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Employment Equity Amendment Act – How is your company affected?

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January 2014 has brought with it a number of significant amendments to the Employment Equity Act No. 55 of 1998 with the promulgation of the Employment Equity Amendment Act, 2013.

In this article I will seek to address the major changes in the various chapters and sections of the Act and how they will affect you business, particularly with regards to the enforcement process and the issuing of fines for non-compliance.

Chapter 1: Definitions

Section 1 of the Act which deals with definitions, has seen some noticeable changes, which see “local spheres of government” being excluded from the definition of a designated employer.

Further to this, the turnover thresholds applicable to companies with fewer than 50 employees, found in Schedule 4 of the Act, which is used as one of the criteria to determine whether an employer is designated, have been amended to take into account inflationary adjustments since the Act was first promulgated in 1998. Please refer to Schedule 4 below:

Sector
Old Threshold – Total Annual Turnover
New Threshold – Total Annual Turnover
Agriculture R2 million R6 million
Mining and Quarrying R7.7 million R22.5 million
Manufacturing R10 million R30 million
Electricity, Gas and Water R10 million R30 million
Construction R5 million R15 million
Retail and Motor Trade and Repair Services R15 million R45 million
Wholesale Trade, Commercial Agents and Allied Services R25 million R75 million
Catering, Accommodation and other Trade R5 million R15 million
Transport, Storage and Communications R10 million R30 million
Finance and Business Services R10 million R30 million
Community, Special and Personal Services R5 million R15 million
Schedule 4

The definition of a “designated group” from the principle Act has been expanded upon, to read:
“Designated Groups” mean black people, women and people with disabilities who –

    • Are citizens of the Republic of South Africa by birth or descent: or
    • Became citizens of the Republic of South Africa by naturalisation –
      • Before 27 April 1994;
      • After 26 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date but who were precluded by apartheid policies.

This effectively means that affirmative action measures do not apply to anyone who falls outside this definition. Please bear in mind that this will have an impact on your B-BBEE scorecard as well.

Chapter 2: Prohibition of unfair discrimination

Section 6 sees the inclusion of a clause which states that “a difference in terms and conditions of employment between employees of the same employer performing the same or substantially the same work of equal value that is directly or indirectly based on the grounds of race, gender, pregnancy, marital status, family responsibility, ethnic or social origin, colour, belief, political opinion, culture language, birth or any other arbitrary ground amounts to unfair discrimination.

Should this be the case, the employer is bound by an amendment to Section 27 to take measures to progressively reduce the income differentials.

Section 8, which deals with psychometric assessments, has an additional paragraph inserted, which will compel an employer who conducts psychometric assessments on employees or job applicants to ensure that the test has been certified by the Health Professions Council of South Africa or any other body which is authorised by law to certify psychometric test or assessments.

Section 10 sets out clearly defined dispute resolution procedures for alleged unfair discrimination, which sees the inclusion of the following:
In addition to the existing clause 1, which stipulates that the first port of call for alleged unfair discrimination is a referral to the CCMA for conciliation, the following clauses are included

“An employee may refer the dispute to the CCMA for arbitration if:

  • The employee alleges unfair discrimination on the grounds of sexual harassment; or
  • In any other case, that employee earns less than the amount stated in the determination made by the Minister in terms of section 6(3) of the Basic Conditions of Employment Act; or
  • Any party to the dispute may refer it to the CCMA for arbitration if all the parties to the dispute consent to arbitration.

Furthermore the amendments will allow a party affected by an arbitration award, to lodge an appeal against such arbitration award by the CCMA, concerning this section, to the Labour Court. The party appealing has 14 days from the date of the award to lodge an appeal with the Labour Court.

Section 11 has been expanded upon to give clear guidelines regarding the “burden of proof” in discrimination cases.

