Co-operatives in the Private Security Sector: a fool’s errand?

The use of co-operatives in the security sector is not new nor uncommon in South Africa. The Co-Operatives Act defines a worker co-operative to mean “a primary co-operative in which the members pursue the objective of optimally utilising their labour by building a jointly owned and self-managed enterprise”.

Big changes for co-operatives before 2023

For a long time, co-operatives were used in the Private Security Sector to circumvent minimum wages and prescribed benefits. Previously this was possible because the provisions of the Co-operative Act outright excluded co-operative members from labour legislation – Sectoral Determination 6 simply did not have the “mechanics” to regulate these co-operatives.

Then, change came. The National Bargaining Council for the Private Security Sector was established and Sectoral Determination 6 was no longer in play. The Bargaining Council was now authorised to extend its services and functions to workers in the informal sector and home workers (as per Section 28).

By the extension of a Main Collective Agreement, the minister extended the application of all clauses of the Collective Agreement, to all employers and workers, in the Private Security Sector.

What is the case for 2023?

This extension of the Main Collective Agreement is acceptable. The Constitutional Court previously found that a Collective Agreement can be extended to cover non-parties without contradicting the principles of freedom of association, therefor it is not unconstitutional.

The 2023 Main Collective Agreement specifically applies to all employees for whom wages are prescribed.

This includes sub-contractors and disguised employment relationships such as self-employed security officers who are deemed employees in terms of Clause 21.

Clause 21 provides the following –

(1) Any person on contract performing the duties of a security officer, as defined in Clause 3 of this agreement, as well as any person on contract performing the duties of other categories, as defined herein, except for managers.

(2) Until the contrary is proved, a person who works for, or provides services to, any other person is presumed, regardless of the form of the contract, to be an employee, if any one or more of the following factors are present –

(a)        the manner in which the person works is subject to the control or direction of another person;

(b)       the person’s hours of work are subject to the control or direction of another person;

(c)        in the case of a person who works for an organisation, the person forms part of that organisation;

(d)       the person has worked for that person for an average of at least 40 hours per month over the last three months;

(e)        that person is economically dependent on the person for whom they work or provide services;

(f)        the person is provided with their tools of trade or work equipment by that person; or

(g)        the person only works for or supplies services to one person.

In view of the above provisions, it is clear that a member of a co-operative falls within the application of the Main Collective Agreement, except where the application is excluded by other legislation.

The previous provisions of Section 6 in Schedule 1 came to the rescue of operators within this industry. In terms of these provisions, “A member of a worker co-operative is not an employee as defined in terms of the Labour Relations Act, 1995 (Act 66 of 1995), or the Basic Conditions of Employment Act, 1997” The judgement in the National Bargaining Council for the Clothing Manufacturing Industry v Glamour Fashions was largely based on this version of the legislation and bolstered the exclusion provided by these provisions.

The amendment of the Co-Operatives Act changed everything

The Co-Operatives Act was amended by replacing the previous provisions with the following:

“6. Application of labour legislation

(1)        An employee of a worker co-operative is any member or non-member of a co-operative who satisfies the definition of ‘employee’ as defined in the Labour Relations Act, 1995 (Act No. 66 of 1995). Page 112 of 121.

(2)        All worker co-operatives must comply with labour legislation.

(3)        Despite subsection (1), a co-operative may apply to a bargaining council with jurisdiction over the sector within which the co-operative operates or, where there is no such bargaining council, to the Minister of Labour for full or partial exemption from the need to comply with applicable labour legislation in respect of employees of the co-operative.  

(4)        The bargaining council or the Minister of Labour, as the case may be, may only grant an exemption in terms of sub-section (3) if reasonably satisfied that there are good grounds for doing so.”

The intention of the legislature to clamp down on disguised employment agreements is very clear.

The question then remains: are members of co-operatives actually employees?

The only exclusion afforded to role players within the industry is now dependent on the interpretation of the definition of Employee as per the Labour Relations Act, which provides the following:

“employee” means –

(a)        any person, excluding an independent contractor, who works for another person or for the State and who receives, or is entitled to receive, any remuneration; and

(b)        any other person who in any manner assists in carrying on or conducting the business of an employer,

The whole of the definition of employee does not leave much to the imagination save for the phrase “who receives, or is entitled to receive, any remuneration”.

Remuneration, in turn, is defined to mean “any payment in money or in kind, or both in money and in kind, made or owing to any person in return for that person working”

It is common cause that members of a co-operative receive money by the hour/shift and that a fraction of these funds is retained for “distribution” at a later stage. In the event that the member has been working lessor shifts, he/she will be earning less. The notion that members share in the profit of the co-operative is therefore far from the truth.

Where does this leave co-operatives in the Private Security Sector?

I am convinced that Subsection 2 will apply to members of co-operatives operating within the scope of the Private Security Sector and that co-operatives will have to apply for exemption at the bargaining council in terms of subsection 3, which will ultimately be refused in terms of subsection 4.

The Co-Operatives Act defines a worker co-operative to mean “a primary co-operative in which the members pursue the objective of optimally utilising their labour by building a jointly owned and self-managed enterprise”.

Co-operatives within the Private Security Sector simply do not advertise, market or render their security services to any end-user of these services in order to build “a jointly owned and self-managed enterprise”, but exclusively provide labour to other security service providers within the private security sector, conclusively fulfilling the role of labour broker and not that of a genuine worker co-operative.

Employees in service of a client of a labour broker will, after the latest Constitutional Court ruling, be deemed to be employed by the client of the labour broker after three months, stripping it of any advantage (if any) of using members of a co-operative.

Remember!

A Bargaining Council may issue a compliance order ordering an employer to make payment of all underpayments to the employee.