Basic Conditions of Employment Amendment Bill; Labour Relations Amendment Bill: public hearings Day 1

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Labour

23 July 2012
Chairperson: Mr E Nchabeleng (ANC)
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Meeting Summary

On the first day of public hearings on the proposed amendments to the Basic Conditions of Employment Act and the Labour Relations Act, the Committee heard submissions from DLA Cliffe Dekker Hofmeyr, HR City, Eskom, the Board of Healthcare Funders, the Federated Hospitality Association of Southern Africa, Forestry South Africa, the South African Chamber of Commerce and Industry and the South African Board for People Practices.

Members’ questions were restricted to obtaining clarity on the points raised in the submissions.  Presenters were requested to provide the additional information requested by the Committee within five days.

DLA Cliffe Dekker Hofmeyr made a submission on behalf of the Real Estate Business Owners of South Africa.  The main concern was that the definition of “employee” in the LRA excluded independent contractors, which differed from the definition in the Estate Agency Affairs Act and failed to address the current differing opinions of whether or not an estate agent should be considered to be an employee or an independent contractor.  The power granted to the Minister to make a sectoral determination for the real estate industry could have significant adverse financial implications for the industry. 

Members asked for suggested definitions to be forwarded to the Committee for consideration.

HR City made a submission on behalf of the AHI Employers Organisation.  The submission included the findings of research projects on employment in the small and medium sized enterprise and the labour broking sectors.  Comments were made on specific sections in the BCEA and the LRA and the impact of the proposed amendments was highlighted. 

Members queried the assumption that was made that job losses had resulted from the announcement of changes to labour legislation rather than the prevailing negative economic conditions.  Members asked for more information on the research referred to in the submission.

The submission from Eskom included specific comment on clauses 1, 2, 9, 14, 15, 26, 35, 38, 39 and 44 of the Labour Relations Amendment Bill and clauses 2 and 8 of the Basic Conditions of Employment Amendment Bill.  The power utility made extensive use of sub-contractors.  The objectives of the Bills were supported but Eskom urged that the amendments balanced meeting the needs of employees and trade unions with the need to avoid an adverse impact on the financial viability and sustainability of employers. 

Members asked for clarity on the reasons for excluding temporary employment services employees from being granted organisational rights and how the restriction on temporary services to a period of 6 months could have an adverse effect on business.

The Board of Healthcare Funders represented medical schemes and administrators in South Africa, Namibia, Botswana, Zimbabwe and Lesotho.  Medical schemes were governed by the Medical Schemes Act of 1998.  The Board was concerned that the proposed provisions in section 33A of the BCEA might be misinterpreted as disallowing the membership of a medical scheme as a condition of employment.  The Board suggested an amendment to section 33A(2)(a) to include medical scheme cover and benefits for employees.

Members asked the Parliamentary Law Adviser to check that the term “benefit” was clear in law.  Members wondered how the introduction of a mandatory National Health Insurance scheme would impact on the engagement between employers and employees on health care benefits.

The submission from the Federated Hospitality Association of Southern Africa included comment on the provisions in the Bills concerning organisational rights, strikes and lockouts, dispute resolution, unfair dismissals, a-typical employment and sectoral determinations.  The hospitality industry provided employment to large numbers of temporary workers.

Members asked questions about the application of different thresholds for different types of union rights; where picketing should be allowed if the premises occupied by the employer was owned by a third party; whether collective bargaining would no longer take place if minimum wages were set by sectoral determination; possible solutions for dealing with inter-union rivalry and reducing the tension between unions; the need to define “non-standard forms of employment” and the assertion made in the submission that employers would pay only the minimum wage.

Forestry South Africa was a voluntary organisation and its members controlled 90% of the timber industry in South Africa.  The industry employed 70,000 people directly and a further 30,000 workers were employed by 300 forestry contractors.  Most jobs in forestry were low-skilled, the industry experienced very high labour turnover rates and operations were becoming increasingly mechanised.  The organisation suggested that the Bills were considered within the current context of high unemployment, depressed local and global economies, continued job losses, a lack of successful job creation initiatives, an estimated 16% of the labour force being in temporary positions and the negative impact of over-regulation and excessive administered price increases on the cost of doing business in South Africa.  The submission outlined the forestry industry’s concerns with specific clauses in the Bills and included recommendations.  The organisation concluded that the proposed legislation were aimed at protecting existing jobs and failed to encourage the creation of new jobs; employers would not be encouraged to employ more permanent or contractor workers; more jobs would be lost through automation and mechanisation of operations; the ability to implement and enforce the legislation was questioned and the cost of doing business would be increased.  It was strongly suggested that another Regulatory Impact Assessment was undertaken.

