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Response to issues raised in the
Portfolio Committee Public Hearings
on the Labour Relations Amendment
Bill and Basic Conditions of
Employment Amendment Bill
Document Number 449251 1
Introduction:
a)The Department of Labour introduced the Labour Relations
Amendment Bill (B16-2012) and the Basic Conditions of Employment
Amendment Bill (B15-2012) in the National Assembly on 23rd May
2012.
b)The introduction of these Bills followed a two year process during
which there were extensive negotiations on the Bills in the National
Economic Development and Labour Council (NEDLAC) and two rounds
of public meetings on the Bills and the changes to the Bills.
c)After the first version of the Bills were published for public comment
in December 2010, the Department commissioned a Regulatory
Impact Assessment (RIA) on selected provisions of the Bills.
2
d) The NEDLAC negotiations resulted in substantial changes to the
2010 Bills, especially in the way that temporary employment is
dealt with.
e) In January 2012, the NEDLAC negotiations concluded on
amendments to the LRA and the BCEA.
f) While there were areas of difference in the NEDLAC negotiations,
there was substantial agreement on many issues dealt with in the
negotiations. Following the NEDLAC Protocol, constituencies are
free to further engage Parliament on areas of disagreement.
g) Revised Bills were submitted to Cabinet in April 2012 where they
were approved for submission to the National Assembly. 3
h)The Public Hearings conducted by the Portfolio Committee attracted
submissions mainly from organised business and organised labour,
but also from interested parties such as the South African Local
Government Association (SALGA), the South African Society for
Labour Law (SASLAW) and the American Chamber of Commerce in
South Africa (AmCham).
i) The purpose of this response is not to deal with issues raised in each
of the presentations, but to comment on key issues that were
common to some presentations and to respond to specific issues
where the Department would like to express its view. The aim of
the document is to assist members of the Portfolio Committee to
gain a balanced perspective on the amendments proposed to the
LRA and BCEA.4
1. Constitutionality of the amendments
a)Both Bills have been submitted to the Office of the Chief State Law
Adviser for a precertification opinion and have been found to be
consistent with the Constitution.
b)This does, however, not provide a guarantee that the Bills are
completely consistent with the Constitution as issues may arise in the
implementation of the Bills that could give rise to Constitutional
challenges at a later stage.
5
c) During the Public Hearings, the constitutionality of limiting
access of high income earners to the Commission for
Conciliation Mediation and Arbitration (CCMA) was raised.
d) Opinion is divided on this issue with some opposing the
amendments and others feeling that it could be dealt with in a
different way.
e) The constitutional issue could be posed as an unnecessary
limitation of the rights of certain categories of employee to
refer disputes to the CCMA.
6
f) The amendment to section 188 does not interfere with the rights of
any employee not to be dismissed for reasons that are automatically
unfair under section 187.
g) The amendment does also not stop high earning employees from
seeking redress for unfair labour practices.
h) The amendment is viewed by the Department as being a
reasonable limitation of rights as outlined in section 36 of the
Constitution.
7
2. Impact of the amendments on jobs
a) An issue that attracted a lot of attention in the
presentations of the business constituency and in the
media, is the impact of the amendments on employment.
b) The amendments that have been singled out are the equal
treatment provisions, the power of the Minister to prescribe
increases on actual rates of pay and the extension of
bargaining council agreements.
8
Three general issues need to be borne in mind when assessing
arguments about the impact on employment:
i. Firstly, legal reform needs to proceed with due consideration
to the rights of employees as well as the economic and
employment impact of reforms. The Constitution requires that
all employees are entitled to fair labour practices. The
Employment Equity Act already prohibits unfair discrimination,
direct or indirect, against any employee, in any employment
policy or practice.
9
ii) Secondly, it is complex to predict employment impact on the
basis of publicly available statistics. In the work done to date
on the current labour law amendments, assumptions have to
be made about the effect of restricting the operation of labour
brokers with little ability to properly test these assumptions. A
number of Bargaining Council collective agreements already
restrict the operation of labour brokers and there has not been
a negative change in employment in the sectors where these
agreements apply.
10
iii) Thirdly, any assessment of likely job losses should ideally factor
in short and medium term adjustments by affected employers.
While there may be some job loss in the short term, there could
well be a recovery over time as the temporary employment
industry adjusts to new forms of regulation.
