The American Chamber of Commerce in South Africa

(AmCham)

The Labour Relations Amendment Bill and Basic Conditions of Employment Amendment Bill

Prepared for the Parliamentary Portfolio Committee on LabourORAL Submission : 24 July 2012

What is AmCham

• Principal mission: facilitating trade and investment between the United States and South Africa

• Represents 260 American Companies in South Africa

• US Companies contributed R62.7 Billion* (portfolio investments: R568.7 Billion*) to the South African Economy in 2011.

• Actively support the aims and ambitions of New Growth Path and the National Development Plan

* South African Reserve Bank Quarterly Report 2011

Is South African Labour Law Competitive?

• 95th / 142 countries in labour market efficiency ₁

• 138th / 142 countries in terms of rigid hiring and firing practices

• 138th / 142 countries in wage determination by companies

• 138th / 142 countries in terms of tension in labour-employer relations

• South Africa and Namibia are the ONLY countries in Sub-Saharan Africa that have not grown jobs since the global financial crisis in 2008₂

1.World Economic Forum: The Global Competitiveness Report 2011-2012; Centre for Global Competitiveness and Performance; World Economic Forum, SRO-Kundig, Switzerland, 2011, pg 322-323

2. ILO Global Job Trends 2012

What principles should be considered when amending Labour Law

1. Whether dismissal routines are made more complex2. Whether the employer’s ability to employ temporary workers is restricted or eased3. Whether there is an increase in centralization or decentralization of union power4. The possible impact on labour relations and whether this terrain has become more hostile or more productive?5. Labour productivity- will this increase or decrease6. Industrial Action- will this reduce or increase in intensity7 . Dispute resolution- will this become more expeditious and less costly

1. Whether dismissal routines are made more complex

• Current Labour legislation allows employers to retrench employees who refuse to accept changes to terms and conditions of employment in times of crisis

• Amendments propose to close this aspect and prohibit retrenchment

• Employer’s only effective tool is to resort to lockout

• The Amendments will curtail the flexibility of employers and contribute to the rigidity of the Labour Laws

• See example on next slide

Retrenchment Prohibition Example

• To meet urgent customer requirements, employees are asked to work overtime

• They refuse unless certain non-related demands are met

• Demands are rejected for sustainability reasons

• Labour amendments don’t allow for these employees to be retrenched in favour of new employees, who are willing to work overtime

• This will result in customers / orders being lost

• Final result is jobs lost even though business was obtainable

2. Whether the employer’s ability or capacity to employ temporary workers is restricted or

eased?

• Changing world of work requires flexibility in the global market.

• To secure the needs of both the employer and employee, effective regulation and the availability of suitable social protection schemes is supported

• Regulation of temporary employment services is welcomed. Regulations should include:

i) providing tariffs to guide the maximum percentage that TES can charge when hiring out employees

ii) provide for an official Regulatory Body

• Automatic conversion of TES staff to permanent employee is subject to certain conditions. See example on next slide

Conversion Example

• Best practice and EEA standards* require transparent advertising and evaluation of candidates on core job competencies

• Automatic conversion by-passes best practices

• This is contrary to EEA standards

• Could result in permanent employees who don’t meet key job requirements

• This could add to cost of labour and potential for future disputes

* Employment Equity Act (EEA)

3. Whether there is an increase in centralization or decentralisation of union

power

• Existing Act seeks to promote strong trade unions and majoritarianism

• Proposed Amendments allow for a decrease in thresholds for the purpose of recognising of unions

and

extends bargaining units to cover wider nets of employees

• This will encourage the multiplicity of unions which might undermine the principle of majoritarianism and result in job losses

4. The possible impact on labour relations and whether this terrain has become more

hostile or more productive

• Current legislation requires that the unions are obliged to conduct pre-strike ballots.

• Only 1 in 8 major strikes in 2011 complied with requirement

• The proposal to entrench the practice of pre-strike ballots is welcomed

• This must be enforced

• The proposal to link the right to picket with orderly conduct is welcomed and necessary

• See example on the next slide

Pre-Strike Ballot Example

• Despite pre-strike clauses in unions’ constitutions, this provision is not followed.

• The result is that a minority view can prevail and lead to a strike.

• Ballots and the right to a secret vote go to the foundation of democratic values.

• The absence of proper ballots could be major cause of strike related violence & property damage.

• The insistence on pre-strike ballots will deepen our democracy rather than take away the right to strike and can promote orderly collective bargaining.

• Enforceability unsure even under proposals.

Right to Protest Example

• Pickets and protests related to industrial action are part of persuasion/communication and orderly collective bargaining.

• These rights not absolute and should be balanced with others’ rights to economic freedom and property rights.

• Loss of right to picket for absence of peaceful protest central to Bill of Rights and AmCham supports this.

5. Labour productivity- will it increase or decrease

• Proposed Amendments will push up the cost of the least skilled labour without any correlation to increasing productivity

• This will result in a higher cost of doing business in South Africa

• See example on the next slide

TES Staff Example 1

• A TES employee is to get same pay/benefits as a permanent employee

• A permanent employee has the qualifications and skill and is likely to be more productive than a TES employee

• This will be a disincentive to train staff

TES Staff Example 2

Part time administrator assistant

• Works but partner has full time employment with benefits

• Family choice is that the part-timer takes home maximum pay

• Proposed law means that part-timer becomes full time and gets fringe benefits as well

• Take home pay is now less

• Unexpected consequence of proposed amendments

6. Industrial action- will this reduce or increase in intensity

• Amendments propose that employers can be held jointly and severally liable along with temporary labour employers for unfair labour practices

• There will be both direct and indirect costs associated with this step.

• This will expose employers to labour disputes, for reasons that could be entirely out of their control

• This should be carefully investigated to ensure that the law does not have unforeseen consequences

• See example on the next slide

Joint and Several Liability Example

• TES providers will likely offer client insurance to cover potential of joint and several liability

• This will add to the cost of doing business

• Possibility that disputes will increase. Only direct costs will be covered by insurance

• Indirect costs, like cost of time (duplication of having both TES and Client in dispute proceedings) will add to cost of doing business

• This is an unintended consequence which will not guarantee fair labour practices

7. Dispute resolution- will this become more expeditious and less costly?

• Employers will be able to dismiss high earners earning above R1 million per annum more easily with a 3 month pay settlement being the only requirement

• Business does call for more flexibility when hiring and firing of workers. Why is this principle only applied to very high earning workers?

• Applying it across the board will result in more people being hired due to flexibility of labour laws, especially for small employers

Conclusion

• Is the best focus added protection to the 2.72 million unionized workers who are key beneficiaries of the proposed amendments or to the

4.244 million people who are unemployed*

• The proposed labour amendments move in the opposite direction to that which is required to grow jobs and carry a raft of unintended

consequences.

• The amendments could mean that South Africa will not be able to attract scarce foreign direct investment which will go elsewhere to developing economies.

*South Africa.info: Trade Unions in South Africa, http://www.southafrica.info/business/economy/policies/tradeunions.htm•Congress of South Africa Trade Unions (COSATU) and affiliates: 1.8 million workers, •Federation of Unions of South Africa and affiliates: 520 000 workers, •National Council of Trade Unions and affiliates: 400 000 workers *Statistics South Africa: Quarterly Labour Force Survey: Quarter1, 2012; Statistics South Africa, 2012

Solution

• Request Government to review proposals for unintended consequences

• Implement a Regulatory Impact Assessment prior to any amendments being gazetted

• Explore whether objectives can be met in other ways e.g. enforcement.

Thank you!