CHEP South Africa (Pty) Ltd v Shardlow NO and Others [2019] 5 BLLR 450 (LC)

The amendments to Section 198 and the introduction of Sections 198A-C of the Labour Relations Act (LRA), effective from 01 January 2015, significantly impacted the employment landscape, particularly in the context of temporary employment services (TES), also known as labour brokers. A key element of these amendments is the deeming provision outlined in Section 198A(3)(b)(i). This provision states that an employee engaged by a TES to render services to a client (excluding temporary services) is considered an employee of that client after three months. Consequently, the client is deemed to be the employer of such an employee for purposes of the LRA.

Case Study: CHEP South Africa (Pty) Ltd v Shardlow NO and Others [2019] 5 BLLR 450 (LC)

In this case, 201 workers employed by Contracta-Force Corporate Solutions (Pty) Ltd (C-Force) were engaged in repairing wooden pallets on behalf of CHEP South Africa (Pty) Ltd (CHEP). The workers argued that C-Force was a TES and sought to enforce their rights under Section 198A(3)(b) and (5) of the LRA to be deemed employees of CHEP and to be treated no less favorably than CHEP’s other employees performing similar work.

The core legal question was whether C-Force met the definition of a TES under the LRA. The workers claimed that C-Force was a TES, while CHEP contended that C-Force was an independent contractor providing services to CHEP under a service level agreement. For the workers to benefit from the deeming provisions and the associated rights, it was crucial to establish that C-Force was indeed a TES.

The CCMA commissioner initially ruled in favor of the workers, declaring C-Force a TES and thereby deeming the workers as employees of CHEP. However, CHEP sought to review this decision. The Labour Court (LC) clarified that the review test was whether the CCMA’s ruling was correct, though it could also be challenged on grounds of unreasonableness. The key issue was the interpretation of the definition of a TES in Section 198(1) of the LRA.

Understanding the TES Definition

Section 198(1) defines a TES as a person who, for reward, procures or provides workers to a client and remunerates them. Section 198A elaborates that a person assigned by a TES to a client for more than three months, and who earns below a certain threshold, is deemed to be the client’s employee for LRA purposes. However, there are exceptions to this deeming provision: if the assignee is a substitute for an employee temporarily absent from work, or if the work is permitted by a collective agreement, sectoral determination, or Ministerial notice under Section 198A.

An independent contractor is not considered an employee of a TES. The commissioner had to determine whether C-Force provided workers to CHEP, whether these workers performed work for CHEP, whether they were remunerated by C-Force, and whether C-Force provided these workers to CHEP for reward—a fee payable for their work.

Labour Court’s Interpretation

The LC emphasized that the focus was not on whether a worker is an employee of the TES, but on the relationship between the workers and the client (CHEP). If workers are integrated into the client’s business to further the client’s interests, and the TES merely delivers these employees as a third party, then the arrangement might qualify as a TES. However, if the service provider is not delivering employees for reward but is conducting its own business for profit, it does not meet the TES definition.

In this case, the LC found that C-Force was providing CHEP with a product (repaired wooden pallets) rather than supplying employees. C-Force was paid for the product, not for providing workers, and thus was not a TES under Section 198(1) of the LRA. Furthermore, there was no indication that the arrangement was a ploy to evade the provisions of Section 198A. The LC concluded that the CCMA’s ruling involved a legal error, rendering it reviewable.

As a result, C-Force was declared not to be a TES, and its employees were not deemed to be employed by CHEP.

Labour Court Documents: https://www.saflii.org/za/cases/ZALCJHB/2019/350.pdf

Original Article Available at: https://www.workinfo.com/index.php/articles/item/2058-is-there-a-difference-between-a-temporary-employment-service-tes-and-a-service-provider-for-purposes-of-section-198