SUBMISSION BY BUSA TO THE SELECT COMMITTEE ON LABOUR AND PUBLIC ENTERPRISES REGARDING THE EMPLOYMENT EQUITY AMENDMENT BILL

08 NOVEMBER 2013

INTRODUCTION

Business Unity South Africa (BUSA) is a confederation of business organisations including chambers of commerce and industry, professional associations, corporate associations and unisectoral organisations. It represents South African business on macro-economic and high-level issues that affect it at the national and international levels. BUSA's function is to ensure that business plays a constructive role in the country's economic growth, development and transformation and to create an environment in which businesses of all size and in all sectors can thrive, expand and be competitive.

As the principle representative of business in South Africa, BUSA represents the views of its members in a number of national structures and bodies, both statutory and non-statutory. BUSA also represents businesses' interests in the National Economic Development and Labour Council (NEDLAC). Internationally, BUSA is a member of the International Organisation of Employers (IOE), The Pan-African Employers' Confederation (PEC) the Africa Employers' Group and the Southern Africa Development Community (SADC) Employers' Group. BUSA is also the official representative of business at the International Labour Organisation (ILO), the African Union (AU) Social Affairs Commission, the B-20, the Organisation for Economic Cooperation and Development (OECD) and World Trade Organisation.

BUSA welcomes the call for submission of written input on the Employment Equity Amendment Bill (EE) to the Select Committee on Labour and Public Enterprises.

1. EMPLOYMENT EQUITY AMENDMENT BILL

1.1 MATTERS SUBJECT TO AGREEMENT

BUSA supports the following amendments:

BUSA participated in the Nedlac deliberations on this Bill in a meaningful social dialogue were significant consensus was reached with government and labour on majority of the proposed amendments. However, it's important to emphasise that BUSA's support for some of the clauses listed above is in consequences of the compromise agreements reached at Nedlac which is as follows:

Section 10 and s48 - discrimination matters can be referred to CCMA for arbitration, provided there is a full right of appeal to the Labour Court. This was a compromise agreement to promote accessibility, and also ensure full recourse to justice before the Court.

Section 21 and 55 - enables annual reporting for all sized businesses. We note our agreement to remove the requirement for separate reporting for small business into an option. This agreement was on condition that there needs to be a note in the Explanatory Memorandum in this regard.

Section 42- assessment of compliance with the deletion and addition of certain clauses. This was a compromise agreement.

Section 45 - failure to comply with DG request or recommendations provisions have been strengthened together with the opportunity for employer's to have certainty within a specified time.

1.2 MATTERS NOT AGREED

BUSA is unable to support the following sections relating to compliance and enforcement:

COMPLIANCE AND ENFORCEMENT

While BUSA acknowledges that the proposed amendments are aimed at improving compliance and greater accountability in order to promote employment equity and are targeted at improving the efficiency and effectiveness of enforcement by streamlining the process, we do not support Government's approach to remove undertakings, objections and appeals to compliance orders in order to improve existing enforcement mechanisms. It is clear that a primary motivation for inadequate enforcement is the absence of suitable resources in the labour inspectorate. There is no evidence, nor any reasonable basis to believe, that the proposed amendments will in fact produce more efficient and speedy enforcement or increased compliance.

BUSA believes that improvements in compliance and enforcement can be achieved through aligning these amendments with the ILO Convention 81 which has been ratified this year by the South African Government. We believe that the source of our problems lies with our inspectorate system. BUSA supports an independent, professional and capable inspectorate as contemplated in the ILO Convention 81. We believe that Convention 81 is a priority convention. It specifies in Article 3 that the functions of the labour inspectorate include: securing enforcement of legal provisions by inspectorate as far a legally enforceable and to supply technical information and advice to employers and workers concerning the most effective means to comply with legal provisions, failing which to bring this to the attention of the of the competent authority. Article 7 requires labour inspectors to be recruited with sole regard to their qualifications and performance and that labour inspectors shall be adequately trained for the performance of their duties. Article 10 and 11 require that the number of labour inspectors shall be sufficient to secure the effective discharge of duties and resources. Article 15 provides there should be a prohibition on conflict of interest and effective disciplinary measures and penalties, and confidentiality in the work of the inspectorate in national laws and regulations. These provisions should be incorporated into the BCEA Amendments and the EEA Amendments to ensure a compliant, credible and professional inspectorate.