The South African Chamber of Commerce and Industry supported Government’s job creation objectives and the need to create ‘decent work’.  The Chamber was of the opinion that the more stringent labour requirements included in the Bills would have a negative impact on the creation of decent work, on meeting the national job creation targets and on the ability of employers to remain competitive and financially viable.  The Chamber believed that the need to protect workers against exploitation could be achieved in a more dynamic and flexible labour environment.  The submission included detailed comment on the proposed amendment of specific sections of the LRA and the BCEA.

The South African Board for People Practices represented human resource practitioners at all levels.  Professional members were registered with the Department of Higher Education and Training.  The organisation was mandated to ensure professional standards of human resource work undertaken by its members.  Human resource practitioners were responsible for implementing labour legislation at the workplace.  The Board disagreed with the perception that labour legislation was responsible for a lack of economic growth.

The submission included specific comment on sections 32, 187 and 198 of the LRA.  The organisation was of the opinion that infrastructure to support the legislation was deficient and that the labour inspectorate needed to be up-skilled.  More support for small, micro and medium-sized enterprises was required.  Solid human capital could not be built by the exploitation of vulnerable workers.  The transformation agenda was hindered by a lack of investment in training and the over-use of temporary labour.  The Board offered assistance to the Department of Labour to improve the labour inspectorate, to improve compliance with the legislation and to raise awareness and increase education about the labour legislation.

Members asked about the need to define ‘casual labour’ and ‘casualisation’ and asked for more clarity on the resistance to the amendment to section 187 of the LRA.

Meeting report

The Chairperson advised that the proposed amendments to the Basic Conditions of Employment Act (BCEA) and the Labour Relations Act (LRA) arose from the public hearings on labour brokering held in 2009.  The Committee had found that there was abuse of workers by labour brokers and that there were divergent views on the issue of labour brokering by various organisations representing labour and organised business.  The Committee acknowledged the work that had been done by NEDLAC in crafting the amendments to the labour legislation but recognised that not all affected parties were satisfied with the proposed amendments.  The public hearings on the Bills was an opportunity for further submissions by interested parties, all of which would be considered by the Committee.  The Committee would ensure that any changes to the labour legislation would be constitutional.

The Committee had received written submissions from a number of organisations and individuals.  Submitters were requested to present a summary of the written submissions during the public hearings.  Questions from members of the Committee would be restricted to points of clarity as there would be opportunity for debate at a later stage in the processing of the Bills.  The proceedings were attended by representatives from the Department of Labour (DOL) and the Office of the State Law Adviser.

DLA Cliffe Dekker Hofmeyr submission
Mr Gavin Stansfield, Director: Employment Law, DLA Cliffe Dekker Hofmeyr presented the submission on behalf of the Real Estate Business Owners of South Africa (see attached document).

The general nature of the business of estate agents was explained.  Agents do not earn a fixed or basic salary and were paid commission on the successful registration of property sold by them.  Working hours and leave arrangements were self-determined.  Estate agencies were predominantly small, family-run businesses.  Typical role players included principals (the owner of the agency), non-principals (qualified estate agents), employees (usually administrative personnel) and interns working towards qualification. 

The Estate Agency Affairs Act, No 112 of 1976 defined “employ”, “employee” and “estate agent” as including an independent contractor or using the services of an independent contractor.  The definition of “employee” in the LRA specifically excluded an independent contractor.  The LRA took precedence over the Estate Agency Affairs Act.  There were divergent views on whether or not an estate agent should be considered to be an employee or an independent contractor.  The insertions to sections 200A and 200B in the LRA Bill were not supported as the conflicting definitions were not clarified and might lead to unintended consequences.

