Briefing notes: Labour law amendments August 2001

CABINET APPROVES LABOUR LAW AMENDMENTS 

Executive Summary of Amendments

Download current draft version 25 Aug 2001 (MS Word 97)

Briefing notes: Labour law amendments August 2001

1. Introduction

The Cabinet meeting of 22 August 2001 approved the tabling of the following amendment bills in Parliament:

• Labour Relations Amendment Bill, 2001
• Basic Conditions of Employment Amendment Bill, 2001.

The Bills were presented to Cabinet after negotiations in NEDLAC with organized labour and business were completed last month. These negotiations also covered a third amendment bill, the Insolvency Amendment Bill which falls under the jurisdiction of the Department of Justice.

This briefing document explains the background to the labour market review process and the main amendments agreed to by cabinet.

2. Background

In his Fifteen Point Programme in 1999, the Minister of Labour, Membathisi Mdladlana committed himself to: "effect[ing] amendments that would improve the efficiency of the labour market and promote employment creation". In particular, the Programme states, "we will seek to review provisions that have unintended consequences on employment creation or are wrongly perceived to be detrimental to employment creation or the expansion of enterprises, new and old, domestic and foreign."

This commitment led to the start of the labour market policy review process. Key stakeholders including organized business, labour and the community constituency in NEDLAC were consulted. The review process concluded that the fundamentals of our labour market policy were sound and the overall thrust of the legislative framework was correct. However, it did identify aspects of our labour law which would require amendments to meet the following objectives:

• Improve the application the Labour Relations Act (LRA) and Basic Conditions of Employment Act (BCEA);
• Ensure the effective alignment of our laws with the changing labour market environment;
•  Address unintended consequences of some provisions; and
• Increase the sensitivity of our legal framework to the imperative to create jobs.

In addition, the Department was concerned to address the following policy imperatives for the Department and government as a whole:

• small business promotion and development;
• improved protection for vulnerable workers; and the ]
• reduction of negative perceptions of investors.

The draft amendment bills were prepared and published in July 2000 for public comments and negotiations in NEDLAC. Negotiations in NEDLAC were concluded after about one year. However, a significant period of this process was taken up with bilateral discussions between organized business and labour in the Millennium Labour Council. By the end of July 2001 agreement was reached on the vast majority of the amendments in Nedlac.

3. Areas of amendments

3.1 Bargaining councils

The Labour Relations Act regulates collective bargaining including the role and functioning of bargaining councils. The following proposed amendments seek primarily to enable the more effective functioning of bargaining councils so that they can service employer and employee parties better, including small business.

• To ensure that bargaining councils address the interests and concerns of small businesses, councils will be obliged to provide a report on an annual basis to the Registrar of Labour Relations of their activities in this regard
• To assist councils enforce their agreements, more appropriate powers have been given to designated agents to monitor compliance with agreements and more expeditious procedures introduced.
• To improve the oversight over bargaining councils and their benefit funds, the powers of the Registrar to investigate alleged irregularities and non-compliance with the Act are increased and the procedure to verify the representativity of councils is enhanced.
• To speed up the process of establishing a rational framework for bargaining in the public service the processes of designating, establishing, amalgamating and varying the scope of bargaining councils in the public sector has been clarified and greater autonomy given to the Public Service Co-ordinating Bargaining Council.

3.2 Dispute resolution by the CCMA and the Labour Court

The proposed amendments should significantly enhance the effective management of disputes and lead to greater stability in the labour market and improved services for those who need them most: vulnerable workers and small employers. The proposed amendments focus on three areas: improvements to processes and procedures, reducing abuse and addressing application problems.