We submit that the net impact of the following sections in the Amendment Bill undermine the achievement of and will be in breach of the above Articles of the Convention and general good practice. In short, the amendments do not go far enough to align with Convention 81.

1.2.1 We do not support the repeal of Sections 39 and 40: Objections and Appeals against Compliance Orders: The amendment provides that after the employer is issued with a compliance order by an inspector, the matter can be referred directly to Court without any further steps to correct or resolve the problem. It is a basic principle of fair procedure that a party should have the opportunity to engage and attempt to address concerns before a matter is referred to Court. BUSA proposes that should compliance order objections and appeals be removed as per the amendment that there should at least be the option of a conciliation process, preferably under the auspices of the CCMA, before a matter is referred to the Labour Court. This is motivated on the basis that the capacity of the inspectorate is limited, and that Court processes are expensive both to employers and the State. To go directly to Court, without a prior attempt at alternative dispute resolution, is also contrary to the principles of our labour law that encourage alternative dispute resolution before adjudication.

Furthermore, the legal advice that BUSA sought during the negotiations at Nedlac has raised concern with the enforcement mechanisms if a compliance order is to go directly to Court. The advice highlighted that the progressive trend in South Africa and elsewhere in Africa is to encourage alternative dispute resolution even outside the sphere of employment law. This is evident, for example, in the imminent introduction of mediation by the Department of Justice in the civil justice system. Therefore, BUSA proposes that should compliance order objections and appeals be removed, there should be an option of voluntary conciliation process upfront, preferably under the auspices of the CCMA, before the matter is referred to the Labour Court.

A copy of the detailed legal advice on enforcement and compliance proposals is attached as Annexure A.

1.2.2 We do not support the Amendment to s36(1): It is voluntary to request an undertaking of compliance by and employer. We are concerned that the change from a compulsory to a voluntary request may lead to a further by-passing of an attempt by the inspector to secure compliance. It is a basic principle and supported by Convention 81, that an employer should at least have an opportunity to comply before being issued with a compliance order or in some instances being taken directly to Court.

1.2.3 We will support the Amendments that certain matters to go directly to Labour Court, without even a compliant order being required s20(7) and s21(6) provided the word compliant ' is removed : We agree that failure to submit an employment equity plan, and failure to submit an employment equity report should be swiftly dealt with. However, the word ‘compliant' is problematic as it becomes an interpretative issue and once there is interpretation required, a pre-step is required to see if the issue can be resolved by clarification prior to going to Court. BUSA is unable to support the current amendment as this deprived a business of the opportunity to correct the problem or engage on issues prior to them going to Court. BUSA believes it would be inappropriate for the Labour Court to adjudicate upon a matter when there has been no prior process. This would undermine the status of the Court, result in backlogs and put the Court under significant pressure. In addition, the amendments introduce the potential for large numbers of correctable infringements or minor administrative matters to be referred to the Labour Court, effectively clogging up that Court's roll. In effect, the proposal requires the Labour Court to do the work of the labour inspectorate, something that Judges of the Court have expressed strong views on in the past. This is not an appropriate use of either the expertise or resources of the Labour Court, and there are currently no court rules that would enable it to dispose of a large volume of matters of this kind effectively other than by way of motion proceedings or trial. The likely consequences are worsening backlogs, significant delays in final resolution of matters, and adverse cost orders made where matters are unnecessarily brought before the Court. Ultimately this will work against resolution and justice being achieved. In addition, the added caseload may delay the resolution of other disputes properly brought before the Court, such as complex or mass dismissals and discrimination cases.

