Address by Zwelinzima Vavi, General Secretary of the Congress of South African Trade Unions, to the Confederation of  Associations in the Private Employment Sector (labour brokers), 26 March 2010, Boksburg

Mr President and delegates

Ladies and gentlemen

Thank you very much for inviting me to enter the lions' den to speak to your members, and spark what I hope will be a very lively discussion. It is absolutely right that we should meet and talk directly to each other on this crucial topic of the legislative framework for the private employment sector, rather than just trade polemics through the media.

When we celebrated the first decade of democracy in South Africa we made a telling observation that the main beneficiaries of economic transformation was monopoly white capital, that whilst workers have certainly made important social and political gains, in economic terms they have little to celebrate.

Recently we revisited that conclusion, as we celebrate fifteen years of democracy. In our view very little has changed between 2004 and 2010. Workers are still facing a structural unemployment crisis which continues to discriminate according their race, geography, age and gender. A staggering 5.8 million are unemployed.  Despite progress registered, poverty remains widespread afflicting millions. According to the recent study of the University of Cape Town, 58% of African household live in poverty. We now number one in the world in terms of inequality. The Gini coefficient has worsened from 6.4% to 6.9% in just ten years. Super exploitation and oppression of workers continue.

Capital has succeeded in restructuring the labour market, despite the gallant efforts of both unions and government. We now have a two-layer labour market. In the first coach are workers who have been organised into powerful unions and/or are covered by collective and centralised bargaining arrangements. Relatively these workers enjoy better job security, better pay and better conditions of employment, though many are still low-paid.

On the second coach are the most vulnerable section of workers. Production has been shifted from the big workplaces, through sub contracting and outsourcing arrangements. Included in this category are the farm workers, domestic workers, workers in the taxi industry and those working for labour brokers and merchandisers. Millions are trapped in super-exploitative arrangements. Sometimes it is workers who would have been working in the same workplace but who were retrenched only to return to the same job but now under worse conditions, now employed by a labour broker, subcontracted, or under an outsourcing arrangement.

It is a combination of all these factors that has led to the share of labour in national income to continue declining, whilst the economy enjoyed the longest expansion since the middle of the 1960s. Wages of workers have stagnated.

We yearn for a society where these extraordinary levels of unemployment and poverty will not be tolerated. All of us want poverty to end and yet we know that often the opulence of the few explain the degradation of others. We want to live in a country where inequalities will not be tolerated and yet we know that the extreme wealth of others explain the extreme poverty of others.

It is these contradictions that are a cause of the great division in society. This is called class division. It is a division between the owners of production who want to maximise profits through whatever means possible and those who sell their labour for a living.

COSATU's overriding mandate is to defend and improve the living standards and working conditions of workers and their families. We have achieved many victories since 1994, including the labour legislation, which was negotiated by government, business and labour, and although not perfect, provides the basis for workers to enjoy basic rights - to decent working conditions, a living wage and protection from unfair dismissal and other unfair labour practices.

Laws on paper are good and necessary, but in reality we still have a long way to go to enforce all those laws and transform workers' lives. The biggest problem remains the massive levels of unemployment, poverty and inequality. Unemployment stands at 24.5%, though by the expanded definition that includes workers who have given up looking for work, it is at a staggering 34.4%. Without a job and job security the bargaining power of workers declines.

In addition, even the ranks of the employed contain a large and growing number of the working poor - workers who are denied the protection of labour laws because their job has been casualised. More and more employers are getting round the labour laws by replacing permanent, secure and at least relatively well-paid jobs by temporary, insecure and generally low-paid jobs, where workers' rights are flouted, and the labour laws sidelined. It is leading to a sharp decline in the quality of employment and the super-exploitation of workers.

Labour brokers, in our view, are one of the main driving forces behind this process, which is why our members have given us a clear mandate to campaign for an end to the practice.

That is why we welcomed the ANC 2009 election manifesto, which included a commitment to create "decent work and sustainable livelihoods" as one of the five priorities areas for the next five years, and to this extent explicitly contemplated the need to "address the problem of labour broking".

These policies are based on the concept of ‘decent work', as defined by the International Labour Organisation: "Work which is productive, and carried out in conditions of freedom, equity, security and human dignity". This it believes can be achieved by addressing the following four objectives:

• Achieving fundamental principles and rights at work;
• The creation of greater employment and income opportunities for women and men;
• Extending social protection; and
•  Promoting social dialogue.

Does labour broking promote these ILO standards? Our view is that the replacement of normal jobs through labour broking arrangements, or other equally insecure forms of atypical employment, effectively displaces and destroys decent jobs. It promotes insecure contractual relations and worsens wage and employment terms. It intensifies the rate of exploitation of workers, and is tantamount to the trading of human beings as commodities.

The true suppliers of the labour, the workers, are excluded from this process, which undermines their rights to negotiate their wages and employment terms.

Let me take the opportunity once again to say that what we have a gripe with is the system that undermines the employment relationship that should exist between the suppliers of labour - the workers - and those who receive services or who benefit from labour. The permanent middleman arrangement is what causes a problem of abuse and super exploitation.

We accept that employers often have to employ temporary staff for various reasons that are completely justifiable. We have no problem with any institution placing workers and meeting this demand as long as that relationship is allowed to mature between the worker and the placing institution to a worker with the firm that will benefit from the labour of a worker.

Brokers like to emphasise the benefit of lowering their clients' labour costs. But this reinforces our view that the whole rationale of companies using labour brokers is to cut their wage bill and enable them to evade the payment of benefits.

Labour broking also makes it easier for the true employer not to have to comply with its obligations. Workers often cannot identify who is legally their employer, from whom they can enforce their rights.

Another problem caused by labour broking is the progressive de-skilling of workers, as a result of the short-term and irregular nature of the contracts associated with labour broking and other forms of atypical labour.

