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The Millennium Council has finally hatched a long awaited egg in the form of the broad accord reached between organised business and organised labour on proposed amendments to labour law.

Changes to labour laws do not fall specifically within the Council's brief. The Council was established some two years ago to find solutions to weighty matters of a social and economic nature, and in particular, those concerning unemployment, economic growth and social justice.


When the Minister of Labour published a series of Bills in July 2000 proposing changes to the Labour Relations Act, the Basic Conditions of Employment Act, and the Insolvency Act, the labour representatives to the Council suggested that these proposed changes might form the basis of pertinent discussion. Almost a year later, the Council has agreed in broad terms to a common vision, and more specifically, to certain key changes to our labour laws.

The vision is an important component of the document. It recognises the deepening crisis in South Africa consequent on job losses, the lack of job creation, levels of poverty and inequality.

The Millennium Council commits itself to making South Africa a leading emerging market, and a "destination of choice" for investment, where investments, both local and foreign, are "secure and can earn a competitive return measured over an appropriate term."

This choice of words is reported to have gone done in the ranks of certain union representatives like the proverbial cup of poison. But measured in terms of a commitment by senior business and union leaders, and a recognition by them that their objectives of a society with decent employment opportunities, committed to equity, fairness and dignity are dependent on this commitment, the statement, whilst not profound, is certainly politically significant.


On the business side of the fence, the part of the deal less easy to swallow is the package of proposals on labour law amendments. The most controversial of these is the understanding developed on the legal requirements relating to retrenchment.

These proposals have a history. When the Minister of Labour invited business and labour to make submissions on labour law amendments before the draft Bills were prepared, Cosatu argued that its members had been sold a pup by the 1995 LRA. One of the important principles underlying the statute was the denial of a right to strike in cases where disputes had to be determined by the CCMA or the Labour Court. Retrenchment disputes were made subject to the jurisdiction of the Labour Court. But when the unions got to Court, they found the Judges disinclined to second guess employer decisions on the need to retrench. Provided that the employer presented a case with a semblance of commercial rationality, the Judges were reluctant to make any further enquiries and refused to second-guess the employer. Retrenchment disputes were largely concerned about whether the employer had moved through the procedural hoops set up the Act as the required process of consultation.


The were understandably concerned having been deprived of the right to strike on disputes about the need to retrench, no effective recourse was available. In its submissions to the Minister, Cosatu demanded that employers be obliged to negotiate the terms of a retrenchment, as opposed to the lesser obligation of consultation. This demand was code of course for a demand that there should be a right to strike in these circumstances.

The Bills published in July 2000 fell short of union expectations. The proposed changes to the retrenchment procedures provided for the appointment of a facilitator in larger retrenchments who would assist the parties in the consultation process to reach consensus on the terms of the retrenchment.


The Millennium Council agreement includes a complex provision on retrenchments. The provision requires that there must first be a "meaningful process of deliberation and interaction" (an elegant egg dance around the use of the words "consult" and "negotiate") on any proposed retrenchment. If the process fail, the employer can proceed with the oint in the retrenchment and workers can resort to strike action. In both instance notice must be given at a defined point in the process.

The proposal affects employers employing more than 50 workers, in circumstances where the number of employees contemplated for retrenchment in a 12 month period is more than 1 0% of the workforce, or 50 workers, whichever is the lesser number. The detailed requirements oblige the employer to give notice of the intended retrenchment to the union/employees, and to the CCMA. The CCMA is required to appoint a facilitator from a previously agreed panel within 14 days. The facilitator must convene a meeting within 30 days of the date of the employer's notice. At the meeting, the facilitator must ensure that he parties address the proposed retrenchment according to the applicable legal requirements, resolve any disputes about the disclosure of information and make proposals on the process to be followed. After the meeting, the parties must "interact meaningfully" and generally address those matters which are defined as matters for consultation in the existing legislation. This process must continue for 30 days from the date of the first meeting with the facilitator (if that meeting is held within 30 days from the notice of intention to retrench) or the expiry of the initial 30 day period from the date of notice. The facilitator may make proposals on the process to be followed.

