Comments on the Proposed Amendments to Labour Legislation - 2012

1. Comments on the Proposed Amendments to Labour Legislation - 2012 As presented by HR City on behalf of affiliated members of the Employers Organization, the AHI

2. Background • At present, the SME (Small to Medium Enterprise) space constitutes the largest private sector employer of labour in South Africa, employing over 68%* of all employees in the country. • Prior to the announcement of the proposed amendments more than 80%* of the labour force in the private sector was employed by the SME space. • Since the announcement of these amendments more than 440 000* small businesses have closed their doors. • The fear and uncertainty generated by these proposed amendments have resulted in significant job losses. • The over regulation of A-Typical employment will impact negatively on businesses ability to remain dynamic in the face of an ever changing economic landscape. *Adcorp Employment Index, February 2012

3. Background • Research has indicated that there are approximately 979 539* employees working for labour brokers. • While this constitutes approximately 7.9%** of the labour force in South Africa, the CCMA reports that only 0.9% of their referrals are from the employees of labour brokers. • 71% of labour brokers are BEE Level 4 or higher***. • 72% of labour broker employees contracts terminate when they are absorbed by the client***, meaning that labour brokerage leads to permanent employment. • Only 19% of labour brokers do not have unions in the workplace***. *National Association of Bargaining Councils Report **CCMA Released Statistics ***Topline Research Solutions Report

4. The Basic Conditions of Employment Act Act 75 of 1997

5. BCEA • Section 1 – Definition of the word “Sector” • The definition of the word “Sector” , when read along with the proposed amendment to section 55(8), allows for the Minister of Labour to include employees who are not currently covered by the Sectorial determinations of existing sectors. • This will not only place undue additional burden as pertains to the potential increased cost of labour but the regulatory impact on businesses which would traditionally fall outside of the ambit of such sectors would grow to the extent that such businesses will elect to close shop. • Section 55(4)(b)(ii) – Expansion of Ministerial input on wages • By giving the Minister of Labour the powers to enforce minimum increases in sectorial determinations, the impact would serve to discourage employers from paying more than the minimum wages to their employees as such increases would be significantly higher than similar increases to minimum wage employees. • Such increases in salary might even result in loss of employment where such increases are not financially viable to employers.

6. BCEA • Section 55(4)(g) – Restrictions on contractors through Sectorial Determinations • By allowing the Minister of Labour to restrict or even ban the use of subcontractors in a business or form of business this section directly violates the right of freedom of trade as enshrined in Section 22 of the Constitution of the Republic. • Section 55(4)(o) – Thresholds of Representativeness by Sectorial Determination • When one considers the exclusive jurisdiction of the Labour Court on all matters considered within the Basic Conditions of Employment Act, this amendment contradicts the Labour Relations Act where jurisdiction for such matters is granted to the CCMA. • Furthermore, this amendment provides the Minister with powers to set thresholds of representativeness for trade unions within a sector where they may exercise organisational rights of access and subscription in a sector, regardless of existing agreements in the workplace with current, qualifying unions.

7. BCEA • Section 55(4)(p) – Determination of Rights of Labour Tenants through Sectorial Determinations • This amendment will grant the Minister of Labour the power to make determinations as relates to the occupation of land. Such implementation intrudes on existing legislation, possibly seeking to circumvent Section 25 of the Constitution. • Sections 68 – 73 – Labour Inspection Process • These sections remove the informal resolution steps which currently constitute the Labour Inspection process, among those, the opportunity for employers to informally correct honest errors/mistakes without formal administrative action. • This amendment grants far too much discretionary power to Labour Inspectors, the potential for abuse may result in an increase in extortion and bribery by labour inspectors, notwithstanding the fact that labour inspector are quite often ignorant of the exemptions granted in sectorial determinations for certain practices.

8. BCEA • Section 74 – Limitation on review processes for Labour Inspections • This proposed amendment is written ambiguously and may result in misinterpretation. • This section does not specify the forums or parties to which this section applies • The amendment can be interpreted to prevent review processes of administrative action, which infringes on the rights granted in Section 33 of the constitution. • Section 77(1) – Jurisdiction of the Labour Court • By granting exclusive jurisdiction to the Labour Court for all matters related to this Act, such matters as are currently in the CCMA/Land Claims Court are removed from such jurisdictions and placed under the ambit of the Labour Courts. • This will create confusion, particularly related to matters for which the Labour Relations Act grants jurisdiction to the CCMA.