It is in any event desirable to allow for conciliation after a compliance order has been issued. Conceptually, it would be the compliance order that triggers this conciliation process, and for this reason it is desirable for a compliance order to be issued as a first step unless the designated employer has failed to comply with a written undertaking.

1.2.3 We do not support amendments to Schedule 1: Fines. Government motivated that it wanted to increase fines substantially and make fines a percentage of turnover rather than a fixed fee. While we support the need to have more severe category of fines we believe that these fines must be related to the transgression and should be targeted at securing the desired behaviour. The 2010 Regulatory Impact Assessment found against this option as an appropriate and effective mechanism to deal with non-compliance. BUSA believes that there is no evidence to suggest higher fines will result in better compliance; further, that turnover has no relationship to the offence (it is a basic principle of law that the ‘fine must fit the crime'); and that an economic risk assessment should be conducted, as was strongly recommended in the 2010 RIA. BUSA proposed that a better approach would be to focus on DG reviews as these are having a positive impact. Many of our members have participated in DG reviews which have identified weaknesses and improved compliance. We believe that the DG review shift attitudes and promotes transformation at the highest levels and this is a positive and constructive process which should be enhanced.

The other option is to adjust the fines upwards by 300% (200% is the trend in the BCEA and other revisions of fines, so this is a higher amount), to address the CPI increases since last amended, and to provide for annual CPI increases.

As another alternative, if turnover is retained, BUSA proposed the inclusion of a clause, similar to that in the Competition Act, that provides that the ‘Court, when having regard to the fine to impose would consider: the size of the business, the number of employees employed, the nature, gravity and number of contraventions, previous contraventions, steps taken to comply, turnover, profit after tax and the impact of the fine on the sustainability of the business and employment in the business.'

It is a well-established principle that the punishment must fit the crime, and without suggesting that contraventions of the Act are not serious, it is undesirable to link these forms of contraventions to turnover. The situation is different in the context of the Competition Act where non-compliance typically results in economic gains that should not have occurred. Should fines be linked to turnover, the Court should have discretion to determine the appropriate fine having regard to all relevant factors.

Duplication of fines should be avoided. For example, it is inappropriate to have both s16 and s17 as subject to fines: s16 contains the obligation to consult, whereas s17 simply lists the matters for consultation. We agreed and it is captured in the Nedlac Report that we should avoid duplication and splitting of fines for offences that are part of the same transgression. This agreement has been omitted from the Amendment Bill and should be incorporated.

It is also important to note that the inclusion of s24 (assignment of a senior manager), s25 (duty to inform) and s26 (duty to keep records) were never part of the matters tabled initially as part of the Nedlac negotiations and Report. The addition of these sections as additional categories for highly onerous fines is not acceptable as it has been unilaterally altered after the conclusion and contrary to the Nedlac Agreement. There are existing enforcement mechanisms for such infringements in any event. As such these post-Nedlac additions to fines should be deleted.

2. CONCLUSION

BUSA acknowledges the constructive role played by the CCMA in assisting the parties at Nedlac to achieve much higher degree of consensus in the negotiation of this Bill. We support transformation in the workplace by promoting equal opportunity and fair treatment in employment through the elimination of unfair discrimination. We remain committed to supporting the implementation of affirmative action measures to redress the disadvantages in employment in order to ensure equitable representation in all occupational categories and levels in the workforce.

As an apex business organisation, we remain committed to ensuring that every employer take steps to promote equal opportunity in the workplace and that no one is unfairly discriminated against. We acknowledge that 19 years into South Africa's new democracy, black people, women and people with disabilities continue to be under-represented in the country's workforce and company boards we are committed to work with our members to support transformation programmes for social and economic growth. We also welcome the initiatives by a number of companies who continue to show commitment to transformation as reported in the recent Commission on Employment Equity Report.

We trust that the above comments clearly articulate concerns of BUSA with regard to the Employment Equity Amendment Bill. We look forward to addressing the Select Committee on Labour and Public Enterprises on this submission.

Issued by BUSA, November 8 2013

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