Labour Relations Amendment Bill: Clause 39-50 deliberations

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Employment and Labour

01 November 2012
Chairperson: Mr N Nchabaleng (ANC)
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Meeting Summary

The Department of Labour, State Law Advisors and Parliamentary Legal Advisors continued to take the Committee through the Labour Relations Amendment Bill, from clause 39 to the end. Clause 39 confirmed the requirement of reasonableness when any extensions of the 60-day period for conciliation were discussed. There were valid concerns by both Labour, who felt that this might be too short a time to reach agreement, and Business, who was concerned that prolonging the time period could cause further damage to struggling companies. Sections 189 and 189A of the Labour Relations Act (LRA) were now being brought in line. Members debated the problems that mechanisation could lead to retrenchments, noted that companies had to be competitive in order to grow the economy, but wanted to limit clauses that could lead to abuses. Clause 40 clarified the effective date of dismissal when a notice of dismissal was given. Clause 41 allowed for parties to extend the 30-day period for conciliation, and allowed the Commission for Conciliation, Mediation and Arbitration (CCMA) to arbitrate on operational requirements, in the case of small employers with less than ten employees. Although there had been attempts to reach a compromise between the Department of Trade and Industry’s definition of small businesses as those with 50 and less employees, and sector determinations that used the figure of ten employees and less, this was not possible. The Department explained the “trade-offs” during negotiations at NEDLAC. Clause 42 made technical amendments. Clause 43 sought to strengthen and affirm the principle of joint and several liability, by allowing a temporary employment agency to be joined with its client as a responsible party. One Member noted that invariably the contract between agency and client would limit the employment to “as long as the client required the services”, and noted that reinstatement was not practically possible. The Department confirmed explained that this clause recognised that the agency listing an employee did not amount to reinstatement, and stressed that contracts between agency and client that sought to take away basic rights would not be enforceable. The Parliamentary Legal Advisors explained when a contract would be regarded as “temporary”, and said that different provisions applied to those earning below and above the threshold. Members agreed that more debate was needed on this clause. For clause 44, the drafters were asked to include various options for the time periods in the Working Document, and to use the word “employ” instead of “engage”. The Department explained the intention behind the new sections 198B to D. Clauses 45 and 49 contained technical amendments. Clause 46 applied the principles of joint and several liability to outsourcing. Clause 47 allowed the Minister, at certain times, to publish Codes of Good Practice. Clause 48 outlined some definitions, including service. The short title, in Clause 50, would change, and the Working Document would note that the new section 198(4F) could come into operation only on a date determined by the President, after certain pre-conditions had been met.

Members agreed to proceed on the Tuesday 6 November, with a new Working Draft of the Bill.

Meeting report


Programming issues
The Chairperson said that the meeting on Friday 2 November would be cancelled, since a number of Members were unable to attend. On the following Tuesday, Members would be able to move faster, because they would have had a chance to consider the matters, and a new Working Document would be presented by the drafters.

Labour Relations Act (LRA): Deliberations from clause 39

Clause 39
Mr Thembinkosi Mkalipi, Chief Director: Labour Relations, Department of Labour, noted that presently the Labour Relations Act (LRA) provided that conciliation was to take place in sixty days. Clause 39 now confirmed that any person could propose an extension on that. There were two concerns around conciliations expressed during the National Economic Development and Labour Council (NEDLAC) process.  Labour, in order to try to save jobs, wanted to ensure that as much time as possible could be allowed for conciliation and felt that the sixty day period might be unduly restrictive, whilst Business did not want to prolong negotiations for retrenchment, because this might cause more damage to an organisation that was struggling. South Africa had lost a huge number of workers through retrenchment from 2008 onwards, and there was a discussion whether more stringent conditions should be imposed around retrenchment. Both arguments had merit. That was why the sixty days was not actually being increased, but the parties were instead being urged to be reasonable.

Mr A van der Westhuizen (DA) asked if the current legislation did not allow for an extension of time. If so, he wondered why this clause was inserted. People were at all times expected to act reasonably.

Mr Mkalipi responded that at the moment the law did allow parties to extend the time, but this clause was trying to stress the point of reasonableness. Again, he noted that the period was seeking to achieve a balance between the time to save jobs, and to save the company. Parties did not always act reasonably at the moment, although of course their reasonableness could in future be tested in the courts.

He added that at the moment the LRA defined what a fair reason for dismissal would be, for operational requirements, in section 189A but section 189 did not have such a requirement, so the intention was also to bring sections 189 and 189A into line. The question was whether technological advancement was a valid reason for retrenchment. Although it was normally assumed that retrenchments would occur when a company was struggling, it might also be that a company could mechanise and not need the extra labour. This clause sought to ensure that parties would have to argue their cases properly.