11
2.2. Regarding the assessment of impact of specific
amendments, the following can be noted:
i) Equal treatment
a)The impact analysis conducted for BUSA draws on Statistics South
Africa’s Quarterly Labour Force Survey (QLFS) to arrive at the number
of people who work part-time in differently sized firms. The firms
include those with one person - a total of 689 284 if one disregards the
number of hours worked. Firms with one person can only be self-
employed, most likely consultants. To include them in calculations of
how increases in employment costs will impact on jobs, distorts the
picture quite significantly. This is just one example of the shaky basis
on which job losses are estimated. 12
b) The assumption in the analysis is that benefits account for “around
25% of the cost-to-company of the personnel expenses”. A
second assumption used is that a wage elasticity of 0.7 % can be
applied across all types of workers. On this basis, a calculation is
made to arrive at expected job losses of 215,150 jobs. Along
with the problematic use of employment figures to make this
calculation, wage elasticity could be very variable across
different categories of employment. For example, the way in
which demand for labour changes when skilled workers become
more expensive is very different to the change in prices of
unskilled labour.
13
c) What is also important is that the impact analysis for business
does not engage accurately with the proposed amendment. The
amendment to section 198A reads:
“An employee deemed to be an employee of the client in terms of
subsection (3)(b) must be treated on the whole not less favourably
than an employee of the client performing the same or similar work,
unless there is a justifiable reason for different treatment.”
14
d) The first important point is that the equal treatment provision only
applies after the six months of temporary employment. The
impact analysis is not able to make any distinction between
employees who work part-time and those who may be deemed to
be employees of a client after a six month period.
e) Secondly, the cost of benefits relate to the wage that an employee
receives as these are calculated on a percentage basis.
Elsewhere the amendments give pointers to grounds for justifiable
different treatment, for instance, skill, experience and length of
service. So, wages may differ for justifiable reasons between a
permanent worker and a deemed employee who have different
levels of skill and experience. The benefit package will differ
accordingly. 15
f) The impact analysis must, therefore, be treated very cautiously in
relation to its assessment of impact of equal treatment provisions
on cost to company.
g) It is worth recognising that equal treatment needs to be viewed in
the context of the history of discrimination in South Africa. The
Constitution also has a strong emphasis on equality and prohibiting
unfair discrimination.
h) Finally, South Africa is not alone in introducing legislative provisions
to ensure equal treatment of temporary workers. In China, labour
hire workers must be paid at the same rate as workers in the user
firm who are engaged in similar work. In Korea since 2008,
employers have been required to provide equal pay and benefits to
hired workers. 16
ii. Wage increases on actuals
a)It is the intention of the Department to provide for wage
increases on actuals only for certain categories of vulnerable
workers. The impact analysis estimates job losses across a
whole range of sectors rather than a select few, thereby
amplifying the estimated job losses.
b)The impact analysis study also does not take into account the
way in which the Minister of Labour may prescribe increases in
terms of this amendment. For instance, the Minister may
prescribe minimum increases linked to years of service which
would have a very different impact than an across the board
increase on minimum rates of a pay. 17
iii. Bargaining council extensions
a)The impact analysis done for business does not engage accurately
with the proposed amendments relating to collective bargaining. It
assumes that the effect of the amendments will be an increase in the
size of the workforce covered by bargaining council agreement. This
refers to the amendment to section 32 (5A) which enables the Minister
to take account of the extent of atypical employment in a sector when
determining whether the parties to a council are sufficiently
representative.
b)It has nothing to do with increasing the coverage of an agreement,
but has to do with how to decide on representivity when faced with
the particular make-up of the work force within a sector.
18
c) The impact analysis goes on to estimate the impact of coverage of
extended agreements using research that suggests that there will
be between 7% and 16% reduction of employment in small firms
when Bargaining Council collective agreements are applied to
them.
d) No explanation is provided for this method and the original
research on which it draws is not summarised in the paper. The
paper also does not make any allowance for the fact that certain
agreements have special dispensations for small firms.
e) In short, the impact analysis carried out for business estimates a
dramatic impact on employment in ways that are problematic and
that could very well exaggerate the real impact. 19
2.3. Regulatory Impact Assessment
a)There has been a call by BUSA for a second Regulatory Impact
Assessment (RIA) to be conducted on the Bills that are before
Parliament. The Department conducted a RIA in 2011 at the request of
a Cabinet Committee. This RIA was carried out in terms of Guidelines
that make no provision for second or repeat RIA’s.