Two options are sketched. In the first, the facilitator can reduce or extend the periods, subject to challenge in the Labour Court on an urgent basis. The second scenario provides that the facilitator can make proposals on the reduction or extension of the time periods.. The employer can elect to act in disregard of the facilitator's proposal, subject to the right of a union to challenge the disregard, on an urgent basis, in the Labour Court.

If no agreement is reached during this phase, the employer can give notice of deadlock. After notice has been given, the employer can give notice of intention to terminate employment, and the union may give notice of intention to strike. The exercise of this right appears to be limited to circumstances where the parties disagree on the appropriateness of retrenchment as a remedy to address the employer's operational requirements. An additional procedure applies to secondary strikes.

If a union intends to challenge the procedural fairness of the retrenchments, this must be done within a period yet to be defined.


In regard to the other proposals in draft Bill affecting unfair dismissal laws, the Millennium Council agreement recognises that a narrower approach to compliance with fairness is appropriate when an employee is on probation, that an appropriate guideline should be draft to assist Commissioners in the application of procedural fairness in disciplinary matters.

The agreement does not address the proposed reforms to the section of the LRA dealing with compensation for unfair dismissal.

One of the draft Bill's more controversial proposals dealt with the nature of employment, and established a series of criteria that would form the basis of a rebuttable presumption in favour of an employment relationship as opposed to an independent contractual or other commercial relationship. The Agreement supports the proposal, on the basis that it is applicable only to persons who earn an annual income below the threshold established by the Unemployment Insurance Act, and that disputes in this regard are resolved in a "con-arb" process.

The Agreement contains detailed proposals in response to the draft Bill's provisions relating to dispute resolution. The "con-arb" proposal is supported after a fashion, with the suggestion that at conciliation, Commissioners should be able to set a date immediately for arbitration, without resort to any new application or paperwork". The proposals made in the draft Bill on the introduction of fees for arbitration hearings and a new approach to the awarding of costs was rejected.


The most significant part of the Agreement affecting the Basic Conditions of Employment Act is the proposal that in all companies employing fewer than 20 or 30 employees (there appears to be disagreement on the number), a premium of 1,5 should apply. This compares with the double pay premium currently applicable.


There is no doubt that the package of proposals in the Millennium Council Agreement represents a reversal for business from the position established by draft Bills. Those who are parties to the deal will no doubt argue that the price is worth the regression. In this regard, two considerations are relevant. The first is the campaign of mass action threatened by Cosatu in its strident response to the publication of the draft Bills last July. The second is the commitment recorded in the preamble to the agreement, and in particular, Cosatu's acknowledgment of the need to establish and sustain conditions for secure and competitive investment.

For the unions, the right to strike over the terms of a retrenchment would represent a significant victory. There are those who would argue that the bargaining power of a group of workers about to be retrenched is not significant, but it is those who are left behind in what by definition will be for the employer a precarious financial position who will be entitled to exercise the right without fear of dismissal. The secondary strike is also not an insignificant weapon in these circumstances. Even then, most private sector employers may not be too concerned. Most industries have effected massive restructuring over the last few years, and a tightening up on the laws regulating retrenchments and the extension of the right to strike in these circumstances may not be an issue. Indeed, the right to strike may represent a more preferable option than interference by Labour Court Judges in decisions about restructuring, the Organisation of work and retrenchment.

The Ministers responsible for the public sector, privatisation and public sector restructuring may have a different view. The State is our largest employer with restructuring , rationalisation and privatisation strategies far from finalised. The Council's proposals on retrenchment in particular may be at present a difficult pill to swallow.

Legal Notice

This information is published for general information and is not intended as legal advice. As every situation depends on its own set of facts and circumstances only specific professional advice should be relied upon. The authors, editors, publishers and printers do not accept responsibility for any act, omission, loss or damage occasioned by any reliance upon the contents hereof. This update is subject to copyright under the Berne Convention. In terms of the Copyright Act No. 98 of 1978, no part of this update may be reproduced or transmitted in any form or by any means, electronically or mechanical including photocopying, recording and any information storage and retrieval system without the acknowledgement of Perrott, Van Niekerk & Woodhouse Inc.

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Gary Watkins

Gary Watkins

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