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.

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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.”

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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.

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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.

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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.

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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.

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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.

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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).

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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);

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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

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