b)Legislative reform cannot be delayed for long periods by impact
assessment studies that are complex to conduct and where the results
are very likely to remain contentious. This issue should also be seen in
the light of an on-going situation where the rights of employees are
being abused and where the existing legislation, that is the current
version of section 198 in the LRA, “offends the constitutional entrenchment
of labour rights guaranteed in terms of section 23 of the Constitution.” Judgement by Steenkamp J, Case C418/11, K Dyokwe vs Coen de Kock, CCMA et
al. pg. 14.20
2.4. Organisational rights
a)Submissions with regard to amendments to section 21
dealing with the exercise of organisational rights have been
both criticised and supported.
b)Business have generally not supported extending rights to
minority unions whereas organised labour support both giving
consideration to atypical employees when determining
representivity as well as extending rights to minority unions.
21
c) These amendments are important given the real difficulty faced by
trade unions in representing atypical employees in any workplace.
d) It would be a legitimate balancing of power for a commissioner to
exclude temporary, part-time and contract workers when
considering the composition of the workforce for the purposes of
representivity of trade unions seeking organisational rights.
e) The extension of organisational rights to minority unions is provided
for in quite limited and specific circumstances.
f) A commissioner in an arbitration may grant rights referred to in
sections 14 and 16 if no other union has been granted that right.
These rights relate to trade union representatives and access to
information. 22
g) Both of these rights should enhance communication and
engagement between employees, their representatives and
employers. Moreover, this right lapses if the trade union
concerned is no longer the most representative union in the
workplace.
23
2.5. Exclusion of senior managers from CCMA
a)The amendment to section 188B has attracted a number of
comments in the submissions, most importantly, the indication that the
exclusion of senior managers from the CCMA could be unconstitutional.
As stated above, the Department is of the view that the proposed
amendment is a justifiable limitation on the rights of senior managers
as they would still enjoy protection from unfair dismissal.
b)Senior managers are also able to negotiate protection through their
contracts of employment, for instance, to notice periods and to make
provision for private arbitration. They would still be able to refer
disputes to the Labour Court for certain categories of dismissal cases.
24
c) The impact of dismissal cases of senior managers on the
CCMA has been referred to as a relatively small number of
cases. The real impact should, however, be assessed in
relation to the time that these cases take in the CCMA
relative to other cases and not just the number of cases.
25
2.6. Compliance and enforcement
There are two areas requiring a response in relation to
compliance and enforcement, the first relates to amendments
that change the functions of labour inspectors and the
enforcement of compliance orders, and the second relates to
fines and penalties.
i.The amendment to section 68 of the BCEA gives labour
inspectors the discretion as to whether they try to secure a
written undertaking by an employer or whether they move
directly to issuing a compliance order. 26
ii) The ability of inspectors to exercise this discretion is important in
the context of high rates of non-compliance and experience of
employers who do not adhere to their undertakings. The intention
is not to remove the use of undertakings in genuine cases, but to
ensure that inspectors do not waste time with employers who do
not stick to their promise to rectify certain situations in their
workplace.
iii. An amendment to section 93 of the BCEA doubles the maximum
term of imprisonment for contraventions in relation to clauses
prohibiting and regulating work by children and to prevent fraud
that may occur in relation to disclosure of information as covered
by section 90 of the BCEA.
27
These amendments were agreed to by organised
business during the NEDLAC negotiations. Organised
business included representation of AGRI SA and the
matter should not be raised again in the Parliamentary
process in terms of the NEDLAC protocol.
28
2.7. Labour tenants
a)The amendment to section 55(4)(p) is intended to make provision for the
Minister to establish a method for determining the conditions of service for
labour tenants who have a right to occupy or use a part of a farm. The
Land Reform (Labour Tenants) Act, 1996, requires that the conditions of
service of a labour tenant may not be generally less favourable than the
conditions applicable to farm workers in terms of the BCEA (section 4).
b)This amendment is, therefore, addressing situations where labour
tenants derive income from occupying and/or using land. This income
should be taken into account when deciding what minimum wage
increases apply to labour tenants. A method for placing a value on the
access to a part of a farm by labour tenants needs to be determined so
that appropriate minimum wages can be set through future sectoral
determinations for farming.
29
2.8. SASLAW
a)A detailed submission was provided by the South African Society for
Labour Law (SASLAW).
b)A number of points were raised that will require technical
amendments where wording or numbering is not clear in the Bill.
These are not repeated below.
c) The following table summarises the clauses and sections where
SASLAW had particular views and/or recommendations that the
Department wishes to respond to.