If unfair discrimination is alleged on a ground of race, gender, pregnancy, marital status, family responsibility, ethnic or social origin, colour, belief, political opinion, culture, language and birth, the employer against whom the allegation is made, must prove, on a balance of probabilities that:

  • The discrimination did not take place as alleged; or
  • Is rational and not unfair, or is otherwise justifiable

If unfair discrimination is alleged on an arbitrary ground, the complainant must prove, on the balance of probabilities, that:

  • The conduct complained of is not rational;
  • The conduct complained of amounts to discrimination; and
  • The discrimination is unfair

This amendment places a burden of proof on the complainant, which was not explicitly stated in the original Act. With these guidelines, we should see a reduction in discrimination cases as an employee or job applicant would now need to prove that the conduct complained about is not rational, is in fact discrimination and that it is unfair. This should bring an end to every second employee claiming “Discrimination” when they don’t get their way in the workplace.

Chapter 3: Affirmative Action

Section 15, 16, 19, 20 and 21 which deal with the designated employer’s duty to consul; conduct an analysis of its workforce profile, policies practices and procedures; prepare and implement an employment equity plan; and report to the Director General have been changed in terms of reference to “occupational categories and levels.” The amendments take into account only “occupational levels.”

The reason for this is that when consulting, analysing, planning and reporting across “occupational categories”, we see sufficient representation of designated groups; however, the real disparity with regards to equitable representation lies in the “occupational levels”. This change will force employers to focus on the real burning platform which affects transformation, i.e. underrepresentation of designated groups within “occupational levels” in their workplaces.

Section 20 sees the introduction of a clause which allows the Director General to apply directly to the Labour court to impose a fine in accordance with Schedule 1 on an employer who fails to prepare or implement an employment equity plan in lines with Section 20, without the option of first obtaining a written undertaking to comply or issuing a compliance order.

This has been introduced to highlight the importance of preparing an implementing an employment equity plan, which, in the past, was seen by some employers as merely a suggestion rather than a legal imperative with “paper compliance” being the order of the day. This too, will drive the principles of the B-BBEE Act and Codes of Good Practice.

Previous Contravention
Contraventions of any provisions of sections 16, 17, 19, 22, 24, 25, 26 and 43(2)
Contraventions of any of the provisions of sections 20, 21, 23 and 44(b)
No previous contravention R1 500 000 The greater of R1 500 000 or 2% of the employers turnover
A previous contravention in respect of the same provision R1 800 000 The greater of R1 800 000 or 4% of the employers turnover
A previous contravention within the previous 12 months or two previous contraventions in respect of the same provision within three years R2 100 000 The greater of R2 100 000 or 6% of the employers turnover
Three previous contraventions in respect of the same provision within three years R 2 400 000 The greater of R2 400 000 or 8% of the employers turnover
Four contraventions in respect of the same provisions within three years R2 700 000 The greater of R2 700 000 or 10% of the employers turnover
Schedule 1

Section 21 which deals with the designated employer’s duty to submit an EEA2 report to the Director General has changed significantly. In the past, there was a distinction made between reporting periods of Large employers (150+ employees) and Small employers (0 – 149 employees).

With the amendments, all employers must now submit an EEA2 and EEA4 report every year, by the first working day of October or on such other date which may be prescribed.

Also, an employer who becomes designated on or after the first working day of April, but before the first working day of October, must submit its first report by the first working day of October the following year, or on such other date that may be prescribed. Please see a worked example of how this will affect your company below:

For example:
  • If you become designated on 18 June 2014, you must submit your report by the first working day of October 2015, or on such other date that may be prescribed
  • If you become designated on 15 March 2014, you must submit your report by the first working day of October 2014, or on such other date that may be prescribed

Furthermore, the amendments to this section stipulate that should you not be able to report by the first working day of October, you are obliged to notify the Director General in writing by the last working day of August in the same year and give reasons for your failure to report by the deadline

Another significant amendment to this section is that the Director General may apply to the Labour Court to impose a fine in accordance with Schedule 1 (see table above) if the employer:

  • Fails to submit a report in terms of this section;
  • Fails to notify and give reasons to the Director General for failing to report by the deadline;
  • Has notified the Director General of failure to submit, but the reasons are false or invalid.

Thus, to avoid unnecessary complications, reporting by the deadline is paramount.

