Labour Relations Amendment Bill: clauses 39-44; Labour Budgetary Review and Recommendations Report 2012

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Employment and Labour

23 October 2012
Chairperson: Mr M Nchabeleng (ANC)
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Meeting Summary

The Committee resumed deliberations on the Labour Relations Amendment Bill.  The Chief Director: Labour Relations of the Department of Labour explained the rationale behind clauses 39 to 44 of the Bill.

Clause 39 amended section 189A of the Act to provide for a consultation period of 60 days before retrenchments were made and allowed for applications to extend the period.

Clause 40 amended section 190 of the Act and clarified the effective date of dismissal.  If the employee was given formal notice of dismissal, the effective date was the day the person ceased to be employed.  If no notice was given, the effective date was the date the last salary payment was made.

Clause 41 amended section 191 of the Act and extended the period allowed for the Commission for Conciliation, Mediation and Arbitration to resolve a dispute and allowed for the Commission to arbitrate disputes.

Clause 42 changed the heading to Chapter IX of the Act to “Regulation of Non-Standard Employment and General Provisions”.

Clause 43 amended section 198 of the Act provisions applicable to temporary employment services.  The temporary employment services organisation and the client company would be held jointly and severally liable; the labour inspector could act against both parties; the Commission and the Labour Court could rule on the validity of an employment contract and could make an award; the temporary employment service was required to register, adhere to laws and regulations and must provide temporary employees with a proper employment contract.

Clause 44 inserted sub-sections 198A to 198D into the Act.  Sub-section 198A provided additional protection for employees who earn below the prescribed threshold.  Temporary work was limited to a period of six months or less.  Employees who worked for more than six months were considered to be permanent employees.  The only exception was an employee who worked as a temporary replacement for an employee of the company.  Temporary services might also be regulated by a collective agreement reached in a bargaining council.

Sub-section 198B provided for the exemption of new and small businesses (i.e. with less than 10 employees).  An employee might be employed on a temporary basis for a period of longer than six months if the nature of the work was of a limited or definite duration.  Temporary employees must be treated not less favourably than permanent employees. and be allowed the opportunity to apply for vacant permanent positions.  If the fixed term contract was longer than 24 months, the employee was entitled to severance pay equal to one week’s remuneration for each completed year of the contract.

Sub-section 198C regulated the work of part-time employees.  The sub-section applied only to employees who earned below the prescribed threshold in terms of section 6 (3) of the Basic Conditions of Employment Act and who worked more than 24 hours per month.  Employees had to receive equal treatment to that afforded to permanent employees.  Exemption for small and new companies was provided.

Sub-section 198D made provision for disputes to be referred to the CCMA or a bargaining council for conciliation or arbitration.

There was disagreement at the National Economic Development Labour Advisory Council on section 198 of the Act.  The Congress of South African Trade Unions wanted labour broking banned outright but organised business supported regulation.

Members asked questions to obtain clarity on the proposed legislation.  Members expressed divergent views on the issue of labour broking but agreed on the need to protect vulnerable categories of workers.  Members queried the rationale behind the six-month period limiting the term of temporary work and probation.

The Committee was granted permission to meet after hours in order to finalise the Labour Bills.  The deadline for adoption of the Bills was 15 November 2012.  The Committee programme would be amended accordingly.

Members requested corrections to amounts referred to in the draft Budget Review and Recommendation Report and that all amounts in the report were expressed in the same format.  Members suggested that the conclusions and recommendations were reported separately.  Members suggested additional recommendations regarding the funding of the Commission for Conciliation, Mediation and Arbitration; the Unemployment Insurance Fund;, the Compensation Fund; the signing of performance agreements; the inclusion of the percentage of budget spent during the quarter in quarterly reports; the attendance of internal auditors at quarterly briefings to the Committee and that that undertakings were met by the deadlines.

The Committee adopted the Budget Review and Recommendation Report, with amendments.

Meeting report

Deliberations on the Labour Relations Amendment Bill [B16-2012]
The Committee resumed deliberations on the Labour Relations Amendment Bill from clause 39.  Mr Thembinkosi Mkalipi, Chief Director: Labour Relations, Department of Labour (DOL) took the Committee through the proposed amendments.