30
30(b) 158(1B) The Department disagrees with the proposal to exclude jurisdictional issues from the limitation placed on review proceedings. ‘Jurisdictional issues’ is vague and may open the way for a series of tests relating to what may or may not be reviewed.
36 187(1)(c) SASLAW is proposing that the section be clarified. The Department is of the view that the section is sufficiently clear as it stands.
38 188B It is agreed that the issue raised by SASLAW relating to possible abuse of section 188B to deprive senior managers of severance pay should be dealt with.
39(a) 189A(2)(d)
The Department disagrees with SASLAW’s view that extending the period for consultation over operational requirements dismissals may defeat the object of the section.
44 198A(3) The Department views the “deeming” provision to be clear in that it applies to employees earning below the threshold who are retained in employment by a client after a six month period and that is such cases, the equal treatment provision applies. Equal treatment
44 198A(5) The equal treatment provision applies to persons on fixed term contracts whose contracts extend beyond a six month period.
BCEA
2 33 Reject in respect of purchase of goods or service as these will only be justified if there is benefit; accept “or other”; also need for clause dealing with pension, provident and medical aid funds.
31
3. New issues
After consideration of the amendments to the LRA, a number of
changes have been identified which are required to clarify and/or
improve on current drafting of the amendments. These are as
follows:
3.1. Amendment of section 21 – It will be necessary to delete
either 8(A), 8(B) and 8(C) or delete 8(D). This is in order to avoid
duplication.
3.2. Amendment of section 32 – A further amendment to the 60
day extension rule in section 32(2) will be required to accommodate
the new procedure introduced under section 32(5).
32
3.3. Amendment of section 144 – The new paragraph (d) will
require further amendment to read: “(d) made in the absence of any
party on good cause shown.” This is to clarify that it is a common law
rescission ground and not some kind of appeal jurisdiction.
3.4. Amendment of section 153 – A new amendment is required to
replace the words ‘Supreme Court’ with ‘High Court’ or ‘Labour Court.’
This is for consistency and accuracy.
3.5. Amendment of section 198 – A further amendment will be
required to section 4(B) to clarify that a temporary employment
service will be required to specify whether section 198 applies in
written particulars of employment. Section 4(C) should also be
amended to include all collective agreements as part of the
instruments that apply to a client who uses temporary employees.
33
3.6. Amendment of section 198A to D – Further amendments are
required to clarify the wording of section 198A(2) in relation to (3) and
a cross reference to the Employment Equity Act is required. Changes
to the wording of Section 198A (3) and (4) were agreed and need
to be incorporated as follows:
s.198A(3): For the purposes of this Act, an employee referred to in
subsection (2) who is–
performing temporary services as contemplated in sub-section (1)
for the client is the employee of the temporary employment
service in terms of section 198(2);
34
not performing such temporary services is deemed to be -
the employee of that client and the client is deemed to be the
employer;
subject to the provisions of section 198B, employed on an
indefinite basis by the client.
(4) The termination of an employee’s assignment with a client,
whether at the instance of the temporary employment service or
the client, for the purpose of avoiding the operation of subsection
(3)(b) or because the employee exercised a right in terms of this
statute is a dismissal.
35
DLA Cliff Dekker Hofmeyer:
a)The submission by DLA Cliff Dekker Hofmeyer on behalf of the Real
Estate Business Owners of SA relates to the alleged divergent views
on whether estate agents are employees or independent contractors.
b)This matter has been dealt with in judgements handed down by the
Labour Court and does not require further amendment to the LRA
which, in any event, takes precedence over the Estate Agents Act in
matters relating to labour relations.
36
South African Local Government Association (SALGA):
a)One issue raised by SALGA that is not dealt with elsewhere relates
to refuse collection being declared an essential service. Currently,
refuse collection only becomes an essential service after 14 days of
non-collection.
b)SALGA’s submission requests a provision in the LRA to make
provision for refuse collection to be an essential service. Such a
provision is not appropriate in the LRA, but SALGA should rather
approach the Essential Services Committee to conduct an
investigation. Such an approach should be made by the South
African Local Government Bargaining Council in terms of section 70
of the LRA. 37
Finally, the amending bill does not include transitional provisions to
deal with the implications of the amendments for existing
arrangements. This is particularly relevant to amendments that will
have an effect on existing contracts of employment at the time that
the amendments are promulgated, for example, contractual
arrangements dealt with in terms of section 198A to D.
38
THANK U
39