Employment Equity Amendment Bill: deliberations

Meeting report

The Chairperson noted that the Committee was meeting after long deliberations looking at the way forward for the Employment Equity (EE) Amendment Bill. Members should raise any controversial issues after the Department had gone through the amendments. 

The Chairperson, noting the Committee was sitting with very few Members, said some Members were in other Committee meetings [24 held that day] although this did not make sense as legislative matters took precedence. Due to this he found the apologies unacceptable and he would engage these Members on this matter so that they were aware. He asked the Department of Labour (DoL) to take them through the contentious and non-contentious areas of the Employment Equity Bill.

Section 1
Mr Thembinkosi Mkalipi, DOL Deputy Director General: Labour Policy & Industrial Relations, said there had been no disagreement for this section to change the definition of “designated employee”. The amendment stemmed from the Department’s desire to treat all South African citizens equally especially in a situation where a white male South African employee was not defined as a “designated employee” but a black American male could be -  this was the central issue which needed to be changed.  The amendment would make it so that a “designated employee” could only be born in South Africa, obtained citizenship before 2004 or if one could show one had applied for citizenship before 1994 and the apartheid government had unfairly denied one citizenship. All the parties at the National Economic Development and Labour Council (NEDLAC) had agreed to this amendment. The amendment would also target employers who were using black foreign nationals to fill their quotas. The Human Sciences Research Council (HSRC) and the Centre for Constitutional Rights were particularly worried about this amendment. They said the definition needed to be clarified as it could be interpreted as inclusive or exclusive of black people but this was actually the point of “designated”  so that only females and black people were “designated”. The other issue for these organisations was that it would be difficult for employers to import foreign labour but this was what the DoL was trying to curb so they did not consider this an issue. He hoped that when Members were ready to vote they would consider the rationale behind this amendment.

Section 6
Mr Mkalipi said there were a number of grounds on which employees may not be discriminated against including race, gender, sex, HIV status. Court cases which had exhausted the listed grounds for discrimination. During the NEDLAC discussions it was decided to include that employees could not be discriminated against “on any other arbitrary ground”. A number of organisations questioned the inclusion of "arbitrary ground" as they felt the present grounds were enough. The Department was not surprised that this was the view of Solidarity as they felt Solidarity would want to challenge any grounds and limit the grounds while the Department felt the door for challenging discrimination against employees should be opened wide.

The Chairperson asked if this meant there could be ground for discrimination such as employees being discriminated against because of their weight.

Mr Mkalipi highlighted the case of the South African who had been discriminated against from immigrating to New Zealand based on his weight.

The Chairperson asked about the case in New Zealand.

Mr Mkalipi answered that he had been granted a 23 month extension of his work visa.   

Section 8: Testing
Mr Mkalipi noted this issue was raised by the Health Professions Council of South Africa (HPCSA). Presently the law required no testing should take place unless the test had been scientifically shown to be valid and reliable. The amendment was made to show that the HPSA was responsible for dealing with tests and not the DoL. He suggested the HPCSA submission be ignored. HPCSA was confused as the Department could not change HPCSA powers in relation to its enabling Act which set them up. Others such as Confederation of Associations in the Private Employment Sector (CAPES) and Mark Roberts, had queried this amendment on how widely the term "testing" could be interpreted and if an interview was thought of as psychological testing. He felt these arguments were misplaced. Common sense on this issue should prevail as interviews did not fall under psychological testing. Those industrial psychologists needed to liaise with the HPCSA as this was not a legal issue.

Section 11: “Burden of proof”
Mr Mkalipi said the onus of proof still lay with the employer to prove discrimination did not take place on any of the listed grounds and this was agreed to by all in NEDLAC. The only thing that had now changed was the addition of “arbitrary ground” (to section 6) where the onus of proof would then shift to the employee to prove this. Shifting of the onus of proof in the case of arbitrary ground also allowed the employer to defend themselves. Prof du Toit, in his submission, believed this was not a legal issue and there was no danger with it because it was already catered for in the grounds for discrimination.  