The Chairperson commented that at a chicken farm in Limpopo, almost twenty people had recently been retrenched, through automation of feeders. This could be said to be fair for the owner of the business, because he had no labour problems, but it was clearly not fair for the retrenched workers.

Mr van der Westhuizen agreed that this was a difficult case. At the moment, South Africa was importing chickens at prices far below what it could produce in South Africa, and it was not desirable that owners be forced to continue running their businesses at higher costs. In the textile industry, many factories closed down because of ageing technology. South Africa could only grow jobs if it was competitive in terms of international costs. Whilst it was desirable to promote labour-intensive industries, from a social perspective, there was also a need to be competitive from a trade perspective. He noted that people would adapt their habits to fit into the legislation, as seen by reorganisation of some businesses to get rid of staff, and that was an abuse. Technology should not be allowed to be an automatic excuse. He knew that this was not likely to be accepted happily by Business, but the Committee should try to remove clauses that would lead to abuses.

Clause 40
Mr Mkalipi noted that this clause was clarifying the date of dismissal, when a notice was received. There was nothing controversial about it.

Mr E Nyekemba (ANC) asked what would happen if the notice expired on one day but not all money had been paid.

The Chairperson added that consideration would have to be given also to whether, for example, interest would be added to the amounts due.

Mr Mkalipi explained that a worker would be dismissed by getting notice on day 1 and would have worked off a month’s notice when he left on day 30.  If the employee wanted to challenge the dismissal, he could approach the Commission for Conciliation, Mediation and Arbitration (CCMA). This clause clarified what the effective date of dismissal would be. If the company owed money to the dismissed employee, the dismissal was regarded as the date on which the outstanding money was paid. This clause was not dealing with dismissal through misconduct. The date of dismissal would be the date mentioned in the notice, or the date on which all money was paid (if this was done earlier).

Clause 41
Mr Mkalipi noted that clause 41 was amending section 191 of the Act. He reminded Members that conciliation took 30 days, after which parties would go to arbitration. This clause was, firstly, allowing parties to agree to extend the conciliation. This was in line with the earlier proposals around section 189A. Secondly, it was giving the CCMA the opportunity to arbitrate on operational requirements, since the clause provided that small employers (with less than ten employees) could have their matters held before the CCMA rather than the Labour Courts. Previously this had applied to single employees.

Mr Nyekemba noted that normally the date of conciliation should take place within 30 days after referring a dispute. He asked what would happen if CCMA gave notice of conciliation within 30 days, but the date set for the hearing was after 30 days.

Mr Mkalipi said that if the CCMA scheduled a conciliation after 30 days, for whatever reason, and this was not challenged by the parties, then it was assumed that they had agreed to extend. Technically, the applicant had the right to demand a certificate after the 30 days had expired, in terms of the LRA. At the moment, all disputes were actually set down within 25 days. If the applicant did not appear in the CCMA, the respondent would get a certificate of non-resolution. In cases where the respondent did not appear, the CCMA had originally removed the cases from the roll, but the Court had confirmed that certificates must also be issued in these cases.

Mr Nyekemba questioned the new wording of section 191(12), and asked what had informed the decision that a small employer would be one employing ten employees.

Mr Mkalipi confirmed that the numbers had been controversial. The figure of ten was based on linkage with the “small business” determination. The sector determination figure of ten was used to exempt small businesses from some provisions of the Basic Conditions of Employment Act (BCEA). The Department of Trade and Industry (dti) regarded small businesses as those of 50 employees and less. The original intention was to amend the sector determination, and this clause, to read “50 and less employees”. Labour was happy with this clause being amended to 50 and less, but Business was not. The opposite applied to the numbers for the sector determination, where Business welcomed the raising of ten to 50, but Labour did not. Mr Mkalipi said this again illustrated the need to find a good balance between creating jobs and making companies viable. It would be desirable to have exactly the same determination across the dti and labour, at 50 and less, but this was not possible at the moment because of competing interests.

Mr Nyekemba was worried about consistency. Under clause 44, he was sure that the explanation of competing interests of the social partners at NEDLAC would again be raised. He understood the reasoning, but did not necessarily agree.

Mr Herbert Mkhize, Advisor to the Ministry of Labour, explained that during the NEDLAC engagements, essentially a “package” was being discussed, so that trade-offs could occur. This explained why in one area there seemed to be more progressive provisions, whilst in others there were not. He urged Members to appreciate this, and said that it was not always easy to rationalise the Bill, one clause at a time. The Department of Labour (DoL) was often trying to reach compromises when drafting the Bill.

Mr Mkalipi added that the Bill had tried to ensure buy-in of all stakeholders, to try to reflect what was agreed upon at NEDLAC and to build it up.

Mr A Williams (ANC) noted that there was not agreement on all clauses at NEDLAC. He thought, for this reason, that it was not entirely relevant to raise those points here, and felt that the DOL was perhaps out of order in trying to explain the Bill in this way.

