Analysis of Labour Law Amendments: Addressing Key Issues and Impact on Jobs

1. RESPONSE TO PUBLIC SUBMISSIONS ON LABOUR LAW AMENDMENTS DEPARTMENT OF LABOUR Briefing to the Select Committee on Labour and Public Enterprise Cape Town

2. Introduction • The purpose of this response is not to deal with issues raised in each of the presentations, but to comment on key issues that were common to some presentations and to respond to specific issues where the Department would like to express its view.

3. Areas Amended by the Portfolio Committee • Deletion of all new clauses relating to strike ballots and picketing (amendments to sections 64, 65, 67 and 69); • Deletion of new clause dealing with public officials exercising authority in the name of the state (s.71A); • Deletion of the probation clause as part of the fixed term contract provisions (s. 198B(4)(e); • New wording to section 198A (3) to clarify indefinite employment by an employee who continues with a client after (6) 3 month period; • New wording to section 198A(4) to clarify that the termination of an employee’s assignment with a client if they exercise a right in terms of the LRA (eg. Strike action) will constitute a dismissal; • Amendment to section 198B to reduce 24 to 12 months. This affects severance on termination of a fixed term contract. • New wording of section 198B(3) to clarify fixed term contract for more than than (6) 3 of employments; • New wording of section 198C(2)(d) to clarify employment of part-time employees earning below threshold

4. Key Issues in submissions Constitutionality of amendments • The LRA and the BCEA Bills have been submitted to the Office of the Chief State Law Adviser for a precertification opinion and have been found to be consistent with the Constitution. • This does, however, not provide a guarantee that the Bills are completely consistent with the Constitution. Issues may arise in the implementation of the Bills that could give rise to Constitutional challenges at a later stage.

5. Key issues cont. Impact of amendments on jobs • Firstly, legal reform needs to proceed with due consideration to the rights of employees as well as the economic and employment impact of reforms. The Constitution requires that all employees are entitled to fair labour practices. The Employment Equity Act already prohibits unfair discrimination, direct or indirect, against any employee, in any employment policy or practice. • Secondly, it is complex to predict employment impact on the basis of publically available statistics. In the work done to date on the current labour law amendments, assumptions have to be made about the effect of restricting the operation of labour brokers with little ability to properly test these assumptions. • A number of Bargaining Council collective agreements already restrict the operation of labour brokers and there has not been a negative change in employment in the sectors where these agreements apply. • Thirdly, any assessment of likely job losses should ideally factor in short and medium term adjustments by affected employers. While there may be some job loss in the short term, there could well be a recovery over time as the temporary employment industry adjusts to new forms of regulation.

6. Key issues cont. Abuses in the labour market: • Labour brokers roll-over contracts of employees thereby making workers permanent temporary employees; • Workers employed by Labour brokers earn less than their counterparts employed by clients doing the same job; • Workers employed by labour brokers not able to take up their dismissal cases with the CCMA/Labour Court and not able to enforce decisions (unclear who the employer is); • Workers employed by Labour Brokers often do not have access to social benefits (eg. retirement funds)

7. Key issues cont. Organisational rights • Submissions with regard to amendments to section 21 dealing with the exercise of organisational rights have been both criticised and supported. Business have generally not supported extending rights to minority unions whereas organised labour support both giving consideration to atypical employees when determining representivity as well as extending rights to minority unions. • These amendments are important given the real difficulty faced by trade unions in representing atypical employees in any workplace. It would be a legitimate balancing of power for a commissioner to exclude temporary, part-time and contract workers when considering the composition of the workforce for the purposes of representivity of trade unions seeking organisational rights.

8. Key issues cont. Organisational rights • The extension of organisational rights to minority unions is provided for in quite limited and specific circumstances. A commissioner in an arbitration may grant rights referred to in sections 14 and 16 if no other union has been granted that right. These rights relate to trade union representatives and access to information. Both of these rights should enhance communication and engagement between employees, their representatives and employers. Moreover, this right lapses if the trade union concerned is no longer the most representative union in the workplace. • A commissioner may also grant rights to trade union access, deductions and leave for union activities to a registered union that does not meet the threshold of representivity established by a collective agreement. The intention of this amendment is to allow for certain organisational rights to unions that may have high levels of representivity among specific categories in a workforce. This is in the interests of enhancing freedom of association.

9. Key issues cont. Equal treatment • The impact analysis for business does not engage accurately with the proposed amendment. The amendment to section 198A reads: • “An employee deemed to be an employee of the client in terms of subsection (3)(b) must be treated on the whole not less favourably than an employee of the client performing the same or similar work, unless there is a justifiable reason for different treatment.” • The first important point is that the equal treatment provision only applies after the six months of temporary employment. The impact analysis is not able to make any distinction between employees who work part-time and those who may be deemed to be employees of a client after a six month period. Secondly, the cost of benefits relate to the wage that an employee receives as these are calculated on a percentage basis. Elsewhere the amendments give pointers to grounds for justifiable different treatment, for instance, skill, experience and length of service. So, wages may differ for justifiable reasons between a permanent worker and a deemed employee who have different levels of skill and experience. The benefit package will differ accordingly.

