A Constitutional court in South Africa ruled in a landmark case yesterday that labour brokers (formerly known as Temporary Employment Services) can no longer be entitled to a portion of a recruit’s earnings after their third month in employment.

The case saw the National Union of Metal Workers of South Africa (Numsa) challenge Assign Services, a labour broker firm.

The case involved Krost Shelving and Racking, a company offering storage solutions, which was Assign Services' client.

The Independent Online reported that the labour broker supplied the company between 22 and 40 workers at a time. Numsa said Krost became the only employer of the placed workers after three months, thereby challenging Assign Services.

The Constitutional Court ruled that, for the first three months, the labour broker is the employer and after that period the company, where the employee was placed by the labour broker, becomes the “sole employer”.

This means companies are obligated to provide former temporary employees with permanent contracts after the three-month period lapses.

Labour unions celebrated the outcome of the case.

Times Live reported that the labour brokering industry will probably “downscale and adjust its business model” after the ruling.

Labour broker companies have complained that the ruling would have adverse effects on their profitability and potentially destabilise the labour market.

Recent amendments to South Africa’s Labour Relations Act dictate that clients of labour brokers have to hire contractors after three months who earn less than ZAR 205,433 (USD 15,515) annually.

Assign Services offers recruitment, temporary and Contract Employment Workforce Management, Staffing Solutions and other services.