Lawsuit Puts Labour Brokers in Spotlight

Article excerpt


Employees or directors have a legal and moral duty to exercise the powers of their office for the benefit of the employer or the firm, and directors must not put themselves in a position where their personal interests and their fiduciary duties may conflict.

But does someone who works for a client through a labour broker owe the client a fiduciary duty?

In Volvo (SA) (Pty) Ltd v Yssel ZASCA 82 this was essentially the question the Labour Appeal Court (LAC) was called upon to answer.

In 2000 Volvo required the services of a manager for its information technology division, and Volvo decided to offer Yssel the position. Yssel, however, did not want to enter into direct employment with Volvo and asked to be appointed via a labour broker he knew.

Volvo reluctantly accepted this arrangement. On receipt of monthly invoices, Volvo would pay the labour broker a fee for the services of Yssel. The broker in turn was responsible for remunerating Yssel.

By 2004 there were six other personnel in Yssel's department, all of whom were employed through labour brokers. Yssel told Volvo's HR manager that some of the staff were unhappy with their labour brokers and he could arrange for them to be transferred to his labour broker. Volvo and the staff agreed.

Volvo had no direct contact with the broker and dealt through Yssel who acted as, what he termed, a facilitator or intermediary. The labour broker sent invoices to Yssel each month for the services of the personnel and Yssel submitted them for payment to Volvo.

However, unbeknown to Volvo and the staff, about 40 percent of each monthly payment made by Volvo ended up in Yssel's pocket. Subsequently it was found that he had an arrangement with the labour broker to be paid a commission for personnel he transferred to the broker and that he had asked the labour broker not to disclose this to Volvo or the other staff.

After Volvo found out, and while drafting Yssel's suspension letter, Yssel resigned. For Yssel this might have been the easy way out; however, Volvo sued Yssel in the High Court for payment of R775 107, being the commission he had received from the labour broker. Volvo claimed Yssel had earned those amounts in breach of a fiduciary duty he owed to Volvo to act in its best interests and not his own.

Yssel argued that he never stood in any fiduciary relationship towards Volvo, mainly because he had no contractual relationship with Volvo.

The LAC held that though certain relationships were clearly recognisable as encompassing fiduciary duties, there was no closed list of such relationships. …