10. Key issues cont. Equal treatment • The impact analysis must, therefore, be treated very cautiously in relation to its assessment of impact of equal treatment provisions on cost to company. • It is worth recognising that equal treatment needs to be viewed in the context of the history of discrimination in South Africa. The Constitution also has a strong emphasis on equality and prohibiting unfair discrimination. Finally, South Africa is not alone in introducing legislative provisions to ensure equal treatment of temporary workers. • In China, labour hire workers must be paid at the same rate as workers in the user firm who are engaged in similar work. In Korea since 2008, employers have been required to provide equal pay and benefits to hired workers.

11. Key issues cont. Compliance & enforcement • The amendment to section 68 of the BCEA gives labour inspectors the discretion as to whether they try to secure a written undertaking by an employer or whether they move directly to issuing a compliance order. The ability of inspectors to exercise this discretion is important in the context of high rates of non-compliance and experience of employers who do not adhere to their undertakings. The intention is not to remove the use of undertakings in genuine cases, but to ensure that inspectors do not waste time with employers who do not stick to their promise to rectify certain situations in their workplace. • Amendment to section 93 of the BCEA doubles the maximum term of imprisonment for contraventions in relation to clauses prohibiting and regulating work by children and to prevent fraud that may occur in relation to disclosure of information as covered by section 90 of the BCEA. • These amendments were agreed to by organised business during the NEDLAC negotiations. Organised business included representation of AGRI SA and the matter should not be raised again in the Parliamentary process in terms of the NEDLAC protocol.

12. Key issues cont. Wage increases on actuals • It is the intention of the Department to provide for wage increases on actuals only for certain categories of vulnerable workers. The impact analysis estimates job losses across a whole range of sectors rather than a select few, thereby amplifying the estimated job losses. • The impact analysis study also does not take into account the way in which the Minister of Labour may prescribe increases in terms of this amendment. For instance, the Minister may prescribe minimum increases linked to years of service which would have a very different impact than an across the board increase on minimum rates of a pay

13. Key issues cont. Bargaining council extensions • The impact analysis done by business does not engage accurately with the proposed amendments relating to collective bargaining. It assumes that the effect of the amendments will be an increase in the size of the workforce covered by bargaining council agreement. This refers to the amendment to section 32 (5A) which enables the Minister to take account of the extent of atypical employment in a sector when determining whether the parties to a council are sufficiently representative. It has nothing to do with increasing the coverage of an agreement, but has to do with how to decide on representivity when faced with the particular make-up of the work force within a sector. • The impact analysis refers to an amendment to section 43(3). There is currently no such amendment in the Bill before Parliament. There was a proposed amendment to section 43 which would have enabled Statutory Councils to conclude collective agreements on any of the areas where Bargaining Councils are able to conclude agreements, including wage agreements, as long as their constitution made provision for this.

14. Key issues cont. Bargaining council extensions • The impact analysis goes on to estimate the impact of coverage of extended agreements using research that suggests that there will be between 7% and 16% reduction of employment in small firms when Bargaining Council collective agreements are applied to them. No explanation is provided for this method and the original research on which it draws is not summarised in the paper. The paper also does not make any allowance for the fact that certain agreements have special dispensations for small firms. • In short, the impact analysis carried out for business estimates a dramatic impact on employment in ways that are problematic and that could very well exaggerate the real impact.

15. Key issues cont. Labour tenants • The amendment to section 55(4)(p) is intended to make provision for the Minister to establish a method for determining the conditions of service for labour tenants who have a right to occupy or use a part of a farm. The Land Reform (Labour Tenants) Act, 1996, requires that the conditions of service of a labour tenant may not be generally less favourable than the conditions applicable to farm workers in terms of the BCEA (section 4). • This amendment is, therefore, addressing situations where labour tenants derive income from occupying and/or using land. This income should be taken into account when deciding what minimum wage increases apply to labour tenants. A method for placing a value on the access to a part of a farm by labour tenants needs to be determined so that appropriate minimum wages can be set through future sectoral determinations for farming.

16. Other matters DLA Cliff Dekker Hofmeyer • Estate agents as employees or independent contractors dealt with in Labour Court judgments. SALGA • LRA cannot determine essential services. SALGA should approach ESC via the SA Local Government Bargaining Council. SASLAW • Agree with technical amendments, respond to some views.

18. Thank You…