August 2021

Many employers are all too aware of the potential pitfalls associated with engaging deemed employees, i.e., employees who earn less than the annual earnings threshold set by the Minister of Employment and Labour from time to time, which is currently R211,596.30 and who, in terms of section 198A(3)(b) of the Labour Relations Act, 1995 (LRA), are deemed to be employees of the client for purposes of the LRA, and not employees of the temporary employment service (TES).

One of these potential pitfalls was the focus of a recent CCMA award in SA Commercial Catering & Allied Workers Union obo Noda and Sovereign Foods & Another (2021) 42 ILJ 929 (CCMA). Sovereign Foods (SF) made use of the services of a TES. The TES placed the employee in question at SF’s workplace. After a few years the employee was disciplined for misconduct and dismissed. The employee referred a dispute to the CCMA challenging the substantive fairness of his dismissal. It was common cause in the arbitration proceedings that the employee was deemed to be an employee of SF for purposes of the LRA. One of the grounds on which the employee challenged the fairness of his dismissal was that he had been disciplined and dismissed by the TES, arguing that the TES was not his employer and as a result, had no authority to discipline and dismiss him. The TES had issued the employee with notice to attend a disciplinary enquiry and notice of his dismissal. The TES and SF argued that the TES was providing these services in terms of its service level agreement with SF and that it was permitted to take this action given the triangular relationship between the parties – the TES, SF and the employee.

The commissioner considered the decision of the Constitutional Court in Assign Services (Pty) Limited v National Union of Metalworkers of South Africa & Others 2018 (6) SA 232 (CC) and its interpretation of section 198A(3)(b). In particular, he referred to and relied on the Constitutional Court’s finding that when the deeming provision applies, the client becomes the sole employer of the employee for purposes of the LRA. The commissioner found that given the finding in Assign Services and the fact that SF was the sole employer, the TES had no authority to discipline and dismiss the employee. The commissioner did not accept the TES and SF’s evidence that the disciplinary enquiry was conducted by the TES, which made recommendations to SF and based on those recommendations, SF instructed the TES to proceed with the sanction of dismissal. The commissioner was not convinced by this, finding that the TES and SF had not placed any evidence before him that showed that the TES made a recommendation to SF as to the outcome and sanction and that SF endorsed the recommendation.

The commissioner found that the notice served on the employee to attend the disciplinary enquiry was on the letterhead of the TES, the witness statements indicated that the TES was in control of the disciplinary enquiry and the outcome of the disciplinary enquiry was also issued on the letterhead of the TES. The commissioner reasoned that all of this was an indication that the TES initiated and concluded the disciplinary process, without SF having any say in the matter. The commissioner concluded that once the deeming provision is triggered, the TES is no longer an employer of the placed employee and the client as the sole employer, is the party who has the authority to discipline and dismiss the employee. In the circumstances, the commissioner found the employee’s dismissal substantively unfair and order that he be reinstated with nine months’ backpay.

This award is an important reminder to clients who engage the services of deemed employees that if a TES is in any way involved in the disciplining of deemed employees that the client must ensure that any steps taken by the TES are at the instance and on behalf of the client, and that it is the client who must make the decision to discipline and ultimately, approve or endorse the sanction.

K. Cowley
(Chairperson – (CEA – TESD)