Section 55 of the BCEA Bill dealt with sectoral determinations and made provision for the Minister to prohibit or regulate sub-contracting.  There were no recognised trade unions operating in the estate agency industry.  The industry was reliant on the services of sub-contractors.  The BCEA Bill did not include definitions of “temporary employment service” and “sub-contracting”.  The Minister might pass a sectoral determination for the estate agency industry that would have a significant economic impact.

Mr A van der Westhuizen (DA) asked for suggested definitions to be forwarded to the Committee.

HR City submission
Mr Eben van Deventer, Industrial Relations and Human Resource Practitioner, HR City presented the submission on behalf of affiliated members of the AHI Employers Organisation (see attached document).

The background to the submission included the findings of research on employment in the small to medium sized enterprise and the labour broking sectors in South Africa.  The impact of the proposed Amendment Bills on employment in Mpumalanga in general and on employment in the mining sector in Mpumalanga was included in the presentation as examples.

The submission included specific comments on a number of sections in the BCEA and the LRA and pointed out where the current legislation and proposed amendments were unclear, unconstitutional and contradictory, increased the burden on employers, increased the potential for job losses and might result in unintended negative consequences for business and labour alike.

Mr D Kganare (COPE) asked for clarity on the assumptions that were made on the basis of the research findings.  For example, it was found that only 19% of labour brokers did not have unions operating in the workplace but it was not clear what the impact was on non-unionised labour broker employees.  Such employees were vulnerable, found it difficult to access the Commission for Conciliation, Mediation and Arbitration (CCMA) and it was difficult to identify the labour broker as the employer on whom papers could be served.  The assumption was made that the announcement of changes to the labour legislation had resulted in dramatic job losses but it was not clear how such announcement was separated from the prevailing economic conditions applicable at the time.

Mr F Maserumule (ANC) echoed Mr Kganare’s concerns about the basis for the assumptions concerning job losses.

The Chairperson said that the issue was the subject for further debate and reminded Members to restrict their questions to obtaining clarity.

Ms L Makhubela-Mashele (ANC) asked for the sources of the information to be made available to the Committee.

Mr Van Deventer agreed to provide more information on the research to the Committee.  The information on labour brokers was based on the statistics released by the CCMA, the report of the National Association of Bargaining Councils and the report of Topline Research Solutions.  The definition of “employer” was clear, the name of the employer must appear on the pay slip as required by law and would therefore be known to the employee.

Eskom submission
Ms Nerina Otto presented the submission from Eskom (see attached document).

The submission included specific comment on clauses 1, 2, 9, 14, 15, 26, 35, 38, 39 and 44 of the Labour Relations Amendment Bill and clauses 2 and 8 of the Basic Conditions of Employment Amendment Bill.

Eskom made extensive use of sub-contractors.  The objectives of the Bills were supported but Eskom maintained that the amendments should strike a balance between meeting the needs of employees and trade unions while avoiding an adverse impact on the financial viability and sustainability of employers.

Mr Kganare remarked that the legislation applied to both employees and employers.  It would appear that Eskom did not acknowledge that certain temporary employment service employees were employed by a third party.  Such employees provided a service to Eskom and he asked for clarity on the reasons for excluding temporary employment services employees from being granted organisational rights.  He asked for clarity on how the restriction on temporary services to a period of 6 months could have an adverse effect on business.

Board of Healthcare Funders (BHF) submission
Dr Humphrey Zokufa presented the submission from the BHF (see document).  The BHF was a representative organisation for medical schemes and administrators in South Africa, Namibia, Botswana, Zimbabwe and Lesotho. 

The submission included comment on clause 2 of the Basic Conditions of Employment Amendment Bill – i.e. the insertion of section 33A in the BCEA.  Medical schemes were governed by the Medical Schemes Act of 1998 (MSA), which superseded all other legislation in relation to matters dealt with in the MSA. 

The BHF was concerned that the proposed provisions in section 33A of the BCEA might be misinterpreted as disallowing the membership of a medical scheme as a condition of employment.  It was suggested that section 33A(2)(a) was amended to read “the employee receives a financial benefit including medical scheme cover and benefits”.

Mr Van der Westhuizen requested that the Parliamentary Law Adviser checked that the term “benefit” was clear in law.  The relevant issue was the interpretation of “benefit”.

Mr Kganare wondered how the introduction of a mandatory National Health Insurance (NHI) scheme would impact on the engagement between employers and employees.