Clause 39
The proposed amendment to section 189A of the Act provided for a consultation period of 60 days before retrenchments were made.  Provision was made for applications to extend the period.  The business sector was concerned that more damage would be caused to the company by protracted negotiation.  Organised labour was of the opinion that more workers would be retrenched if companies were allowed to make hasty decisions.

Clause 40
The proposed amendment to section 190 of the Act clarified the confusion over the effective date of dismissal.  It was currently not clear if the effective date was the day an employee was informed that he was dismissed or the day the employee received the final payout due to him.  Clarity on the effective date was crucial for determining the duration of the 30-day notice period.  If the employee was given formal notice of dismissal, the effective date was the day the person ceased to be employed.  If no notice was given, the effective date was the date the last salary payment was made.

The Chairperson asked what was regarded as a dismissal.

Mr Mkalipi explained that a dismissal occurred when both parties agreed that the employee was dismissed.  The Commission for Conciliation, Mediation and Arbitration (CCMA) would determine whether the employee was dismissed if there was a dispute and would determine if the dismissal had been fair.

Advocate Anthea Gordon, Parliamentary Legal Adviser advised that section 196 of the Act dealt with the effective date of a dismissal where no notice was given.

Ms Zuraya Williams, State Law Adviser added that the date of dismissal was the date when the employer first informed the employee that he was no longer employed and was not required to report for work.

Clause 41
The proposed amendment to section 191 of the Act extended the period allowed for the CCMA to resolve a dispute.  Currently, the period was 30 days and no provision was made for parties to agree to extend the period.  In most labour disputes, the CCMA mediated and the labour court arbitrated.  Small companies with less than 10 employees could not afford the high cost of resolving labour disputes in the Labour Court.  Provision was made for the CCMA to arbitrate disputes, which was a quicker and cheaper solution favoured by the Department.

Mr E Nyekemba (ANC) supported the amendment.  He preferred legislation that was more flexible and recognised the vulnerability of small employers.

Mr Mkalipi said that certain companies were of the opinion that there was a better chance that the Labour court would rule in their favour.  Most workers could not afford the cost of appointing a lawyer to represent them in Court and should not be denied access to the CCMA.

Clause 42
The proposed amendment changed the heading to Chapter IX of the Act to “Regulation of Non-Standard Employment and General Provisions”.

Mr A Van der Westhuizen (DA) felt the term “non-standard” was vague.

Mr S Motau (DA) wanted to know what the meaning of “non-standard” was and what was considered to be “standard”.

Mr Mkalipi explained that the term “non-standard” applied to temporary or contract workers.  “Standard” employment referred to permanent employment with regular working hours.  The terminology was accepted internationally and was generally understood by organised business and labour.

Clause 43
The proposed amendment to section 198 of the Act attempted to prevent the abuse and exploitation of vulnerable workers by labour brokers.  The current section introduced the concept of temporary work but there were shortcomings.  The proposed amendment clarified the provisions applicable to temporary employment services (TES).  The amendments were that the TES and the client company could be held jointly and severally liable; the labour inspector could act against both parties; the TES was required to adhere to laws and regulations; the CCMA and Labour Court could rule on the validity of an employment contract and could make an award; the TES must be registered and the TES must provide temporary employees with a proper employment contract.

The proposed amendments were not particularly controversial as the law already recognised the principles of temporary employment.  The position of the Bargaining Council was clarified and authority was given to the CCMA and the Labour Court to extend the scope of joint and several liabilities to include dismissals.  Companies should ensure that the TES appointed adhered to the law.

There was disagreement at the National Economic Development Labour Advisory Council (NEDLAC) on section 198.  The Congress of South African Trade Unions (COSATU) wanted labour broking banned outright but organised business supported regulation.  Any changes to labour policy arising from NEDLAC would impact on clause 43.

