Is this the end of labour brokers as we know them?

The labour broker industry will probably downscale and adjust its business model after the Constitutional Court on Thursday ruled that employers will have to insource employees that used labour brokers after three months.

That is what Jose Jorge‚ director of employment at law firm Cliffie Dekker Hofmeyr‚ said on Thursday after the landmark ruling.

“It’s going to downscale massively. They will find something. They just need the dust to settle‚” he said.

Before the court ruling‚ employees could work for an employer but remained the responsibility of a labour broker‚ formally known as Temporary Employment Services (TES). But after the Constitutional Court ruling on Thursday morning‚ employers now have to insource an employee and make them permanent if they have been employed for longer than three months – despite them being initially employed through a labour broker.

Jorge said that labour brokers would possibly diversify and become recruitment companies for larger employers.

“You [a labour broker] have the expertise. You would know the sector. You would know where to find labour for the sector and you can effectively recruit‚ so that after the three months you get a recruitment fee or something‚” Jorge explained.

“Technically you [employers] could still manage the relationship through the TES if you wanted to‚ but there’s really no incentive to do that.”

Recent amendments to the Labour Relations Act (LRA) dictate that clients of labour brokers have to hire contractors after three months who earn less than R205‚433 annually. 

TES companies have complained that the ruling would have adverse effects on their profitability and potentially destabilise the labour market.

The Constitutional Court upheld a 2017 ruling by the Labour Appeal Court that found in favour of trade union the National Union of Metalworkers of South Africa (Numsa)‚ which represented workers in the employ of Assign Services.

Numsa general secretary Irvin Jim said: “Labour brokers can no longer abuse these contracts and extend them beyond the three-month stipulation given in the Labour Relations Act.”

He called it a “major victory” for casual and temporary workers.

“We view this as the first step in ending the Labour brokering system in South Africa. Our experience with labour brokers is that they are extremely abusive and expose workers to low wages and terrible working conditions.”

Trade union‚ the South African Federation of Trade Unions (SAFTU)‚ celebrated what they called a “historic” and “ground-breaking” judgment.

“The court has dealt a deadly blow against labour brokers and is the biggest victory for workers in recent times.”

SAFTU alleged that employers use labour brokers as a buffer to avoid complying with the laws that protect workers’ rights and minimum conditions of employment.

“It has led to a form of human trafficking under which labour brokers hire out workers to their client companies‚ with no job security‚ lower wages and worse conditions.”