New employment legislation for temporary staff poses liability issues

Simon Colman, Underwriting Executive at SHA Specialist Underwriters.

The implementation of changes to Section 198 of the Labour Relations Act - which stipulates that from 1 April 2015 employers are required by law to appoint temporary workers as permanent employees, following a three month continuous working period - could place South African employers at risk of Commission for Conciliation Mediation and Arbitration (CCMA) awards of up to 12 month’s salary for unfairly dismissed temporary employees.

This is according to Simon Colman, Underwriting Executive at SHA Specialist Underwriters, who says that employers and labour brokers who employ casual workers are now facing an increased risk of unfair dismissal cases lodged against them, should they not abide by the new regulation. “Employers of casual staff need to ensure that they abide by the rules in order to not be held liable for unfair dismissals of temporary workers.”

He explains that according to the new legislation once the three month employment period has lapsed, the temporary worker becomes entitled to the same benefits as any of the permanent staff members at the company, which includes medical and retirement benefits. “The only exceptions lie within a few categories of employment where a particular project is set for a specific duration, or in the case where foreign employees with work permits are employed temporarily.”

Should an employer be unaware of the changes to legislation and they decide to terminate a temporary worker’s contract after four months, they are required to follow the same dismissal procedure they use for permanent staff, says Colman. “Failure to do so could result in a worker rightfully lodging an unfair dismissal dispute with the CCMA. Should the employer be found guilty of unfair dismissal activities, the award could amount to as much as a 12 month’s salary for the unfairly dismissed worker.”

In light of these legislative changes, it is vital that these employers educate themselves about the new rules and also consider labour dispute insurance, as part of an employment practices liability policy, to ensure that they are not overwhelmed with unfair labour practice disputes, which could in turn lead to great financial losses, says Colman.

He also notes that this legislation affects labour brokers as they are the ones largely responsible for placing employees in temporary positions. “The new labour amendments could easily result in an increase of cases lodged with the CCMA as confusion generally exists as to who the ultimate employer of these workers is.”

Since the effect of the new laws as of 1 April, clients of labour brokers could find themselves considered as joint employers after the first three month employment period has passed, says Colman. “The new labour law amendments seek to restrict the use of temporary employees in positions that require permanent employment. This in turn means that labour brokers may find it more difficult to conduct their business in the same way they did before 1 April.”

He also states that many employers in the past used labour brokers due to their unwillingness to employ workers permanently, although this type of activity has reduced in more recent years. “Labour brokers are advised to speak to their insurance providers to ensure that their employment practices liability policies are extended to protect their clients who could now be the joint employers of these casual workers. Above all, labour brokers should consult with their legal representatives to ensure they comply with the changes.

When employers decide to dismiss or not renew a temporary worker’s contract, they should first determine whether the position is required to be filled permanently, he says. “Should this be the case, employers would be well advised to move the casual worker into permanent employment. If this is not possible, the employer will sit with the responsibility to constantly fill the temporary position with different employees to avoid exceeding the three month threshold and finding suitable employees for specific positions can prove to be very challenging and time-consuming.”

While employers and labour brokers alike need to revisit their employment and human resources models to ensure that they abide by new legislation, it is equally important for these business owners who employ temporary workers to ensure that they are fully covered in the event of any labour dispute cases that could lead to financial repercussions, concludes Colman.