking (Pty) Ltd[1] the Labour Appeal Court, in interpreting section 198A(3) of the LRA, denounced the dual or parallel employer interpretation in favour of a sole employer interpretation. The matter has been taken on appeal to the Constitutional Court and we understand that it will be heard in early 2018. The Judgment of the Constitutional Court will directly impact upon the TES industry and their respective Clients who may number in the thousands.

 

The effect of the LAC’s Judgment is that TES employees automatically ‘become’ the sole employees of the Client after being placed at a Client for a period in excess of three months (subject to certain exceptions). If the LAC’s Judgment is correct, the TES then falls out of the picture altogether.

 

Worryingly, the CCMA has also issued a directive obliging Commissioners to follow the LAC’s decision despite the pending appeal to the Constitutional Court. If the LAC’s decision is ultimately set aside by the Constitutional Court, the Labour Court will no doubt be inundated with review applications on this issue, not to mention the legal and other costs that will be incurred by employers should this transpire.

 

Inherent Ambiguity

At the heart of the issue regarding the correct interpretation of section 198A(3) of the LRA is the ambiguous and arbitrary manner in which section 198A as a whole was drafted. Based on the inelegant wording of the section, persuasive arguments can be made for either a sole employer or a dual employer construction. This could have been avoided had the drafters simply stated that TES employees would “become” the employees of the Client after a period of three months. Instead the drafters of the amendment stated that the Client is “deemed” to be employer for the “purposes of the LRA”. The LRA is also silent on the continued role of the TES, if any.

 

The use of the word deeming when drafting statutes often invites confusion because the word can have different meanings and on occasion, with respect, it indicates that the drafters have not given sufficient attention to the intention underlying the provision. In this regard, in commenting on the argument before the Labour Court on this issue, the writer Grogan stated as follows:-

 

“Both parties focused on the meaning of the word ‘deemed’, and both agreed that it has a meaning that isn’t easy to pin down. Both, naturally, sought to stretch that elastic word in their own favour. In its dictionary meaning, the verb ‘to deem’ means to ‘judge or account to be’, or to ‘regard as’. As an adjective, ‘deemed’ means ‘judgment, opinion or surmise’. To say that X is deemed to be Y is therefore something different from saying X is Y.[2]

 

The vagueness of the section therefore places the Constitutional Court in the unenviable position where it is essentially left to guess the intention of the legislature, especially in the context where the consequences are potentially highly prejudicial for the TES industry.

 

Violation of the Rule of Law

It goes without saying that it is a fundamental aspect of the Rule of Law that statutes should be written in a clear and accessible manner in order to create legal certainty and transparency. The Constitutional Court has previously held that “… the legislature is under a duty to pass legislation that is reasonably clear and precise, enabling citizens and officials to understand what is expected of them”.[3]

 

In the international context, more certainty with regard to TES’ has been created through the Employment Agencies Convention which provides that all members to the Convention are required to allocate the respective responsibilities of both the TES and the Client. The Convention has not been ratified in South Africa and in any event section 198A(3) does not delineate the respective responsibilities contemplated by the Convention.

 

The explanatory memorandum that accompanied section 198A is also of little assistance in resolving the issue as it does not specifically address these issues other than stating that the Client should be “treated as” the employer.

 

The drafting of 198A(3) has therefore created deep seated uncertainty regarding who the employer is and what the obligations of the parties are following the expiry of the three month period. Given that ambiguity, any interpretation will necessarily involve a ‘reading in’ of provisions in order to render the provision intelligible.

 

As previously pointed out by the Constitutional Court: “[f]or [the Court] to attempt that textual surgery would entail it departing fundamentally from its assigned role under our Constitution.  It is trite but true that our role is to review, rather than to re-draft, legislation”. [4]

 

Recommendation

Given the circumstances, it may be preferable for the Constitutional Court to simply refer section 198A(3) back to the legislature for re-drafting so that clarity can be provided by the legislature. In the absence of doing so, it appears that the Court will be left to essentially create a body of substantive law dealing with TES’. This is far from ideal and may have a range of unintended consequences including significant job losses.

 

Given the fact that proper legal debates have now taken place on this section, Parliament would have more clarity on the implications of the amendment and hence the actual intention could be dealt with more coherently.

 

For more information please contact Rod Harper at This email address is being protected from spambots. You need JavaScript enabled to view it. , or Tanya Mulligan at This email address is being protected from spambots. You need JavaScript enabled to view it. or James Horn at This email address is being protected from spambots. You need JavaScript enabled to view it. or (011) 783 8711 / (011) 048 3000

 

[1] (2017) 38 ILJ 1978 (LAC).

[2] Grogan, J ‘Let the “deemed” be damned – section 198A(3)(b) deconstructed’ (2015) Dec EL 4.

[3] Investigating Directorate: Serious Economic Offences and Others v Hyundai Motor Distributors (Pty) Ltd and Others in re Hyundai Motor Distributors (Pty) Ltd and Others v Smit NO and Others 2001 (1) SA 545.

[4]Case and Another v Minister of Safety and Security and Others, Curtis v Minister of Safety and Security and Others (CCT20/95, CCT21/95) [1996] ZACC 7.

 

 

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