“The proposed amendments to the Labour Relations Act could over time have the effect of indirectly banning the practice of labour broking for many in the industry,” says Vatalidis.

“That effect would almost certainly be reinforced by the proposed changes to the Basic Conditions of Employment Act, which will further criminalise  certain forms of contraventions.”

Cabinet approved amendments to both acts on 20 March 2012 after heated public debate over the controversial issue of labour broking.

“Although labour broking is not the only matter dealt with in the amendments, it has become the focal point of the debate on labour law change,” says Vatalidis.

This focus is likely to sharpen in the coming months as Parliament’s Portfolio Committee on Labour prepares to hold public  meeting on the amendments to the Bills.

Vatalidis says the amendments do not ban labour brokers but appear to have resolved the long-running controversy over them.

“The stringent regulations, although welcomed by some players, give brokers and their clients little leeway and this could make the practice less attractive."

“If a labour broker assigns an employee earning below the threshold prescribed in the BCEA to a client for more than six months, that employee could be deemed to be the employee of the client,” says Vatalidis.

“In that case, the person must be employed on terms no less favourable than the terms applying to the client’s other employees doing the same or similar work, unless there is a justifiable reason for the differentiation,” she says.

The only exception to the six-month rule would be when employees are  employed to do work that falls under the category of  “temporary services”.

“The draft bill contemplates that the Minister will categorise certain types of work as temporary services,” says Vatalidis. “Once specific work has been categorised as a temporary service, the employees engaged by a labour broker to perform that work will not be deemed to be the employees of the client merely by virtue of them having been assigned to that client for more than six months."

However, she says it is not yet clear what work will be regarded as temporary versus “indefinite” work.

“Although the Minister of Labour intends to invite representations from the public on the categorisation of temporary services, the lack of clarity on this  critical issue could make many a labour broker anxious.”

More cause for anxiety among brokers and their clients alike are other proposed changes affecting employees on fixed-term contracts, such as severance pay.

“When terminating the fixed-term contract of a person employed for 24 months or longer, an employer will be obliged to pay at least one week’s remuneration for each completed year of service,” says Vatalidis.

“Importantly, the payment of a severance package will not protect the employer  (whether it be the labour broker or the client)  from a claim of unfair dismissal should the fixed-term employee hold the view that he or she had a legitimate expectation of continued employment.”

Taken together, the proposed changes to the Labour Relations Act and the Basic Conditions of Employment Act will make labour broking  a highly regulated industry. “If passed into law, the amendments may  over time negate the use of labour brokers who provide employment for over one million people within the work force.”

Anastasia Vatalidis - Werksmans Attorneys Head of Employment Law