Mr Maserumule wondered if engagement between employer and employee on medical scheme benefits would be necessary when the NHI was introduced.

Federated Hospitality Association of Southern Africa (FEDHASA) submission
Ms Dianne Robinson presented the submission from FEDHASA (see document).

The hospitality industry provided employment to large numbers of temporary workers.  The submission included specific comment on the provisions in the LRA concerning organisational rights (section 21), strikes and lockouts (section 64), dispute resolution (sections 115 and 158), unfair dismissals (sections 187 and 188) and a-typical employment (section 198) and on the amendments to section 55 of the BCEA dealing with sectoral determinations.

Mr Maserumule commented on the relative weakness of unprotected workers when negotiating with employers.

Mr Kganare asked if FEDHASA proposed that different thresholds should apply for different types of union rights.  He asked where workers should be allowed to picket during a legal strike if picketing at premises owned by a third party and occupied by the employer was prohibited.  He asked if collective bargaining would be obsolete if minimum wages were set by sectoral determination.

Mr Van der Westhuizen remarked that the main aim of the LRA was to manage employer/employee relationships in a more peaceful manner.  It would appear that this objective was not being met and he was concerned by the statement in the submission that certain changes to the legislation could result in increased inter-union tension.  He asked for more detail on this aspect and what solutions there were for dealing with inter-union rivalry and associated violent action against opposing union members.

Mr S Motau (DA) asked for further comment on the need to define non-standard forms of employment.  He wanted to know more about the statement made in the submission that certain employers would pay only the minimum wage applicable.

Ms Robinson responded that thresholds were currently specified in the legislation.  The term ‘sufficient representation’ in the proposed amendments was not clear and should be defined to remove uncertainty.  The issue of union thresholds had been under discussion for some time but the proposed amendments would exacerbate the potential for conflict between employers and unions.  The definition of “workplace” did not take into account that different unions could have the majority at different premises of the same employer.  It was imperative that the legislation was clear on the matter of majority and minority unions and that all uncertainty was removed.

Ms Robinson explained that the amendments would allow the Minister to announce a certain percentage wage increase in the sectoral determination.  In cases where the employer was paying above the minimum wage, the percentage increase could be substantial.  In such cases, employers could decide to pay only the minimum wage announced for the sector.  This had been the experience when the sectoral determination for domestic workers came into effect.  She pointed out that the employer was not legally obliged to bargain with unions.  Collective bargaining was problematic where only a portion of the employee complement belonged to the bargaining union.  In such cases, the wage gap between unionised and non-unionised staff continued to widen.

Ms Robinson was doubtful if the provisions concerning ownership of premises by third parties could be enforced.  It was preferable if the rights and obligations of the third party were much clearer in the legislation.  Non-standard employment was not necessarily limited to temporary employment and it was important that the legislation included a clear definition of “non-standard employment” to avoid any misinterpretation.

The Chairperson asked for a copy of the impact study by Paul Benjamin referred to in the submission.

Ms Robinson advised that the Regulatory Impact Assessment (RIA) report compiled by Mr Benjamin was available on the website of the Department of Labour.

Forestry South Africa (FSA) submission
Mr Roger Godsmark, Operations Director, FSA presented the submission (see document).

FSA was a voluntary organisation and its members controlled 90% of the timber industry in South Africa.  The industry employed 70,000 people in rural areas.  Outsourcing was common practice and 300 contractors employed approximately 30,000 workers.  Labour turnover rates were extremely high, most forestry jobs were low-skilled and the industry was becoming increasingly mechanised.  The FSA supported government’s overall labour objectives but warned that the proposed legislation would have severe unintended consequences and result in employers hiring fewer rather than more workers.

The Bills needed to be considered within the current context of high unemployment, depressed local and global economies, continued job losses, a lack of successful job creation initiatives, an estimated 16% of the labour force in temporary positions and the negative impact of over-regulation and excessive administered price increases on the cost of doing business in South Africa.

The submission outlined the forestry industry’s concerns with specific amendments and included recommendations.  Comments concerned sections 51(9), 64, 186(1), 188B, 191(12) and 198 of the LRA and sections 33A, 55(4), 71 and 72 of the BCEA.