Improving the dispute resolution system

The amendments that are proposed to improve the dispute resolution system, particularly for small business employers and or vulnerable workers, include:

• Enabling a speedier one-stop process of conciliation and arbitration for individual unfair dismissals and unfair labour practices. This so-called 'con-arb' process will allow conciliation and arbitration to take place as a continuous process on the same day, if necessary.
• Giving employers and employees an option to request by mutual consent the CCMA or a bargaining council to appoint an arbitrator to conduct a final and binding disciplinary enquiry. This will eliminate the duplication of proceedings involved in having both an internal inquiry and arbitration at the CCMA or Labour Court hearing. The employer would be required to pay a fee.
• Deeming arbitration awards made by the CCMA, bargaining councils and accredited agencies in terms of the Act to be final and binding and to be capable of being enforced in the same manner as a court order. This will alleviate the need for an employee whose award is not complied with to approach the Labour Court to have the award made an order of Court.
• Clarifying that during a probationary period, an employer will have to meet a lower burden in establishing the substantive fairness of dismissal on grounds of performance. Such a dismissal will however still have to follow a fair procedure.

Addressing application problems

The amendments that address application problems and issues include:

• Providing that Labour Court judges will be concurrently appointed as judges of the High Court and would thus have life long tenure. This will enable the Labour Court to attract and retain suitable judges.
• Giving Commissioners a full discretion as to the amount of compensation that may be awarded when a dismissal is procedurally unfair, subject to a maximum award of 12 months' wages. At the moment there is no discretion and unrealistically high amounts of compensation have been awarded, especially in cases affecting workers with short service.
• Aligning the powers of bargaining council arbitrators with those of the CCMA.
• Aligning the LRA with the recently passed Protected Disclosures Act. It is automatically unfair for a person to be dismissed or victimized as a result of him/her making a protected disclosure.

Limiting abuse

Amendments have been proposed to try and limit the abuse of the CCMA often by relatively few individuals and organizations who delay proceedings, mislead workers and employers etc. These amendments include:

• Giving the Minister the power to make regulations, after consulting NEDLAC and the CCMA, to determine matters such as representation of parties and the charging of fees by the CCMA.
• Giving Commissioners at the CCMA the power to deal with contemptuous conduct by one of the parties by referring his/her findings to the Labour Court which can confirm the findings and if appropriate impose a sanction for contempt.
• Giving Commissioners broader powers to issue cost awards when frivolous and hopeless cases are brought to the CCMA.
• Adding a requirement that the Registrar of Labour Relations must be satisfied that an applicant is a genuine trade union or employer organisation before registering it. This is to reduce the number of applicants, generally labour consultants, who seek registration so that they can represent employees or employers at dispute resolution proceedings of a trade union or employers' organisation.
• Enabling the Registrar of Labour Relations to wind up and cancel the registration of labour organisations that have ceased to operate as trade unions or employer's organisations.

3.3. Rights and responsibilities of employers and workers in the event of retrenchments, transfers of a business and insolvency

In the context of high unemployment, large numbers of retrenchments and high levels of insolvency, it is important to provide certainty to employers and employees as to their rights and obligations. The law should also facilitate and encourage job retention and the genuine search for alternatives.

With these objectives in mind, the Department engaged in very robust negotiations in NEDLAC. On the table were very detailed proposals arising out of an agreement reached between organized business and labour at the Millennium Labour Council (MLC). The final outcome relates to the regulation of retrenchments, transfer of businesses and liquidations/insolvencies.

This package of measures will improve the position of workers and give them more avenues for action in the event of both unprocedural actions of employers on the one hand and engage in constructive processes to assist in the saving of businesses and jobs on the other.

Employers also gain from the proposed changes to these laws. They no longer face a situation in which there can be drawn out litigation over the substantive fairness of a retrenchment where the Labour Court may be tempted to second-guess a business decision. There is more clarity, certainty and flexibility when contracts of employment are transferred when a business changes hands.

Details of the proposed amendments are as follows:

Retrenchments

Section 189 of the present Labour Relations Act together with a Code of Good Practice which was published last year sets out the procedures that should be followed in the event of retrenchments which include a requirement to consider alternatives to dismissal and extensive consultation.

The trade union movement had a number of concerns, including the fact that employers do not take the procedures in the Act or Code seriously. In addition, workers have no right to strike or recourse to the Labour Court if they want to oppose the substantive reasons for retrenchment. This was raised very forcefully by the trade union movement. As a result an agreement was reached at the MLC where, inter alia, employers agreed on the right to strike in respect of retrenchment disputes.