Section 27 amendments were mentioned in the beginning of this article, where we saw that “a difference in terms and conditions of employment between employees of the same employer performing the same or substantially the same work of equal value that is directly or indirectly based on the grounds of race, gender, pregnancy, marital status, family responsibility, ethnic or social origin, colour, belief, political opinion, culture language, birth or any other arbitrary ground amounts to unfair discrimination.

An employer is bound to progressively reduce these disparities.

Chapter 5: Monitoring, enforcement and legal proceedings

Section 36 dealing with a “written undertaking to comply” has been amended to state that a labour inspector may obtain a written undertaking to comply from the designated employer who has failed to:

  • Consult as per Section 16
  • Conduct an analysis as per section 19
  • Publish a report as per section 22
  • Assign responsibility as required by section 24
  • Inform employees of the Act as per section 25 or
  • Keep records as per section 26

From the list above, and as mentioned earlier, we can see that the duty to prepare and implement an employment equity plan as well as report are excluded. Failure to observe these two duties will allow for procession straight to the Labour Court upon application by the Director General.

Other changes state that if an employer fails to comply with a written undertaking within the time period stipulated in it, the Director General may apply to the Labour Court to make the undertaking or part thereof an order of the court.

Section 37 which deals a “compliance order” has been amended to state that a labour inspector may issue a compliance order to a designated employer who has failed to:

  • Consult as per Section 16 on the topics dealt with in S17
  • Conduct an analysis as per section 19
  • Publish a report as per section 22
  • Assign responsibility as required by section 24
  • Inform employees of the Act as per section 25 or
  • Keep records as per section 26

The previous provisions which state that the inspector can issue the compliance order if the employer refuses to sign a written undertaking to comply or has failed to adhere to the written undertaking by the deadline, have been taken out

With this change, we can see that inspectors will be faced with a choice of either securing a written undertaking or issuing a compliance order. I believe they will default straight to the compliance order.

Once again, we can see that the duty to prepare and implement an employment equity plan as well as report, are excluded. As before, failure to observe these two duties will allow for procession straight to the Labour Court upon application by the Director General.

Other changes state that if an employer fails to comply with a compliance order within the time period stipulated in it, the Director General may apply to the Labour Court to make the undertaking or part thereof an order of the court.
Section 39 and Section 40 which deal with and objection and appeal against a compliance order are repealed. Thus, the designated employer is left no recourse other than to wait for his day in Labour Court should he believe he has complied with the provisions of the compliance order and the Director General submits an application to Labour Court to impose fines in accordance with Schedule 1.

Section 42, governing the Director General’s “Assessment of Compliance” has seen the existing clauses being substituted with the following clauses:
In determining whether a designated employer in implementing employment equity in compliance with this Act, the Director general or any person or body applying this Act, may, in addition to factors listed in Section 15, take the following into account:

  • The extent to which suitably qualified people from designated groups are equitably represented within each occupational level of the employer’s workforce in relation to the demographic profile of the national and regional economically active population;
  • Reasonable steps taken by the designated employer to train suitably qualified people from the designated groups
  • Reasonable steps taken by the designated employer to implement its employment equity plan
  • The extent to which the designated employer has made progress in eliminating employment barriers that adversely affect people from designated groups
  • reasonable steps taken by the employer to appoint and promote suitably qualified people from designated groups
  • Any other prescribed factor.

Further to these changes, the Minister may, after consultation with NEDLAC, issue a regulation which must be taken into account when determining whether a designated employer is implementing employment equity in compliance with the Act

This regulation may also specify the employer’s compliance with reference to either the national or regional economically active profile.

In any assessment of its compliance with this Act or in any court, a designated employer may raise any reasonable ground to justify its failure to comply.

Section 45 which describes the consequences in “failing to comply with Director General’s request or recommendation” has changed significantly.

