Labour Law in South Africa

On December 2010, the South African government proposed amendments to existing labor legislation and new measures by means of the Employment Service Bill. As these proposed amendments are numerous, this paper does not intend to represent an exhaustive analysis of the new legislative landscape. Rather, the analysis focuses on a few major themes which I consider of particular interest. Alternative perspectives of business and labor organizations are presented.

1. Labor Law Reforms: In December of 2010, South Africa’s government offered up a series of potential changes to its labor laws. This was mostly done through amending several existing labor acts including The Labour Relations Act (LRA), Basic Conditions of Employment Act (BEC), Employment Equity Act (EEA) and also the Employment Services Bill (ESB). Following the introduction of sweeping amendments to these acts, public outcry, political debate and criticisms emerged from businesses, employees, trade unions and the like. After a prolonged period of debate, the amendments were ultimately repealed.

2. Principal Proposed Changes: Below are some of the major areas of changes in the various laws above which were later repealed.

➢ Enforcing Employment Equity & Reducing Unfair Discrimination

The changes proposed in this area were largely directed toward strengthening enforcement of the EEA. The changes essentially empowered the Director General to instigate fines for employers who failed to comply with EEA prescriptions. In detail, such fines were calculated as a percentage of annual company turnover, varying from 2% to 10%. Moreover, reporting frequency on the part of companies increased markedly following the amendments. Employers of 50-150 employees for example, were suddenly required to submit periodic reports on the status of their EEA implementation. Employers were allowed to set targets for demographic “sensitivity” according to national or regional demographics.

The Amendments, however, would cancel the regional demographics option, thereby requiring employers to consider the national proportions of an economically active population indirectly determining whether their workforce demographics met compliance. To help reduce unfair discrimination, an additional measure was introduced, whereby people who work for the same employer and perform essentially the same job must be paid equally.

➢ Facilitating Dispute Resolution

LRA Amendment 115 was proposed to facilitate dispute resolutions by enhancing the efficacy of operations carried out by the Commission for Conciliation Mediation and Arbitration (CCMA). The amendment largely expanded CCMA’s scope and empowered them not only to adopt rules to review practices every two years, but to also provide advice and training. The Labour Courts jurisdiction was likewise expanded through this amendment. LRA Amendments to ss157 as well as BCE amendments to ss77, in effect, removed the parallel jurisdiction of the civil courts on labor matters including: interpretation or application of employment law; constitutional issues arising from employment or labor relations; and, disputes concerning employment contracts.

➢ Regulating Atypical Employment and Labor Broking

Overall, the bills intend to eliminate several abuses often related to atypical employment relationships such as independent contractors and temporary employees. The newly proposed 200B LRA Amendment states that “an employee must be employed permanently, unless the employer can establish a jurisdiction employment on a fixed term.” The BCE also repeals existing provisions disciplining Temporary Employment Services (TES), sometimes referred to as Labor Brokers, and makes the client as, in effect, the employing entity.

In the legacy system, the brokers themselves were legally construed as being the employer; and, businesses which do not utilize brokers with these new requirements in mind will fall under heavy scrutiny. The ESB seems to support the mediation of Labor Brokers as well, by requiring hiring employers to list employment vacancies with the Board of Labor.

➢ Aligning to International Labor Law Standards

Proposed BCE regulations of dealing with child employment align South African child labor laws with prevailing international standards as defined by the International Labour Organisation Conventions.

3. Reactions from Labor Organizations & Businesses

Business Unity South Africa (BUSA), offered up several concerns on proposed amendments referring to those as a “blockage to the goal of job creation and economic growth” and to the National Growth Path’s goal to create 5 million jobs by 2025 (BUSA, 2011).

While the International Labour Organization is better realizing the “role of the atypical employment and private employment agencies” and “realizing that a failure of labour market flexibility will result in unemployment, mechanizations and new technologies”, the proposed amendments tend to reduce flexibility for employment (BUSA, 2011). BUSA suggests these measures can result in job loss and increased unemployment.

Adcorp, one of the largest employment services agencies, in its statistical research demonstrates that most of South Africa’s employment growth over the past decade has been temporary in nature. Since 2000, permanent employment has declined by 20%+, while atypical employment has risen by 64.1%, representing 2.4 million people in 2011 (Adcorp, 2011). The proposed amendments curtailing the use of fixed-term contract employees will be highly detrimental to some sectors, such as construction and wholesale/retail, which are larger employers of temporary workers due to the seasonal, cyclical or project based nature of their work.

A divergent opinion emerges from Cosatu, a trade union federation, which does not support the growth of atypical jobs because this erodes its power. Temporary workers are hard to unionize as they can sometimes weaken the impact of strikes, as non-union members.

On the labor organization side, opinions may diverge. Solidarity, one of the oldest trade unions in South Africa, is cautioned by the restriction of fixed-term contracts since it will only benefit the proportion of temporary workers that will be converted into permanent employees. The vast majority of current temporary employees – representing approximately 25% of the South African workforce – will likely lose their jobs if employers are unwilling to incur the administrative and other costs associated with hiring those people.

Regarding the EE proposals, BUSA argues that the administrative obligations and fines introduced by the bills do not sufficiently address employment equity issues. Furthermore, the penalties for non-compliance, too many being onerous, as calculated as a percentage of the company turnover, may ultimately paralyze company operations and viability, which could in turn lead to higher unemployment (BUSA, 2011).

Trade Unions also cautioned the EE amendments inasmuch as it requires a company to reflect the national demographics of the South African active populations at all levels. The risk is that some positions may not be filled because people from “designated groups” in line with the national demographic proportions may not be available in a particular region.

In terms of ESB Section 10, the Department of Labour must be notified of any vacancy or position with an employer. Companies contested this proposal as oftentimes, the resources required to properly manage the information received are beyond the resources available to the Department of Labour. Recruiting and placing the right person to the correct job requires substantially more information; and, the Department might be unable to effectively and properly propose employees for recruitment.

As Professor Bhorat from Capetown University highlighted in his research, the rationale behind the CCMA amendments is to quicken the dispute resolution process and increase its efficiency and effectiveness. He argues that extending the jurisdiction of the Commission may have the side effect of an increase in Commission workload and operating budget (Borath, 2010) thus undermining the intended objectives.