Tough for labour brokers at arbitration

Ivan Israelstam

Employment agencies and labour brokers are referred to in the LRA as “temporary employment services” (TES). Many of these employers have not fully realised that the labour laws applying to other employers apply also to them. Such legislation provides as follows:

  • Strict procedures for firing and retrenching employees.
  • Many employers are required by law to register with industry specific bargaining councils which then dictate the terms and conditions of employment in the sector
  • There is no legally quick and easy way of dealing with strikes
  • Trade unions can force employers to allow them access to the workplace
  • Deduction from employees’ remuneration of money owed to the employer is very difficult to achieve due to the legislation protecting employees and their pay
  • All employees are entitled to paid annual leave, sick leave and family responsibility leave
  • It is compulsory to pay minimum wages, limit hours of work and pay a premium for overtime work
  • Affirmative action is compulsory for a great many employers

In addition to having to comply with this legislation the cost of fighting CCMA and bargaining council disputes can be very heavy.

The TES provides to the client company staff to do the work that company employees would normally do. The TES thus frees the client from many labour law responsibilities in return for a fee. While employment agencies and labour brokers can make profits from this business they often pay a very high price for taking over the labour law risks involved. This is because:

  • Becoming an employer in South Africa is fraught with legal dangers whether you are a TES or not;
  • Agencies and brokers are often at the mercy of their business clients who may mistreat the TES staff and thus incur legal liabilities for the TES;
  • Many employment agencies and brokers neither understand our labour laws pertaining to TESes nor understand how to protect themselves from the legal liabilities imposed on them due to their client’s actions.

Where labour brokers and employment agencies fail to treat their employees strictly according to the law they are likely to lose at the CCMA or bargaining council.

For example, in the case of Smith vs Staffing Logistics (2005, 10 BALR 1078) the client informed the labour broker that it no longer needed the services of the employee. The broker therefore removed the employee from the client’s premises and placed him on indefinite standby without pay. At the bargaining council the employee alleged that this constituted unfair dismissal and the reason for the termination was a disagreement that the employee had with the client. The employer denied this but the arbitrator found that:

  • Even though the employment contract gave the broker the right to terminate the employment at the client’s behest the dismissal was unfair
  • The broker’s claim that the employee’s assignment had been completed was not proven. The employee’s version that the termination was due to his disagreement with the client was more likely
  • The broker could not evade its duty as an employer by projecting the role of employer on to the client
  • Placing an employee on unpaid standby constitutes unfair dismissal
  • The employer had to pay the employee 14 months’ remuneration in compensation.

These principles have been confirmed in the cases of NUMSA obo Daki vs Colven Associates Border cc (2006, 9 BALR 877) and NUMSA obo Mahlangu and others vs Abancedisi Labour Services cc and another (2006, 1 BALR 29).

Labour brokers and employment agencies can avoid these legal traps by using labour law experts to:

  • draw up legally compliant TES contracts with clients and workers
  • develop policies and procedures in line with labour law provisions and the employer’s operational requirements
  • train managers to implement these policies and procedures properly
  • ensure that their employees are hired, disciplined and/or dismissed via fair, legally sound and effective strategies and procedures.

Ivan Israelstam is the Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 082 852 2973 or via e-mail address: [email protected]. Website address:


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