The NEDLAC negotiations, using the MLC agreement as a basis, considerably revamped and enhanced Section 189 of the Act. The proposed amendments contain the following provisions:

• Parties to a retrenchment dispute are obliged to engage in "meaningful joint consensus seeking process".
• This process can also be enhanced by utilizing the services of a facilitator from the CCMA.
• If the process of meaningful interaction fails after a period of no less than 60 days, workers in companies which employ over 50 employees can elect whether they want to go on strike or take their dispute to the Labour Court in respect of dismissals above a specified size.
• If workers elects to refer a dispute about the substantive fairness of a dismissal for operational requirements to the Labour Court, the Labour Court may only consider whether the dismissal was in fact a retrenchment, whether it was operationally justifiable on rational grounds, whether there was a proper consideration of alternatives and whether the selection criteria were fair and objective.
• If workers elect to strike, the existing strike procedures apply except that 14 days notice must be given of a secondary strike.
• The onus is put on the employer to prove that information that they refuse to disclose to trade unions during consultation is not relevant. This will improve the ability of unions to gain access to information which will allow them to participate meaningfully in retrenchment consultations.
• Workers can also apply to the Labour Court on an expedited basis to compel an employer to comply with the retrenchment procedures.
• Individually retrenched employees have the right to choose whether they want to go to the Labour Court or the CCMA for arbitration.

At the time of concluding the NEDLAC negotiations, business were still in the process of receiving a full mandate on the above proposals.

Transfer of employees when a business changes hands

Government's initial objective in respect of this issue, contained in section 197 of the LRA, was to provide greater certainty and flexibility to local and foreign investors who want to acquire local businesses. In the course of the negotiations, provisions have been added to prevent transfers being used as a device to deprive employees who have been transferred to a new employer of accrued benefits.

Proposed amendments to section 197 include the following:

• Clarify that the provision applies to all going concerns. A new 197A has been drafted in respect of insolvent businesses.
• Allow for the new employer to either negotiate new conditions with trade unions or employees or offer conditions which on the whole are as favourable. The latter option only applies where there is no collective agreement.
• Clarify the obligations of the new and old employer in respect of collective agreements, pension and provident fund contributions, outstanding claims, circumstances under which severance pay can be claimed.
• Create a new obligation on the employer who is transferring employees to take reasonable steps to ensure that the new employer is capable of taking over the benefit obligations that have already accrued to the employees.

Insolvency

Workers of companies that go insolvent are often worse off than workers who have been retrenched while insolvencies are not due to the fault of the employees. A package of amendments have been introduced to try and improve the situation facing workers in insolvent companies and prevent employers using insolvencies to restructure companies while escaping their labour law obligations. There is also a commitment by the NEDLAC parties to continue to discuss further amendments to all relevant laws that deal with insolvency.

Amendments proposed include:

• Providing in the BCEA that employees whose contracts of employment are terminated as a result of insolvency are entitled to severance pay.
• Requiring in the BCEA that employers' pay over their contributions as well as deductions made from employees salaries for benefit funds within 7 days of the deduction being made or the contribution becoming due. This will prevent money intended for benefit funds becoming part of the insolvent estate.
• Requiring in the LRA that employers notify trade unions or employees of circumstances and legal proceedings that may result in insolvency.

In addition amendments to the Insolvency Act were agreed at NEDLAC that in the event of an insolvency would suspend as opposed to terminate the contract of employment of an employee and allow for a limited process of consultation for employees who want to attempt to save the company which is in provisional liquidation.

3.4. Basic conditions of employment and contractual relationships

While the implementation of new conditions of employment since 1999 has gone well, a limited number of areas could be adjusted or refined to

• be more sensitive to the imperatives of job creation and small business development;
• respond more appropriately to present realities including increased casualisation so as to enhance the protection of vulnerable workers; and
• improve the application of the Act, including in respect of enforcement.

This adjustment could take place through legislative amendments as well as through the rolling out of the Act through collective bargaining as well as through Sectoral or Ministerial determinations which vary conditions in respect of certain sectors, areas or circumstances.