Clause 44
The proposed amendment inserted sub-sections 198A to 198D into the Act.  Sub-section 198A provided additional protection for employees who earn below the prescribed threshold.  Temporary work was limited to a period of six months or less.  Employees who worked for more than six months were considered to be permanent employees.  The only exception was an employee who worked as a temporary replacement for an employee of the company.  Temporary services might also be regulated by a collective agreement reached in a bargaining council.  The business sector felt that the six-month limitation was too short.

Sub-section 198B provided for the exemption of new and small businesses (i.e. with less than 10 employees).  An employee might be employed on a temporary basis for a period of longer than six months if the nature of the work was of a limited or definite duration, for example seasonal work.  There must be justifiable reason for the fixed term contract.  Employees must be treated not less favourably than permanent employees and be allowed the opportunity to apply for vacant permanent positions.  If the fixed term contract was longer than 25 months, the employee was entitled to severance pay equal to one week’s remuneration for each completed year of the contract.

Sub-section 198C regulated the work of part-time employees.  The sub-section applied only to employees who earned below the prescribed threshold in terms of section 6 (3) of the Basic Conditions of Employment Act and who worked more than 24 hours per month.  Employees had to receive equal treatment to that afforded to permanent employees.  Exemption for small and new companies was provided.  The definition of “part-time work” was in accordance with the International Labour Organisation (ILO) definition.  The retail sector in particular was opposed to the proposed provisions but the DOL felt that part-time workers were vulnerable and needed additional protection.

Sub-section 198D made provision for disputes to be referred to the CCMA or a bargaining council for conciliation or arbitration.

Mr D Kganare (COPE) understood the intention to restrict trial periods to less than six months (clause 198B (4) (e)) but felt that a trial period of three months was more than adequate for a company to decide to employ a person on a permanent basis.

Mr Nyekemba agreed that there was no need for a lengthy probation period.  He argued that there was no need for the involvement of a TES as clause 198B provided for fixed term contracts.  He conceded that a TES would have a database of suitably qualified and experienced temporary workers and could charge a placement fee but he felt that the employee should have only one employer (i.e. the client company).

Mr Motau asked what the rationale was for limiting temporary work and probation periods to six months.

Mr Van der Westhuizen conceded that there had been many examples of the abuse of temporary workers and workers on fixed term contracts.  Temporary workers were often unaware of their rights and means to recourse.  He agreed that temporary contracts should not be renewed year after year in order to avoid paying workers the benefits permanent employees were entitled to.  He asked the Committee to seriously consider the unintended consequences and the risk of increasing the unemployment rate if the term for temporary work was limited to six months.

Mr A Williams (ANC) observed that the threshold referred to in section 198 was currently approximately R14,000 per month and therefore employees earning below the threshold were generally not highly skilled.  The intention of the amendments was to prevent the exploitation of vulnerable workers, particularly temporary workers who earned far less than the threshold.  He felt that the period of employment should be three months rather than six months and that the Committee could not justify the exploitation of workers for a further three months.  He asked what other justifiable reasons there could be in terms of section 198D (2).

Mr Mkalipi explained that the 2010 version of the Bill had banned labour broking.  The earlier version of the Bill had resulted in extensive discussion.  Labour legislation provided protection for all workers, irrespective of what sector of the economy the workers were employed in.  The DOL eventually conceded that the banning of labour broking would not pass constitutional muster.  Unless the constitution was changed, the practice would continue but it needed to be regulated to ensure that temporary workers were not exploited.  The Department acknowledged that stringent regulation of the job market would result in job losses.  The six-month period referred to in the Bill was decided on as the average of the periods applicable in practice.  For example, the probation period in the public service was currently twelve months and three months in the private sector.  The proposed period was six months maximum but could be for a shorter period.  The DOL thought it would simplify matters if most of the periods in the Bill were six months.  The business sector had not provided justification for the request to increase the term of temporary employment to 12 months.  The Labour Court would determine if any other reason would be justifiable in terms of section 198D as it was not feasible to attempt to legislate for all possible circumstances.

Mr Nyekemba observed that there had been significant changes in the labour market in recent years.  He was not convinced that the proposed legislation would have a negative impact on the rate of unemployment in the country.  He was not convinced that TES created employment and reiterated his stance that the TES should not be involved once a temporary worker had been employed by the client company.