9. The Labour Relations Act Act 66 of 1995

10. LRA • Section 21(8)(b)(v) – Disputes about Organisational Rights • Extends the manner in which the representativeness of trade unions is calculated to include the employees of third parties (Labour Brokers, Contractors, Sub-Contractors) who may already have existing bargaining agreements with the same or different trade unions. • This amendment would create dramatic increased administrative complexity, not only for employers seeking to establish collective bargaining structures, but also for Unions who may already be representative in the workplace of their employees, who would now lose such rights due to these members being negotiated for by a trade union of the client thereby infringing on the right to freedom of association as encapsulated in Section 18 of the Constitution.

11. LRA • Section 64(1)(a)(iii) + (iv) – Balloting before engaging in strike action • This amendment is greatly welcomed by employers and employees alike. • By introducing a democratic process whereby employees can determine by majority vote whether or not they wish to launch a strike, employees get to choose to continue to work, bearing in mind that during a strike, the no-work no-pay principle would impact on their abilities to provide for their dependants. • It will prevent unions from using employees as pawns in power struggles. • It must however be noted, that without proper supervision of such a process, the validity of the ballot cannot be confirmed.

12. LRA • Section 69 – Picketing on Sites not controlled by the Employer • By allowing the employees to picket on the sites of clients, this amendment gives effect to disproportional bargaining powers for unions as employers whose employees embark on a picket on a client site may very well lose their contracts with such clients. • Such possible loss of contracts, in turn, could result in huge job losses. • Since the discussion of these amendments have begun, more than 480* employees have lost their jobs within HR City alone, as our clients fear the loss of production which such amendments may cause. • Similarly, some of our clients, as contractors, have been forced to reduce more than 10%* of their own respective workforces due to such overregulation. • It is important to note that none of these employees were absorbed or re-employed by those clients of the employer. *Internal Company Figures

13. LRA • Section 115 – CCMA to review Rules Every two years • Such an amendment could result in changes in rules on a bi-annual basis in the largest dispute resolution forum in the world. • Enacting such rules this often would place an already heavy burden on the users of the CCMA, as they now need to stay abreast of ever-changing processes. • While the interest of social justice remains important, it is also equally important to consider the burden that social justice places on employers, either financial or administrative. • Employers, who are charged with job creation, could elect, rather, to cease their business continuity, potentially resulting in additional job losses. • The lack of a mechanism for public input on such changes could lead to unfair rules being passed. • The CCMA is already struggling to cope with the dramatic burden placed on their processes, adding more responsibilities to such an over-burdened organ of social justice cannot be feasible. • This proposed amendment might also open case management services within the CCMA to bribery and corruption.

14. LRA • Sections 115(2A)(k), 161(1)(c), 188(5)(c) as well as Paragraph 27 of Schedule 7. – Removal of the word “Member” in the representation before forums. • The removal of the word; “Member” from these points is unfair in that it removes the fair ability for employers to be represented in such processes where they often find themselves overwhelmed by the technical abilities of trade union officials. • It should be noted that trade unions manage a much larger user base from which to generate income. Fewer businesses exist than employees and it is unfair to expect employers organizations, who manage dramatically smaller incomes, to afford the appointment of a sufficient number of trained officials to adequately represent their members. • The use of members of Employer’s Organisations as impromptu officials has proven to facilitate fair processes, resulting in swift labour dispute resolution due to their knowledge of the law and processes as is evident in the manner in which HR City has expediently concluded 96%* of the 260 cases that we have arbitrated on behalf of our members in 2011 alone. • The removal of this ability would result in a disproportional advantage to employees in such forums as the companies often lack the legal knowledge required to accurately state their cases with reference to the complexity of legislation. *Internal Company Statistics

