Outsourcing – balancing efficiency and protection Paul Benjamin 14 August 2010

The political context “In order to avoid exploitation of workers and ensure decent work for all workers as well as to protect the employment relationship, introduce laws to regulate contract work, subcontracting and out-sourcing, address the problem of labour broking and prohibit certain abusive practices.” –ANC 2009 Election Manifesto

Rise of “non-standard” work Features of standard work: a single-employer, single-job site, with full-time, long-term jobs earning wage plus benefits (to what extent was that true of SA?) “Fordist” enterprises: production and distribution processes under direct control and lined by employment nexus; “post-Fordist” trend to decentralize and contract out “non-core” production: productive decentralization or vertical disintegration Production (supply) and distribution linked by “non-employment “ networks and chains Casualisation – replacing standard with non-standard workers resulting in greater insecurity To what extent do non-standard jobs reflect new or displaced work?

Forms of non-standard employment Work which may involve more than one “employing party” –Agency work (labour broking) –Outsourced work –Subcontracted work These forms of work may be difficult to distinguish Part-time work Fixed-term contracts/ temporary workers Sectoral variation in patterns of non-standard employment

Factors contributing to (in) security labour market security (opportunities for employment); employment security (protection against arbitrary loss of employment); job security (protection against arbitrary loss of or alteration to the job); work security (health and safety in the workplace)l representation security (representation in the workplace); income security Insecurity may flow from lack of rights/ lack of enforcement

Debating issues Non-standard employment is not exclusively a new phenomenon but it has become increasingly common (no longer “atypical”) It is a result of firms restructuring in response to changes in local and international economy/ cost-saving strategies/ risk- shifting strategies. Labour law should permit non-standard work where it is economically efficient while ensuring it is not used as a device to deprive employees of basic labour protections What is impact on trade union organisation/ collective bargaining and how should organisations respond? Our labour legislation premised on standard employment model – to what extent does it need to be tailored Regulation must address the impact of non-standard work on employee security rather than the form of the relationship

Labour broker/ temporary employment service In aftermath of LRA widespread use of fraudulent “independent” contracting for labour law avoidance judicial and legislative response: courts begin to scrutinise employment relationship and presumption of employment for low- paid workers introduced Consequence: massive increase in number of TESs and use of placements for indefinite (permanent) employment DOL research (2004) identifies externalisation (in particular use of TESs) as major driver of informalisation (rather than casualisation) Placed employees –Have no effective security of employment; –paid less than direct employees (excluded from discrimination/ collective bargaining) LRA created the motive and the opportunity for avoidance

Employment hire in Namibia 2004 Act – modify SA model –full joint and several liability (including dismissal) – agent and client can both be sued directly 2007 Labour hire banned 2009 Supreme Court rules unconstitutional 2010 Cabinet resolution –Parity with direct employees –Must have written contracts –No use in strikes

Outsourcing No precise definition; term is used inconsistently. Contracting out of a business function to an external provider. (Based on a contractual agreement involving an exchange of services and payments). Outsourcing to suppliers outside the nation is sometimes referred to as offshoring Almost any conceivable business practice can be outsourced. When does outsourcing have employment consequences/ disguise employment?

Sub-contracting The delegation to a third party of some, or all, of the work that one has contracted to do. Subcontracting usually occurs where the contracted work (for example, the construction of a building) requires a variety of skills. Responsibility for the fulfilment of the original contract remains with the original contracting party. The term subcontracting is sometimes used to describe outsourcing arrangements. When does subcontracting give rise to abuse?

Outsourcing as a transfer If “outsourcing” involves transfer of business, service (or part) as a going concern –employer can transfer employees without consent on existing t’s and c’s –employee who refuses transfer loses severance benefits Labour Appeal Court has extended to “second generation” transfers Test: is an identifiable entity being transferred Prevents point of outsourcing being a mechanism to reduces of employment; prevents competition thru reducing wages etc. Facilitates business restructuring by removing requirement for consent

Who is the employer? Three “primary criteria” for identifying employee: –employer’s right of supervision and control; –whether employee integral part of employer’s organization with the employer; –extent of employee’s economically dependence on employer. The presence of one of these factors sufficient Employee may rely on other factors associated with the “dominant impression” test Is this useful in “multi-employer” situations? When should more than one party be held liable for employer duties? State Information Technology Agency (Pty) Ltd v Commission for Conciliation Mediation & Arbitration & others (2008) 29 ILJ 2234 (LAC); Pam Golding Properties v Erasmus & others (2010) 31 ILJ 1460 (LC).

Preventing less favourable treatment International trend for parity principles to apply to principle categories of non-standard employees (part-time, fixed-term contract, “temporary”, agency employees;) Prevention of less favourable treatment not limited to wages – includes access to training, permanent positions (seeks to prevent “ghetto” effect) Which incidents of employment should be covered? Allows for flexibility/ savings associated with different form of non- standard employment but seeks to prevent use to drive down conditions of employment

Fixed term contracts Can be used to avoid security of employment –Protection procedural rather than substantive Regulatory approaches – –Objective justification (work must be time-bound, project work etc.) –Limitation: (e.g. one year contract not renewable) –Confined to special categories (young, unemployed, new businesses etc.) (e.g. section 18(2) learnerships) –Parity/ prevention of less favourable treatment – how to apply?

Conclusion Double movement: the emergence of new forms of work and production (economic) gives rise to need for new forms of regulation and organisation (social).