"Employer Of Record?" The Labour Court's Decision Regarding Territorial Jurisdiction

The Labour Court's decision regarding territorial jurisdiction in Ephraim and Others v DRG Outsourcing (Pty) Ltd (JS292/2023) [2025] ZALCJHB 547

DRG Outsourcing (Pty) Ltd retrenched three employees in January 2023. The employees referred an unfair dismissal dispute, which found its way to the Labour Court. In the Labour Court, DRG argued the court lacked the territorial jurisdiction to adjudicate the dispute.

Following Fasken's previous publications on this topic,¹ in this bulletin, we consider the court's decision in this case.

Facts

DRG provides HR, payroll and compliance services. DRG recruited the applicants and, in terms of their employment contracts, assigned them to DRG's client 54Gene Inc (54Gene) in either Washington, D.C. or Lagos, Nigeria. 54Gene is a biotechnology company which engages in genetic research. Interestingly, DRG refers to itself as the "employer of record" tasked with ensuring compliance with South African employment law.

DRG facilitated the retrenchment process that led to the applicants' dismissals. The employees referred an unfair dismissal to the CCMA, which was not resolved at conciliation. They then referred the dispute to the Labour Court for the contemplated adjudication of the dismissal dispute.

In the Labour Court

DRG raised two special pleas in the Labour Court. First, it argued that the Labour Court lacked the territorial jurisdiction to entertain the dispute. Secondly, DRG argued that the applicants failed to join 54Gene to the dispute.

Relying on the Labour Appeal Court's (LAC) decision in Sorrell,² the court noted that the "location of the physical workplace" must be considered, not the place where the contract is concluded. The location of the undertaking for whom the employee is contractually required to render services, rather than the location of the intermediary recruiter, must be used to determine jurisdiction.

The applicants argued that DRG was the true employer: the employment contracts were signed in South Africa; DRG issued their pay slips; DRG facilitated the section 189 process; and, DRG described itself as the "employer of record".

The Labour Court rejected this argument. The court held that jurisdiction "is a matter of fact and law, not self-characterisation."³

The court found that DRG was an intermediary which merely aligns HR strategies with business strategies of clients. DRG does not engage in biotechnological and genetic research, nor does it have a stake in the enterprise of 54Gene. The court also alluded to the principle in Sorrell that the "undertaking of the TES ('temporary employment service' provider), involved with the recruitment of personnel for clients, is an undertaking distinct from the rendering of services to clients at particular locations and workplaces."⁴

Given its finding that it lacked territorial jurisdiction, the court did not decide the special plea regarding the non-joinder of 54Gene.

Conclusion

The Labour Court therefore concluded that it lacked jurisdiction to adjudicate the dispute. This decision highlights the importance of ensuring that labour matters are referred to the appropriate forum with the necessary territorial jurisdiction. For more on this topic, consider Fasken's previous publications and a Fasken podcast episode (in its World of Work Podcast Series) on this subject-matter.⁵

Footnotes

1. "Remote work legal jurisdiction – who sets the rules?" in Business Brief, June/July 2025, https://www.bbrief.co.za/businessbrief-june-july-2025/ 88; Can South African Labour Law Apply to Employees Working in Other Countries? The Jurisdiction of South African Labour Forums in respect of Employees Working Abroad and the Legal Principles of Extra-Territoriality | Knowledge | Fasken

2. Sorrell v Petroplan Sub-Saharan Africa (Pty) Ltd (2025) 46 ILJ 128 (LAC).

3. Ephraim and Others v DRG Outsourcing (Pty) Ltd (JS292/2023) [2025] ZALCJHB 547 (4 November 2025), para 17.

4. Sorrell supra note 2, para 21.

5. See footnote 1 above; see also World of work series: Navigating global workforces from an employment law standpoint - From remote work to cross-border roles | Knowledge | Fasken, a podcast episode hosted by Venolan Naidoo on the impact of globalisation on employment and how legal principles, especially extra-territoriality, aims to shape the governance of cross-border work arrangements.

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