Understanding deeming and clarifying its impact on employers and employees

It's crucial to recognise that a fixed-term contract can exceed the three-month mark if a valid reason exists for its duration.

It's crucial to recognise that a fixed-term contract can exceed the three-month mark if a valid reason exists for its duration.

Published Jan 3, 2024


By Natashia Barnabas

When it comes to labour laws and regulations, a critical component often under scrutiny is deeming provision, and its implications on both employers and employees.

The Assign Services case stands as a Constitutional milestone, casting a clarifying light on this provision entrenched in the Labour Relations Act.

At its core, the deeming provision asserts that after three months of service, a temporary employee placed by a Temporary Employment Services (TES) company is to be deemed indefinitely employed by the client company, even though still technically employed by the TES.

Deciphering the Deeming Provision

To fully grasp this concept, it is important to probe the dynamics at play.

The deeming provision arises from the recognition that the TES provider’s client is responsible for providing directives and tools of the trade to the employee, thereby dictating the employment relationship.

The TES provider, on the other hand, serves as a facilitator in this equation. The necessity for a justifiable reason for fixed-term contracts becomes apparent, often tied to the client's project-based, specific requirements. A proficient TES provider would then structure the contract of employment based on the client’s operational requirements and in alignment with the applicable legislation (for example, the Labour Relations Act No. 66 of 1995 (LRA), Basic Conditions of Employment Act No.75 of 1997 (BCEA), Employment Equity Act No. 55 of 1998 (EEA) just to name a few) and to pre-emptively mitigate any resultant risks.

It's crucial to recognise that a fixed-term contract can exceed the three-month mark if a valid reason exists for its duration.

However, it is imperative that employees considered to be under the client’s instruction receive equitable treatment in comparison to their permanent counterparts undertaking similar roles. This equitable treatment spans salary, benefits, and other terms of employment. The obligation falls squarely on the TES provider’s client to justify any disparity in treatment, highlighting the principle of fairness that underpins the provision.

In this situation, the role of a TES provider emerges as pivotal. Their expertise not only guides the justification process for fixed-term contracts but also ensures that the designated employees don’t find themselves in a position of unfairness. A well-informed and capable TES provider will craft contracts that withstand scrutiny and protect employees’ rights while meeting the client’s project-specific needs.

It’s worth noting that the deeming provision extends its reach selectively, applying only to employees earning below a defined threshold set by the Minister of Employment and Labour, linked to the National Minimum Wage. This amount is determined according to the National Minimum Wage Act No.9 of 2019 (NMWA), on an annual basis and published in the Government Gazette. For 2023, this amount is R25.42 per hour which equates to R20 093.00 per month and R241 110,59 per year. Employees earning below this threshold enjoy full benefits under the LRA, BCEA and the EEA.

Equitable Treatment

To unpack this concept, we must first refer to the following provision:

Section 198A(3)(b) states: “an employee not performing such temporary service for the client is:

(i) Deemed to be the employee of that client and the client is deemed to be the employer; and

(ii) Subject to the provisions of section 198B, employed on an indefinite basis by the client.”

There is often confusion surrounding the interpretation of a certain clause, which is outlined in Section 198A (5) of the LRA, an employee who is designated as the client's employee under subsection (3)(b) must be treated with the same level of favourability as an employee of the client who carries out identical or similar work, unless there is a legitimate reason for any discrepancies in treatment. However, it should be noted that there are some exceptions to this clause. For instance, if you were to compare a permanent employee with a fixed-term employee who has a shorter period of service, their pay rates and benefits may differ according to their respective years of service.

Deeming provision: fixed term vs. permanent employment

A pertinent distinction resides in the differentiation between "indefinitely employed" and "permanently employed." Indefinitely employed does not directly equate to permanent status. It highlights a scenario where an employee operates on a fixed-term contract, yet the contract's termination date remains unknown. Think of it as employment hinged on the completion of a project, a state of indefinite employment until the project's conclusion. There are many factors that can affect the duration of a project such as load shedding, weather, season, availability of materials, strikes, economic conditions etc.

The deeming provision is of utmost significance in the endeavour to prevent employee exploitation and safeguard the well-being of those individuals who are either assigned to a client for longer than 3 months, or perhaps transitioning from temporary employment agencies to client companies. The deeming provision is specifically designed to tackle the potential threat of maltreatment, and thereby foster a culture of fairness and equity.

Beyond Deeming

It's understandable to have concerns about the outcome of an employee’s position if the client-TES contract were to terminate. However, in the Constitutional decision as per the case of:

Assign Services (Pty) Limited v National Union of Metalworkers of South Africa and Others (CCT194/17) [2018] ZACC 22; [2018] 9 BLLR 837 (CC); (2018) 39 ILJ 1911 (CC); 2018 (5) SA 323 (CC); 2018 (11) BCLR 1309 (CC) (26 July 2018) (“Assign Services case"), the judgment provides clarity that the triangular relationship remains intact. Specifically, paragraph 109 of the judgment confirms that although the deeming provision establishes a legal employment relationship between the client and employee, it does not supersede the pre-existing employment relationship between the employee and the TES provider.

When it comes to the complex arena of labour laws, contractual obligations, and worker rights, it can often be difficult to navigate with confidence and certainty. However, the Assign Services case has shed significant light on the importance of the deeming provision, which has become a crucial aspect of ensuring fair and just contracts for both employers and employees. As such, it is imperative that those seeking to build strong and harmonious employment relationships work with a reputable and experienced TES provider, who can offer the expertise and guidance necessary to protect the rights and interests of all parties involved.

The deeming provision is a significant milestone in the evolution of labour regulations, which aims to promote fairness and ethical practices in the employment sector. Its multifaceted implementation underscores the need for continuous education and awareness among employers, employees, and TES providers. This provision ensures that workers in the gig economy are treated fairly and have access to basic employment benefits, such as minimum wage, overtime pay, and worker's compensation, just to name a few. Therefore, it is crucial that all parties involved understand the implications of this provision and work together to ensure compliance and promote a just and sustainable work environment.

Natashia Barnabas, Labour Relations and Commercial Manager at Workforce Staffing.