Clause 42
Mr Mkalipi noted that this was a technical amendment to the heading.

Clause 43
Mr Mkalipi noted that the principle of joint and several liability was in the LRA, and this clause sought to strengthen that principle. Section 198 of the LRA dealt with temporary employment services. The present subsection (4) indicated what contraventions would give rise to joint and several liability. If a labour broker had breached a collective agreement, or an arbitration award regulating terms and conditions of employment, or a determination in terms of the BCEA, consequences would follow. Clause 43 was essentially extending this ambit. It clarified that the employee or inspector could join either the temporary employment agency, or the client, or both, as a responsible party. There was not disagreement at NEDLAC on that, but again, it was part of a  “package”.

Mr Nyekemba made the point that the referral form may well have to be re-designed to accommodate the changes. He made the point that no matter who was cited, the service agreement signed between the client and the temporary employment service had to be considered. These service agreements invariably would contain a clause to the effect that the contract would be in place “as long as the client required the services”. Clients tended not to tell the temporary service employees of their dismissal, but instead relayed this through the agency, despite the fact that the employees would know what treatment had been shown to them, and what had led to the dismissal. Mr Nyekemba felt that whatever was put in this clause would not result in any real protection for the employee. He also suggested that it was important to look at the trend of the arbitration awards. It was difficult for the Commissioner to say that the employee would be reinstated, because the temporary employment agency would not have a company or business in which to reinstate.

Mr Mkalipi said that there were various intentions behind the proposal. The proposal sought to deal with the current problem where employees employed by labour brokers could be dismissed, then approach the CCMA, and the labour broker would then agree to “reinstate”, although in effect this only meant that the employee would be put on the list, not placed in a job. This clause recognised that putting a person on the list was not akin to employment. Secondly, if the contract between the client and the labour broker was contrary to any employment law, perhaps being subject to another suspensive condition, that would be deemed a dismissal. The law was intended to deal with vulnerable workers, so any termination of contract between a client and labour broker should not be considered a good reason for dismissal of the employee. He agreed that there had been many workers who had suffered because of the ending of a contract between client and labour broker. This debate had been held at NEDLAC, which had insisted on clauses to counter this kind of abuse.

Mr Nyekemba agreed that the intention was to protect vulnerable workers. The definition of an employer (in the Health and Safety Act) did not include a labour broker. The first issue had to do with the citation of the respondent, in a referral. Section 198A(3)(b) said that the client was deemed to be the employer. That point was not in dispute. Mr Mkalipi had sought to link subsections (3) and (4), but Mr Nyekemba pointed out that (4) was referring to a situation where the temporary service employee was not performing. He reiterated that there was invariably a clause in the service agreement, between the temporary employment service (labour broker) and the client, that placement would be “as long as services were required”.  A similar provision would be included in the service agreement. That was why he was worried about this clause. In previous deliberations, it had been stressed that the contract of employment was important

Mr Mkalipi explained that there was a kind of hierarchy. The law would respect a contract of employment and its terms, unless it actually contravened the law, but only insofar as it did not actually try to amend the legislation. For instance, a bargaining council agreement could not attempt to amend provisions in a piece of legislation, because there was nothing in the legislation empowering this to happen.

Ms Suraya Williams, State Law Advisor, Office of the Chief State Law Advisor, added that the contract of employment should not attempt to give lesser rights than the legislation provided, and at least the minimum labour protection would be given. The contract would be described as ultra vires or unlawful when it tried to impose provisions that the courts would not allow to be enforced. A contract could give better conditions and more rights, but could not allow anything less than the basic rights as set out in legislation.

Adv Anthea Gordon, Parliamentary Legal Advisor, said that the amendment and the LRA covered all situations. She explained that different provisions applied to those earning above and below the threshold mentioned in the Basic Conditions of Employment Act (BCEA).

For those earning below the threshold, the term of employment was important. A person employed “for as long as required” was not regarded as being under temporary service.  If, however,  the employee was required for a stated period – say four months - this was regarded as a temporary service. If an employee was covering maternity leave, even if the employer extended the period of maternity leave beyond the BCEA requirements, this would still be regarded a temporary position, under section 198B. In those cases, the employee was the employee of the labour broker. If the labour broker entered into a contract for “as long as your services are required”, this was presumed to be longer than six months. If the time was not specified, the contract was deemed to be indefinite, and the employee would be deemed the employee of the client. She stressed that this was applicable to those earning below the threshold

For those earning above the threshold, the employee would be the employee of the labour broker, as specified in section198A of the broker.

Mr Nyekemba thought that more discussion was needed on the point, as he was not entirely happy with it.

Clause 44
Mr Nyekemba thought the earlier debate covered his concerns on this point.

