DISTINGUISHING BETWEEN A LABOUR BROKER AND CONTRACTED SERVICE PROVIDER

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  • #11847
    Ivan Israelstam
    Keymaster

    DISTINGUISHING BETWEEN A LABOUR BROKER AND CONTRACTED SERVICE PROVIDER
    In the September 2020 case of David Victor and 200 others VS Chep SA (Pty) Ltd the Labour Appeal Court approved seven important factors that rendered a firm a labour broker (TES) instead of a contracted service provider. That is, a logistics company called Chep used a provider called C-Force to refurbish its pallets. 201 C-Force employees claimed that the section 198B deeming provision rendered Chep their employer because C-Force was a labour broker. C-Force and Chep claimed that C-force was merely a service provider and not a labour broker. The factors that led the Court to decide in the employees’ favour are:
    • The requisite materials for the work were supplied and maintained by Chep
    • Pallet conditioning forms an integral part of Chep’s business
    • C-Force does not enjoy a discretion as to how the work is done
    • The service level agreement describes the way in which specified results are to be attained during the hours prescribed by Chep and in accordance with Chep’s instructions
    • Chep exercises overall control over the workers’ activities, sets production targets and provides detailed rules of conduct
    • Chep has the right to require the immediate cessation of an employee’s services
    • Chep has the right to instigate disciplinary proceedings.
    These factors convinced the Court that C-force was effectively providing workers to Chep (rather than providing a pallet refurbishing service) in line with the definition of a labour broker in section 198(1) of the LRA. The Court did not find significant the facts that C-Force provided the refurbishment equipment and that its managers were the ones managing the refurbishment work. Did the LAC get this right?

    #11854
    Michael Bagraim
    Keymaster

    LABOUR BROKER OR CONTRACTOR

    It is understood and seems to be the norm that all the Judges tend to lean to define the relationship as one of a labour broker as opposed to external service provider.

    Many employers and their clients obviously want the service to be deemed to be an external contractor so that they are not obliged to actually put the people on their list as employees with all the attendant issues arising therefrom.

    Often employers slip up when they use the numbers for employment equity to show how many previously disadvantage employees they employ and by counting in those from contracted service providers.

    If in fact the contract service provider offers a full turn key operation such as catering or transport then they are truly contracted service providers.

    Michael Bagraim

    #11858
    Patrick Deale
    Keymaster

    Yes –the LAC got it right.

    It’s evident that the court applied the “dominant impression test” to decide the case. This test seeks to determine who controls the working relationship between the parties.

    An independent contractor controls the manner in which a service is provided to a client. An employer controls what work must be done and the manner in which it must be done.

    There are different reasons why parties may prefer an independent contractor relationship: a business to minimise the labour law obligations of an employment relationship – and an employee (usually skilled) to minimise the tax obligations in an employment relationship.

    The labour court formulated a number of features of a working relationship to assess whether a party is an employee or an independent contractor. The features indicate who has the most control the working relationship.

    The features were later codified as 7 indicators and added to the LRA in a new section 200A. An employment relationship will be proved if any one or more of these indicators is shown to exist on the facts of a particular working relationship.

    The factors which the LAC considered in the Chep case closely resemble the indicators in section 200A. The dominant impression test revealed that Chep in fact controls the manner in which the work is done. C-Force’s attempt to reinvent itself as an independent service provider instead of a hirer of labour was shown
    to be a sham.

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