Mr Kganare observed that employers would exploit any loopholes in the labour legislation.  A-typical work was a reality and needed to be dealt with in the legislation.

The Chairperson advised that deliberations on the Bill would be resumed on Tuesday, 30 October 2012.

Adoption of the Budget Review and Recommendation Report (BRRR)
The draft report was circulated to Members for comment.

Mr Williams noticed errors in the amounts quoted in the report.  He suggested that all the amounts and figures in the report were verified and corrected by the Committee Secretary.  The report dealt with the 2011/12 financial year and should not include references to the following 2012/13 financial year.

Mr Motau suggested that the format used to report amounts were applied consistently throughout the report.

Mr Nyekemba pointed out that the Committee could not make a recommendation to itself and suggested that the relevant sentence on page 13 of the draft report was corrected.  He suggested that the Committee included a recommendation that a sustainable funding model for the Commission for Conciliation, Mediation and Arbitration (CCMA) was developed.  Although the responsibilities of the CCMA had increased, the DOL had not suggested that the amount of funding was increased.  The BRRR did not include recommendations regarding the Unemployment Insurance Fund (UIF).  The UIF had a number of projects and investments linked to job creation.  The committee had requested the UIF to quantify the investment in job creation and illustrate how the investment contributed to increasing the benefits to beneficiaries.

The Chairperson added that the Committee needed to include recommendations for the Compensation Fund.  The high prevalence of fraudulent activities and the handling of claims were major areas of concern.

Mr Williams suggested that the recommendations and conclusions were separated.  He suggested that the recommendation that the DOL and its subordinate entities submitted quarterly reports to the Committee on what percentage of the budget had been utilised during the quarter.

The Chairperson said that the Committee had requested that the quarterly briefings were attended by the internal auditors.

Mr Van der Westhuizen suggested that the recommendations included that performance agreements had to be signed by senior officials.  There was a discrepancy between the Minister’s undertaking that the agreements would be signed and the action taken by the DOL.  The Department should support the Minister in the achievement of her performance objectives.

Mr Motau referred to the findings of the Auditor-General that the accounting officer of the DOL had failed to comply with a number of laws and regulations.  The Committee could not be silent on the issue in the BRRR.

Mr Nyekemba said that the monitoring of the implementation of the performance agreement of the Director-General was the responsibility of the executive authority.  The agreement should include compliance with the relevant legislation governing disclosure and financial performance.  The recommendations of the Committee had to be specific, for example that the DOL must resolve all findings related to expenditure before the end of the financial year.

The Chairperson said that reports had to be submitted and deadlines had to be met.  The Department could not be allowed to carry over matters from year to year.  The Committee would hold the Department and the executive authority accountable for meeting deadlines.  A list of all the outstanding matters needed to be compiled.

Mr Williams suggested that the Committee recommended that all performance agreements were signed by a specified date each year and that the Department confirmed that the agreements were signed.

Mr Motau thought the first draft of the BRRR was good.

Mr Nyekemba proposed that the report was adopted by the Committee, with amendments.  Mr Motau seconded the motion.

Other Committee Business
The Chairperson informed Members that permission had been granted for the Committee to continue deliberations on the Labour Relations Amendment Bill and the Basic Conditions of Employment Amendment Bill after hours.  The deadline for finalisation of the Bills was 15 November 2012.  The Committee programme would be amended accordingly.  If necessary, Members would be excused from attending sessions in the House.

Mr Nyekemba pointed out that the Bills could not be formally adopted before the Committee had considered the concomitant amendments to the Public Service Act and the Employment Equity Act.

Ms Gordon and Ms Williams confirmed their availability to attend late meetings.

The Committee had received an invitation from Ms J Fubbs (ANC), Chairperson of the Portfolio Committee on Trade and Industry to attend the briefing on Thursday 25th October 2012 by the Department of Trade and Industry on the progress report on the implementation of the industrial policy plan.  None of the Members of the Committee were available to attend the briefing and apologies would be sent to Ms Fubbs.

T
he meeting was adjourned.

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