Arising out of the negotiations process, amendments have been agreed to which will:

• Enable employers and trade unions to conclude a collective agreement to extend the weekly limit on permissible overtime to 15 hours for up to two months in any 12 month period;
• Reduce the minimum notice period to one week during the first six months of employment and restricting the ability of a collective agreement to reduce the notice periods below two weeks;
• Enable the Minister through a ministerial or sectoral determination to increase the ordinary hours of work above 45 if the resultant working time arrangements are more favourable either where there is a collective agreement, where it is necessitated by the operational circumstances of the sector or in respect of the agricultural or private security sectors.
• Give the Minister the power, after consultation with NEDLAC to determine what kinds of payment should be included or excluded from the calculation of remuneration;
• Introduce alternate members from organized business and labour to the Employment Conditions Commission; and
• Improve the enforcement mechanisms in the Act.

Some of the amendments originally proposed, most especially the proposal to normalize work on Sunday, have been withdrawn. This is as a result of the agreement reached in the MLC, the effect of which would be to retain the status quo for work on Sunday for all employees except those that are employed in establishments of either 20 or 30 employees. For these workers the only change would be that the premium would be 'time and a half' instead of 'double time' for working occasionally on a Sunday. This would not be easily implementable and enforced and thus it would be more appropriate to maintain the status quo.

Last but not least in this regard are amendments made to the LRA and BCEA which attempt to address the practice of converting contracts of employment into contracts for service without altering the employment relationship, thus 'converting' genuine employees into independent contractors.

As a result amendments have been proposed which:

• Create a series of rebuttable presumptions for all employees who earn below a threshold of approximately R90 000 per year as set by the BCEA as to whether or not an employment relationship exists. The threshold will prevent skilled consultants from seeking to use this provision to claim protection as employees.
• Enabling NEDLAC to issue a Code of Good Practice on guidelines in respect to the above; and
• Allowing parties to approach the CCMA for an advisory award as to whether persons involved in the above mentioned arrangements are employees.

As a result of these proposed amendments, workers in such situations would receive the effective protection of labour law including the right to lodge a dispute in the event of an unfair dismissal or unfair discrimination and the right to basic conditions of employment.

Minister's Statement

CABINET APPROVES LABOUR LAW AMENDMENTS
FOR TABLING IN PARLIAMENT
22ND AUGUST 2001

The Cabinet today approved amendments to the Labour Relations Act and Basic Conditions of Employment Act for tabling in Parliament during this session.

Just over a year ago, I released a Labour Relations Amendment Bill and Basic Conditions of Employment Amendment Bill for public comment and negotiations at NEDLAC. We received important public comments and have recently completed very constructive negotiations at NEDLAC.

The miracle that I promised did not become a mirage. Parliament will receive a set of amendment bills that have the substantial support of organised labour and business and include something for everyone. I said something for everyone and not everything for everyone because for any right conferred to any of the social partners there is a reciprocal obligation on another.

Some amendments in these bills will improve the protection of workers while others will assist to improve the efficiency of the labour market. Some amendments will make it easier for small business to comply with our laws while others will make it more difficult for unscrupulous players in the labour market to abuse vulnerable workers.

We have made amendments to:-

• Improve the functioning of bargaining councils;
• Increase the effectiveness and efficiency of the CCMA, particularly in relation to their ability to serve small businesses and vulnerable workers;
• Bring stability to the Labour Court in respect of the status of judges in this Court;
• Improved the procedures in the event of dismissal including providing for probation and introducing a more fairer system of compensation in the event of unfair dismissal;
• Significantly revamping the procedures in the event of retrenchments;
• Provide certainty and clarity as to the transfer of workers' contracts of employment when a company changes hands;
• Address problems that workers face in the event of an insolvency;
• Prevent the abuse of workers who are forced to sign contracts which turn them into independent contractors when they are in fact employees;
• Improve the balance between labour market efficiency and decent labour standards in respect of the Basic Conditions of Employment Act; and finally to
• Improve the application of the Basic Conditions of Employment Act

This is a significant set of amendments. I am confident that the amendments as a package are a signal to our supporters and detractors alike that we are responsive to the changing nature of the labour market and to the concerns and problems of all our stakeholders: organised labour and business, unorganised workers, investors, small employers and those whose possibilities of gaining employment could be limited by the operation of our laws.