FSA concluded that the proposed legislation were aimed at protecting existing jobs and failed to encourage the creation of new jobs.  Employers would respond by cutting down on hiring new permanent employees and contract workers and increase the automation and mechanisation of operations.  The ability to implement and enforce the legislation was questioned.  The Bills did not reduce the cost of doing business, which impacted negatively on the country’s ability to become internationally competitive.  The FSA urged that another RIA was undertaken.

Mr Kganare asked if FSA suggested that small businesses should be exempted from labour legislation.  A sectoral determination would be applicable unless the employers and employees had a collective agreement in place.  He understood that there was no bargaining council in the forestry industry and that Government had an obligation to take care of unprotected workers.

Mr Godsmark advised that a sectoral determination for the forestry sector was in place and the arrangement worked fairly well.  However, the industry was not happy with the power granted to the Minister to determine wage increases and to effectively play the role of a bargaining council without the involvement of employees or employers in the process.

The Chairperson remarked that the Minister would follow a process of consultation and would not make a unilateral determination.

South African Chamber of Commerce and Industry (SACCI) submission
Ms Peggy Drodskie, Chief Operating Officer, SACCI presented the submission (see document).

SACCI supported Government’s job creation objectives and the necessity for ‘decent work’.  However, SACCI was of the opinion that the more stringent labour requirements included in the Bills would have a negative impact on the creation of decent work, on meeting the national job creation targets and on the ability of employers to remain competitive and financially viable.  SACCI believed that the need to protect workers against exploitation could be achieved in a more dynamic and flexible labour environment.

The submission included detailed comment on the proposed amendment of sections 21, 32, 64, 69, 70, 145, 150, 186, 188, 191 and 198 of the LRA and sections 33A, 43, 45, 55, 68, 69, 71 and 72 of the BCEA.

South African Board for People Practices (SABPP) submission
Dr Penny Abbott, Head: Human Resource Research and Dr Angela Du Plessis, Industrial Relations Consultant and Mediator presented the submission from the SABPP (see attached document).

The SABPP was the largest human resource (HR) body in South Africa and represented HR practitioners at all levels.  Professional members were registered with the Department of Higher Education and Training (DHET).  The organisation was mandated to ensure professional standards of HR work undertaken by its members.  HR practitioners were responsible for implementing labour legislation at the workplace.  SABPP disagreed that labour legislation was responsible for a lack of economic growth.

The submission included specific comment on sections 32, 187 and 198 of the LRA.  The organisation was of the opinion that infrastructure to support the legislation was deficient and that the labour inspectorate needed to be up-skilled.  More support for small, micro and medium-sized enterprises (SMMEs) was required.

The SABPP concluded that solid human capital could not be built by the exploitation of vulnerable workers.  Transformation was hindered by a lack of investment in training and the over-use of temporary labour.  SABPP was willing to work with the Department of Labour to improve the labour inspectorate and to improve compliance with the legislation.  The organisation was committed to raise awareness and increase education about the labour legislation.

Mr Kganare observed that the terms ‘casual labour’ and ‘casualisation’ were widely used but were not defined in the legislation.

Mr Van der Westhuizen asked for more clarity on the concerns with regard to the amendment of section 187 of the LRA.

Mr Motau remarked that ‘infrastructure’ was a broad concept and asked for more clarity on what was meant by the term in the context of labour legislation.

Mr Maserumule asked what skills were required of a labour inspector.

Dr Abbott explained that labour inspectors needed to have a sound understanding of the applicable legislation as well as the prevailing conditions at employers.  The inspectors needed to apply the law and understand how the particular business operated.  ‘Casualisation’ was the term used where a company constructed its labour force around a few permanent employees and made extensive use of temporary and casual labour.

Dr Du Plessis explained that most small employers were against the proposed amendment to section 187 of the LRA.  There was a difference between the permanent dismissal of employees and conditional dismissals.  The proposed amendment attempted to address the different interpretations of the legal provisions by the Court.

Mr Jonathan Goldberg, Chief Executive Officer, Global Business Solutions explained that the Court had ruled in the Algorax case that the employer could dismiss workers but could not offer the workers re-employment after changes were made to working conditions.  In the Fry’s Metal case workers were dismissed permanently.

The Chairperson thanked all the presenters and Members for their participation.  The hearings would continue on the following day.

The meeting was adjourned.

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