Cross-border employment arrangements are commonplace as human mobility, technology and globalisation have become more fluid. These engagements can often result in an employee being present and performing services in one country, whilst the employer is present in a different country. Further complexities arise when an employee is ’placed’ by an Employer of Record or temporary employment service (TES) at a client in another jurisdiction. 

The Labour Appeal Court (LAC) in Sorrell v Petroplan Sub-Saharan Africa (Pty) Ltd CA02/2023) [2024] ZALAC (Sorrel), recently considered the territorial application of the Labour Relations Act 66 of 1995 (LRA) in a TES arrangement where the client was located outside of South Africa and where the employee sought to refer an unfair dismissal dispute against the TES in the Labour Court in South Africa.

The LAC in Sorrell held that, where an employee is engaged by a TES, the territorial application of the LRA is to be determined according to the locality of the undertaking for whom the employee is engaged to provide services and not the location of the undertaking of the TES. In essence, this means that it is not the place at which the TES conducts its recruitment or labour brokering business which determines the place of employment for purposes of jurisdiction in terms of the LRA, but the location of the undertaking for whom the employee renders services (ie the location of the business of the client).

Cross-border TES arrangements present a host of complexities from a tax, immigration and employment law perspective. In this article, we focus solely on the employment aspects regarding the territorial application of the LRA in the context of a TES arrangement by discussing the most recent case of Sorrell.

Findings of the LAC in Sorrell

The issue in this case was whether the Labour Court had territorial jurisdiction to determine an alleged unfair dismissal dispute referred by Mr Sorrel against Petroplan Sub-Sahara Africa (Pty) Ltd (Petroplan SA). Mr Sorrel was engaged by Petroplan SA as a logistics superintendent at a gas exploration project in Mozambique, and was appointed to provide his services to two companies, one registered in Mozambique and the other registered in the United Kingdom. Effectively, Petroplan SA operated as a TES.

The logistics superintendent role was an ‘in-field’ role whereby Mr Sorrell would have been required to work on location at the remote gas exploration site in Mozambique, reporting to a field operations manager, with the UK entity being responsible for directing operations at the site. However, due to Covid-19 and visa complications, Mr Sorrell had to work from home in South Africa on an alternating duty cycle. Mr Sorrell’s services were terminated effective 24 June 2021.

The LAC found that the location of the undertaking for services to be rendered was in Mozambique, and accordingly, the Labour Court had no territorial jurisdiction to hear the matter. Moreover, the contractual relationship contemplated that Mr Sorrell’s workplace was in Mozambique.

The LAC clarified the principles applicable in a cross-border employment TES relationship and held that an employer may conduct more than one undertaking, with the location of an undertaking at any given time ultimately being a question of fact. What is important in determining territorial jurisdiction for purposes of the LRA is the location of the undertaking for whom the employee provides services.

Although Petroplan SA was effectively a TES, and its undertaking was located in South Africa, Mr Sorrell was contracted to work in an undertaking in Mozambique which was separate and divorced from Petroplan SA’s recruitment business. The fact that section 198 of the LRA stipulates that the employee is employed by the TES and not by the client of the TES does not alter this conclusion.

Jurisdictional considerations for the parties in a cross-border TES arrangement

This case authority is in line with previous decisions of the SCA, and the LAC in relation to the relevance of the locality of the undertaking in determining the territorial application of the LRA. Key considerations include whether the undertaking is separate and divorced from a South African undertaking or whether it is inextricably linked to the business in South Africa. If it is separate and divorced, then it is likely that the locality of the undertaking is not in South Africa and the LRA will not have application.

Accordingly, and with reference to a TES arrangement, the location of the undertaking for whom the employee renders services is relevant. This is the undertaking of the client rather than the TES. The TES is involved with the recruitment of personnel for clients which is an undertaking distinct from the rendering of services to clients at particular locations and workplaces.

Subject to the applicable local laws of foreign jurisdictions, engaging employees through a TES in South Africa may not necessarily protect an overseas entity from being sued in their local jurisdiction. Further, engaging a South African employee in terms of an employment contract that seeks to oust the jurisdiction of the South African courts or tribunals will also not necessarily exclude the possibility of an employee referring a dispute in South Africa and a South African court or tribunal exercising discretion to assume jurisdiction over such matter.

Written by Melissa Cogger, Partner, Tshepo Mokoana, Senior Associate, and Layla Shah, Associate, Bowmans