15. LRA • Section 143 – Arbitration Awards are made equal to Labour Court Judgements • It would appear that this amendment seeks to remedy the delay in getting writs issued by the Registrar of the Labour Court when the focus should be on getting the capacity of the Registrar’s office up to scratch in order to alleviate the problem, rather than affording a Tribunal the right to engage in judicial processes. This also grants powers to Commissioners equal to judges in a higher court, here again, the possibility is created for potential abuse. • Section 188A (8) + (9) – Enquiries by arbitrators • The phrasing in these two subsections directly contradict one another as subsection 8 makes the arbitration award issued in such a process equivalent to a judgement of the Labour Court, whereas subsection 9 allows for the discretion of any party in the execution of such an Arbitration award by the use of the word “may”.

16. LRA • Section 189A(2)(d) – Dismissals for Operational Requirements • By this amendment, additional powers are given to the employee party in such processes to extend the timeframes for consultations. • This could further increase the financial burden on a company which is already contemplating possible reduction of the existing workforce, most likely due to financial constraints. • Such increased financial burdens could then, in turn, necessitate even more job losses than were originally contemplated. • Section 189A(19) - Substantive fairness of Dismissals for Operational Requirements • The deletion of this subsection removes the substantive fairness test for dismissals for operational requirements, which would make it impossible to prove that such dismissals were substantively fair when such matters are heard in the Labour Court. • In so doing, it could be argued that it is no longer possible to dismiss employees for operational requirements.

17. LRA • Section 198A(1)(a) – Limited terms for Labour Brokers • By specifying that a temporary employment service cannot place an employee for any project exceeding six months, this amendment will impact on potential continued employment of employees on projects which, while temporary in nature, might exceed six months in duration, such as the Gauteng Freeway Improvement Project. • Not only would this amendment impact negatively on the ability of the employer to remain dynamic, but also, an employee would only have employment temporarily through S198B. • At the conclusion of such fixed term, the employee would then be left without further employment • Had such an employee, however, been an employee of a labour broker, that employee would likely have been re-deployed to a different client.

18. LRA • Section 198A(3)(b) – Deeming a person to be the Employee of a third party • This amendment ignores the S197 process, already established for such transfers of employment, which could create tremendous confusion in the application thereof. Uncertainties as to who the actual employer would be has already resulted in many companies terminating their labour brokerage arrangements with providers, which in turn, has already resulted in significant job losses. • It has been the threat of such amendments which has resulted in the loss of employment of 480 of our own employees due to the cancelation of service contracts with our clients. • This trend carries across the country as can be seen in the following graphs:

19. Employment In Mpumalanga* • * Statistics South Africa NQLF Statistics

20. Employment In The Mining Sector in Mpumalanga* This increase in employment can be directly linked to the Increase in demand for Coal by Eskom. Another decline in employment as the 2012 bill is announced where, once again, 5 000 jobs are lost. Dramatic drop in employment as the announcement of the 2010 amendment bills lead to 8 000 job losses in the sector. • * Statistics South Africa NQLF Statistics

21. LRA • Section 198C(3)(b) – Fair Treatment of Temporary Employees • The expectation which this amendment creates would result in companies expending additional resources in the training and education of employees who, due to the very nature of their contracts, will not be able to add value to the company from such training for any measurable extent of time. • This might lead to companies restricting such benefits to it’s permanent employees in an attempt to remain fair. • Section 198C(5)(b) – Definition of comparable employment • This amendment is impracticable as such similar positions on other sites might not be feasible permanent positions on the site on which the employee is employed.

22. LRA • Section 200B – Liability for Employer’s Obligations • This addition places a further burden on the employer to disprove allegations of attempts to circumvent legislation, without any commensurate explanation as to how such proof could possibly be presented or which requirements would be attached thereto. • This might also present situations where legitimate contractors might be engaged by a client, and the client be held liable for the actions of the contractor, without the client having any actual ability to affect the policies of the contractor.

23. Conclusion • While these were the only points highlighted in this presentation, we by no means disregard other proposed amendments, and would like to congratulate the law makers on much more refined draft amendment bills than the 2010 submissions. • It is also important to note that there are multiple points in these proposed amendment bills which are welcomed by the employers for the manner in which they seek to enact legislative support for judicial precedent.