The amendment now stipulates that if an employer fails to comply with a request made by the Director General for the employer to:
submit copies of its analysis or Employment Equity Plan;

  • submit any record, book correspondence or information which could be relevant to this Act;
  • honour a request for a meeting with the employer to discuss its employment equity plan and implementation thereof;
  • allow a meeting with an employee or union, workplace forum or other relevant person;
  • The Director General may then apply to the Labour Court
  • for an order directing the employer to comply with the request or recommendation; or
  • If the employer fails to justify the failure to comply with the request or recommendation, to impose a fine in accordance with Schedule 1.

Further to this, if an employer notifies the Director General in Writing within the period specified in the request or recommendation that it does not accept the request or recommendation, the Director General must institute an application to the Labour Court in accordance with (a) and (b) above within:

  • 90 days of receiving the employers notification, in the case of a request; or
  • 180 days of receiving the employer’s notification, in the case of a recommendation.

Should the Director General not institute proceedings in the timeframe stipulated above, the request or recommendation lapses.

Should an employer challenge the validity of the Director General’s request or recommendation, the challenge can only be made in Labour court proceedings as described above.

The introduction of these timeline will give more clarity to employers regarding how to deal with a request or recommendation but will place a large amount of pressure on the employer to firstly, adhere to both a request and recommendation and secondly, on the Director General to enforce compliance.

Section 48 which deals with the “powers of a commissioner in arbitration proceedings”, has been amended to state that an award made by the commissioner of the CCMA hearing a matter in terms of Section 10 may include any order which can include payment of compensation by the employer to that employee, payment of damages by the employer to that employee and / or an order directing the employer to take steps to prevent the same discrimination or a similar practice from occurring, but, an award of damages mat not exceed the amount stated in terms of section 6(3) of the Basic Conditions of Employment Act.

This clause was amended to ensure congruence between the EE Act and the BCEA.

Section 50 which stipulates the “powers of the Labour Court” has introduced an additional clause which states that fines payable in terms of the Act must be paid into the National Revenue fund. In the original Act, there was no mention of where fines were to be paid into.

This section has also indicated that the Labour Court has the power to review an administrative action I terms of the Act on any grounds that may be permissible by law.

Chapter 6: General Provisions

Section 53 which deals with the awarding of state contracts includes a new subsection which states that the minister may, in the code of good practice, set out factors that must be taken into account when assessing whether an employer complies with Chapter 2 or Chapter 3 of the Act.

Section 55 has seen minor changes in that the Minister may, by notice in the Gazette, make regulations providing for separate and simplified forms and procedures in respect to sections 19, 20, 21, 25 and 26 for employers who employ less than 150 employees

Section 59 which deals with breaching confidentiality with respect to information acquired during duties concerning the employers implementation of this Act, has seen the maximum permissible fine move from R10 000 up to R30 000.

Section 61 which highlights the penalties for obstruction, undue influence and fraud has seen the maximum permissible fine move from R10 000 up to R30 000.

Section 64 has changed with the insertion that the Minister may, after consultation with the commission, by notice in the Gazette, amend the annual turnover thresholds in Schedule 4 to counter the effect of inflation.

Conclusion

With all the amendments mentioned above, we can clearly see that the Department of Labour is taking its role very seriously with regards to employment equity.

Not only has dealing with the adverse effects of past discrimination become a social imperative, but compliance with Employment Equity Legislation has now, more than ever, become a business imperative.

Employers who fail to comply with the provisions of the Employment Equity Act No 55 of 1998 and the Employment Equity Amendment Act, 2013 not only face large financial penalties in the form of fines from an Employment Equity legislative perspective and adverse consequences on their B-BBEE scorecards by failing to transform, but they may tarnish their corporate reputation and lose their competitive advantage when recruiting and retaining high performing staff as well as tendering for business.

For any queries regarding the Employment Equity Amendment Act 2013, feel free to contact the LabourNet Helpdesk on 0861 LABNET / 0861 522 638.

If you are not yet a LabourNet client, link to the LabourNet website www.labournet.com to view all our services, follow us on Twitter, join us on Facebook or contact us on our National Helpdesk on 0861 522638.

Date:  28 January 2014
Author Name: Greg Kowalik