Section 21: Streamlining of reporting
This section specifically dealt with online reporting and reducing the number of pages that employers needed to submit to the DG which was now 12 and would later further be reduced to eight pages. The aim of the department was to ensure that less information needed to be submitted each year and that the employer only need fill in if changes had been made to information submitted the year before. There was also need for the system merely to import the information. By next year it should take an employer less than 30 minutes to fill in the report. There had been agreement at NEDLAC on this section. The concern was for small business as it was felt that for small business to report annually was a burden to them. The Department disagreed with this as some small businesses actually wanted to submit reporting about Black Economic Empowerment (BEE) and for the purposes of working with government. By making the forms very simple and user-friendly it would not be a problem for small businesses to fill them. The Department could come back and show Members how easy it was to fill in this reporting form and the changes that had been made.

Section 42: Assessment of compliance
Mr Mkalipi noted that the term “category” was taking out and “level” retained so as prevent making reporting cumbersome - this was agreed by everybody. Secondly, there were the factors that needed to be taken into consideration before taking a company to a DG review. The factor about national/regional demographics would not be changed in the Act. "Remember, there was a big fight that we are changing the law because Jimmy Manyi said this and that and we want now to change the law". At NEDLAC, there was a discussion and it was agreed that we would not change the law. Instead, in that area, the Minister would be given an enabling provision.  The laws says now that the employer must use both national and regional demographic of the active population group. Common sense tells one the two cannot be used together but one has to be chosen. How do you make that selection? The law did not give guidance and it was left up to the employer, the inspectors and our former DG to make that assessment of when to use national or regional demographic. This provision now enables the Minister to provide guidance as to under what circumstances the employer must use national or regional. This will go to NEDLAC and be debated and the Committee can even say if it wants to see the regulation and say if it is comfortable with the regulation. This regulation which would come into effect before the President signs the Bill into law.

This section's amendments also removed the need for inspectors to check if there was a (ii) “pool of suitably qualified people from designated groups from which the employer may reasonably be expected to promote or appoint employees”. The responsibility was for the employer, through its plan, to identify its limits in employing the correct quotas and how this would be corrected in the next five years and not for the DG to take responsibility for checking the pool of suitable employment. The responsibility should ultimately lie with the employer if the issue went to court. It was not the responsibility of inspectors to check the suitable pool otherwise there would be no reason for employers to plan. 

This section also removed the need for inspectors to assess, under section 42(1)(iii), “economic and financial factors relevant to the sector in which the employer operates” and (iv) “present and anticipated economic and financial circumstances of the employer”. Even the brightest economists in the world could not predict the global financial downturn so how were inspectors supposed to? This would be placing too much of a burden on inspectors and was not their responsibility to anticipate. If inspectors were that bright they should not be inspectors. This was the rationale behind amending this section and thus showed the law needed to be changed. This was precisely why the Department lost the case against Comair because of this section.   

Section 45: Failure to comply with the Director-General’s request or recommendation
There was no public comment on this section and all were in agreement with it at NEDLAC.

Section 48
This section dealt with commissioners deciding on arbitration matters. Presently only the Labour Court could adjudicate on matters relating to sexual harassment but now the power was being extended to the CCMA. Mr Mkalipi noted there had been no comment on this amendment.

Section 50: Powers of the Labour Court
Mr Mkalipi said there had been no comment on this amendment. It had to do with the Comair legacy where they went to court to review a recommendation made by the DG. The amendment would be in line with the Promotion of Administrative Justice Act (PAJA) where only an action could be reviewed and a recommendation was not an action and everyone agreed with this.

Section 53
The original Section 53 was never promulgated as it meant almost no companies would be able to do business with the state and the consequences would be devastating for the economy and jobs because they had not reached transformation. This amendment made it more flexible by stating “the Minister may in the code of good practice set out factors that must be taken into account by any person assessing whether an employer complies with Chapter II or Chapter III”. There had been no disagreement on this amendment.

Section 55: Regulation
This section was linked to the simplification of forms where the amendment read, “the Minister may (rather than must) by notice in the Gazette make a regulation providing for separate and simplified forms and procedures in respect of the obligations created by sections 19, 20, 21, 25 and 26 for employers that employ fewer than 150 employees”. Everyone had agreed to this amendment.

Section 56: Delegation of powers
This amendment would allow the Minister to (1) “delegate any power conferred, or assign any duty imposed, upon the Minister in terms of this Act, except the powers and duties contemplated in sections 29(1), (5), and (7), 54, 55, 59(4) and 61(4)”. There was agreement on this amendment.