Apart from undermining collective bargaining rights, labour brokers are also often called upon to provide ‘scab labour' as substitute workers for those on strike, with the aim of undermining workers' right to embark on industrial action.

We also need to correct the erroneous notion, advanced by CAPES and organised business more broadly, that labour brokers create jobs. On the contrary they merely act as intermediaries to access jobs that already exist, and which in many cases would have existed previously as permanent full time jobs and would continue to exist if the labour brokers were banned.

Workers with labour brokers not only often receive a lower rate of pay with no benefits from, but remuneration in many cases is based on completion of tasks and/or fixed-term contracts. The lack of access to a regular and consistent income contradicts any right that a worker may have to income security.

The labour brokers' agreements are purely commercial contracts between the labour broker agency and the client, and different labour brokers compete against each other for the same contracts. So there is constant pressure to undercut quotations of competitors. This in turn places a consistent downward pressure on the wages that workers are expected to accept with agencies, further constraining the already weakened bargaining position of the worker. No wonder wages of workers have stagnated and that labour's share of the national income continues to decline, leading to South Africa being a country with the worst income inequalities in the world.

This has escalated the fragmentation of not only individual workplaces, but entire industries and sectors as well. Workers effectively are dislodged from the sectors within which they would normally bargain collectively, acquiring national but unenforceable rights to bargain with labour brokers as the new employer, despite this not being their place of work.

This has undermined trade union rights to collective bargaining and dramatically reduced the scope for implementing a more centralised mode of bargaining. Considering the highly unequal bargaining power between individual workers and their employers, collective bargaining is the only truly effective mechanism workers have to mitigate the consequences of this unequal relationship.

The client company can often evade compliance with a worker`s rights against unfair dismissal, by merely terminating the ‘commercial contract' with the labour broker or asking for the replacement of the worker. As the worker is still technically employed by the labour broker, despite not receiving remuneration when not allocated to a client, there is no formal legal basis to challenge what is in reality a dismissal.

The defenders of labour broking refuse to acknowledge that the abuses we are complaining about are general throughout the industry as a whole, but argue that they are only perpetrated by a few "rogue elements". This is however contradicted by the first-hand experiences of our membership who indicate that the abuses are widespread.

Despite being regulated as "temporary employment services" (TES) under section 198 of the Labour Relations Act (LRA), labour brokers are used to supply labour services that are not temporary. In many cases the work is ongoing or indefinite, with the contractual terms being represented as temporary.

Hence the phenomenon of the worker now colloquially referred to as a "permanent temp". In such cases repeated consecutive renewals of the labour broker contract enables a company to retain an experienced worker for years without having to worry about the length of service leading retrenchment pay or other rights.

Labour brokers claim to contribute approximately R26 billion a year to GDP, but this disregards the fact that this not a separate sector in a true sense; client companies would be likely contribute similar amounts if they employed workers directly.

Relevant statistics reflect that the vast majority of all current labour broker agencies were established after 1995, which coincides with the year in which the LRA was enacted. It is difficult to ignore this as the likely causal relationship, with employers seeking alternative contractual arrangements to evade the new labour law obligations.

Considerable emphasis is placed on the benefits labour brokers are perceived to offer through outsourcing, so that employers can then focus on their ‘core' business. But there has been an ever-expanding definition of which workers are now deceptively classified as ‘non-core'. The problem is often illustrated by the fact that many such workers are often indefinitely either located at the premises of the client business or work exclusively for it.
Labour brokers would have us believe that the industry is already adequately regulated, and would nevertheless support self-regulation as well as co-regulation with social partners. However, our experience has not been positive when we have opted for the co-regulation approach in relevant bargaining councils.

The reality is that workers subject to labour broker arrangements do not enjoy the same rights or legislative protection compared with those in normal, regular contracted situations. This picture is rendered even starker when you see that workers supplied by labour brokers at the same workplace where workers are directly employed by the client generally earn less and do not enjoy the same benefits despite doing the same work.

Currently there are no provisions in legislation to protect workers against the discrimination described above, despite the Constitution requiring "equal protection and benefit of the law". Further there are clear contradictions between section 9(2) and the undermining of rights that workers are entitled to under section 23 of the Constitution.

COSATU maintains its stance that labour brokers must be banned. We believe that sufficient opportunity has been provided for alternative mechanisms to regulate this industry, which have proved inadequate. Further, the extent of the problems and abuses as well as the trends reflecting the intensification of this exploitation, call for the need for more stringent intervention.

The Department of Labour, and now the Parliamentary Portfolio Committee on Labour, have resolved that abusive practices should be prohibited, for example where there was no contractual relationship between all the parties in a triangular employment situation - the employee, labour broker and client company. They also want to outlaw paying different pay for the same work, and those contracts where the definition of the employer and workplace was not clear.

Their report recommends that the department redraft section 198 of the Labour Relations Act "as it brings confusion to the employment relationship", and examine all labour legislation to ensure that abusive practices in relation to labour broking be addressed.

COSATU will not dismiss such proposals out of hand but will need to be satisfied what ‘abusive practices' are to be banned and that any legislation is watertight, with no loopholes for the labour traffickers to continue their businesses of eroding workers rights and living standards.

COSATU will never stop fighting for workers' rights. We shall lobby and battle to the end to get the best possible laws through Parliament and to make the fullest use of those new laws when they are passed. But we are well aware that even the best labour laws are useless unless they can be fully implemented. That is why laws on their own are not sufficient.

We need strong, powerful trade unions to enforce the laws and give working people control over their own destinies and liberate them from employment practices like labour broking, which amount to a modern from of slavery.

Once again thank you for inviting me to share our concerns with the industry.

Issued by COSATU, March 26 2010

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