The Chairperson noted that the Members would be voting on the time periods during the next round of deliberations, and reminded them that the options suggested were 12, 6, 3 and 0 months. This would apply to all the new sections in which time periods were mentioned.

Mr Mkhize said that this was a decision to be taken by the Members.

Mr Mkalipi said that the new section 198B related to fixed and temporary time periods. Everything else had been agreed, at NEDLAC, on the fixed term contract, and the only outstanding matter was the question of the time period, suggested as six months.

Mr Mkalipi also wanted to refer to the probation periods, in the new section 198B(4)(e). The Bill assumed that a party could be tested during a fixed-term contract.

In relation to section 198C, there was disagreement between labour and business. Mr Price had made the point that this company, as well as other retailers, employed a lot of part-time employees over weekends. These employees would take home less than other full-time employees, simply because of the hours they worked, but other conditions of employment would have to be the same.

The new section 198D was clarifying the different pay issues. Sections 198A to C spoke to equal work for equal pay. However, section 198D was saying that there might be reasons for differential treatment. Some criteria were suggested, but there could be others. 

Mr Nyekemba noted that the legal drafters would look at whether there had to be definitions around “engaged”, and would set out some options for the time periods.

The Chairperson suggested that perhaps “employ” might be a better word.

Adv Gordon said that this suggested change had already been made in the Working Document that was being prepared by the drafters at the moment.
Clause 45
Mr Mkalipi noted that this clause was a simple amendment, to change a citation. Currently, a person working for, or rendering service was regarded as an employee if certain factors were present, and the clause was extending the factors to include other employment laws in the ambit of the existing section. This was not dealing with labour brokers, but covered the situation of independent contractors.

Mr A Williams confirmed that the ANC had no problems with this clause.

Clause 46
Mr Mkalipi said this was a technical amendment, which dealt with outsourcing. It recognised that there might be more than one person who was responsible as an employer. It was linked to earlier discussions around joint and several liability. For instance, if a hotel manager used his influence over a security manager to dismiss a contracted-in security guard, the hotel manager could also be held responsible. The ANC Manifesto had spoken of the problems of labour brokers sub-contracting, and this clause was speaking to that.

Mr Williams confirmed that there was no problem with this clause.

Clause 47
Mr Mkalipi noted that this amendment allowed the Minister to issue and publish codes of good practice, and said when this could be done.

Mr Nyekemba said that he understood the principle.

Mr Williams said that he agreed with the clause.

Clause 48
This clause dealt with definitions. Mr Mkalipi noted that in the current LRA, “Commission” was not defined, and this was now being corrected. There was also correction of a citation. The Unemployment Insurance Act was being defined. The clause also included a definition of “serve”, and stated that the Labour Court, the CCMA and bargaining council could specify what type of service they would accept. He noted that at the moment, the CCMA was giving notice of dates to parties via SMS.

Mr Williams indicated that he agreed with the clause.

Mr Nyekemba said that SMS was not mentioned in the definitions as proof of service.

Mr Mkalipi agreed that this was not covered in the Bill, but the Rules of the Court, CCMA and bargaining council could specify whatever they wished. It was essentially empowering the bodies to determine what “service” in their forum would be.

Ms Suraya Williams noted that in the Durban High Court, a judge had recently ordered service by Facebook, since there were indications that a party was deliberately avoiding the Sheriff, but was known to be online on Facebook regularly.

Clause 49
Mr Mkalipi noted that this clause was correcting a citation of a section.

Clause 50
Adv Gordon notified Members that the Short Title would change. The Act would normally come into operation on a date determined by the President, in a proclamation.  However, the coming into operation of the new section 198(4F) in (clause 44) would have to be done at a later day, because the complementary legislation for implementation was not yet in place.

Members then discussed the future meetings on the Bill. The Chairperson noted that a Working Document would be produced by Tuesday.

Adv Gordon said that it would be more practical for the Parliamentary Legal Advisors to continue working on this Bill, returning to the BCEA at a later date.

Mr K Manamela (ANC) asked if there was any possibility of getting the Working Document any earlier, but Adv Gordon responded that the volume of work would make this impossible. She assured Members that the new Working Document would be quite clear and easy to read.

The Chairperson said that Members would also have to read the Working Document with the current version of the Bill.

Ms Williams asked if Members could give an indication of what changes they wanted to propose.

Mr Manamela and the Chairperson suggested that where options had been proposed during these deliberations, they be stated as possible options. He would like to avoid re-debates on matters already covered thoroughly.

Adv Gordon noted that she and Dr Loots were the Parliamentary Legal Advisors, and ultimately they had to ensure that the Bill was constitutional. Whilst all drafters were “on the same side” the final word on constitutionality would remain with the Parliamentary Legal Advisors.

The meeting was adjourned.


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