If these amendments are approved by Parliament, organised labour will be able to elect whether they want to strike or contest the substantive fairness of a retrenchment through the Labour Court. Vulnerable workers will become less exposed to abusive contractual relations and have easier access to the CCMA.

Small businesses should see their interests taken into account by bargaining councils and will undoubtedly get a better deal at the CCMA. Investors will have a more certain climate in which to do business, especially in relation to the transfer of contracts of employment where they buy a business.

It is our view that these labour law amendments coupled together with other government initiatives including the New African Initiative; the roll out of our skills development strategy, the soon to be introduced Immigration Bill, the Integrated Rural Development Strategy; and the Urban Renewal Programme; all contribute to increasing the quantum of new investment in our country. This can only be good news for job creation and economic development.

The negotiation process with our social partners took over a year. There were moments of high tension and were many long nights. A lot of time and energy was also spent in obtaining appropriate mandates as each team of negotiators was determined to get nothing but the best for its constituency.

I would like to acknowledge the contribution that the Millennium Labour Council made in the process. A number of critical agreements which laid the basis for constructive negotiations in the NEDLAC process were reached by organised labour and business in this Council.

One of the hallmarks of a strong and dynamic democracy is vibrant social partnership between government, organised labour and business. We are fortunate to have such a strong tradition of this in South Africa.

Strong social partnership brings with it many advantages: labour laws that are agreed upon have high levels of credibility and legitimacy and are more likely to be implemented and enforced. This has been our experience to date.

But social partnership requires hard work, hard bargaining and at the end deal making. The harder one works, the harder one is likely to develop win-win solutions. I believe that this has been the case in respect of retrenchments and pay for work on Sunday.

Government had different proposals a year ago in respect of addressing these issues. Firstly, in respect of retrenchments our proposals sought to improve the operation of the consultation process and reinforce the original intention of the Act to encourage parties to find solutions to avoid or minimize retrenchment.

We were however persuaded in the negotiation process to consider a more significant revamping of the retrenchment procedures to include:-

• Strengthening the processes of consultation prior to a retrenchment, including by giving parties the option to have a facilitator to assist them;
• Allowing workers to choose whether to strike or refer a dispute about the substantive fairness of their retrenchment to the Labour Court;
• Interdicting employers who do not follow the correct procedures in respect of retrenchment disputes; and
• Circumscribing the role of the Labour Court when considering whether or not a retrenchment was substantially fair.

This is a new route but I am of the view that these amendments would assist both employers and employees in managing retrenchments in a better way than up to now.

Secondly, in respect of Sundays it was clear during the negotiations that organised business and labour did not have a problem with the status quo except in respect of companies which employed less than 20 or 30 employees. As a result and bearing in mind other representations that was received from the public and church groups, Cabinet approved that the status quo rather remain.

While laws can follow traditions and practices, it is more difficult for law to lead the way. However, we believe that we can still address some of the problems we sought to address, for example in respect of workers in the tourism and services sector, through existing provisions that allow conditions to be varied.

WAY FORWARD

Cabinet approval of these Amendment Bills ends a further phase in the process that we embarked upon over 18 months ago to revise two of the central labour laws administered by the Department of Labour.

The next phase is the Parliamentary phase. It is my intention to expedite the tabling of the Bills in Parliament, after which the baton passes to the Labour Portfolio Committee. Public hearings will be scheduled by the Portfolio Committee and after consideration of the representations received; the Bills can be finalized by Parliament.

Those who would like to further comment on the proposed amendments will have the opportunity to do so during the public hearings to be arranged by the Labour Portfolio Committee at Parliament. It remains for me to thank all of those who made this possible for us to be where we are today - organised labour, organised business, Nedlac our legal drafters, my chief negotiators as well as ordinary South Africans for the role they played in this process.