Section 59: Breach of confidentiality
Mr Mkalipi said this was relating to internal departmental matters and breach of confidentiality of a department employee.  The fine for this offence was increased from a maximum of R10 000 to R 30 000. There had been agreement and no comment, even from the Department of Justice, so far on this section.

Section 61: Fines
This section dealt with the issuing of fines to employers who obstructed inspectors from doing their job. This fine had also been increased from R10 000 to R30 000.

Section 64: Amendment of annual turnover thresholds
This would allow the Minister to amend turnover thresholds in terms of Schedule 4 which had never been amended.  It would mean that the higher the company turnover, the higher the burden. The emphasis was to strike a balance between not making the fine on turnover too high or too low. The amendment would also allow the Minister to adjust turnover thresholds according to inflation over the years and there was no disagreement on this proposed amendment.

Schedule 4: Turnover threshold applicable to designated employers
Mr Mkalipi explained Schedule 4 dealt with the turnover threshold applicable to designated employers and for the Minister to adjust these thresholds per sector or subsector in accordance with the Standard Industrial Classification.

Mr Mkalipi noted there had been a number of comments made by the public but that this was not going to make the Department do anything different.

Discussion
Mr S Motau (DA) said he wished for the Committee to discuss the areas of contention.

Mr A van der Westhuizen (DA) felt that international workers would be pushing out South African white males which could mean they might find it hard to get employment at all. He wanted the emphasis to be on ensuring that South Africans had a fair opportunity to compete for jobs. This would be particularly applicable in terms of the Bill not for the current circumstances but for 30 years from now when things had really changed.

Mr Mkalipi explained that the Bill would change the status quo of all non-South African citizens irrespective of race and creed based on the amendment to the definition of “designated employee”. The regulations and the forms the employers submitted every year, the employer needed to show how many employees that had from each racial and gender grouping including foreign nationals at the different levels. Even foreign nationals of African background would be included as they could not be used as part of affirmative action. White males were separate from foreign nationals in the form.

Mr van der Westhuizen asked in which law foreign nationals appeared as a category on its own as he did not read it in the law.

Mr Mkalipi answered that this EE Bill did not deal with foreign nationals but there was a definition in the Employment Services Bill. The law did not define foreign nationals but excluded this grouping from the definition of “designated group”. Only South African citizens could be part of the designated grouping i.e. those people born in South Africa, obtaining residency prior to 1994 or if they could prove they did not acquire citizenship before 1994 because of oppression. Foreign nationals could not benefit from being in the designated group as they were excluded.  

The Chairperson understood that the definition of “foreign national” would not be the Azanian definition but would be one informed by the SA Constitution. The purpose of the EE Bill was to benefit South Africans who had been historically disadvantaged or victims of apartheid. South Africans could not afford to lose this benefit to African foreign nationals who were not discriminated against or had not tried to apply for SA citizenship. If the person could prove they had come from a country considered hostile by the apartheid government and could therefore not work in SA, the person could argue that they were a victim of apartheid.  The Azanian definition of “African” was not very dissimilar to the definition used by the apartheid government. By Azanian he was referring to Pan African Congress (PAC), the Azanian Peoples Organisation (AZAPO) and others represented in Parliament. The definition would definitely not follow that route but be grounded in the SA Constitution.

Mr Motau looked at Mr van der Westhuizen’s concern from a practical point of view which was: there would be competition between employing a foreign national who would not get an employer points and a white South African male who would also not get the employer points.  

Mr van der Westhuizen noted his concern was not white males but their children. The status quo might be skewed presently but what about during their children’s time? He was hurt by the number of white South Africans which had taken their skills overseas - such as to Australia - due to the uneven opportunities. The legislation meant that an American had the same chances of being employed in SA as a white South African male. He did not want to support legislation that would make the South African economy suffer in the future. This came down to a numbers game which included foreign employees in the small pool of non-designated employees in SA.

Mr Mkalipi said the law did not talk about foreign nationals or citizenship other than defining the designated employee. Section 42 of the EE Act was used to see if the company was complying with national or regional demographics for transformation. In this section the company was expected to ensure representivity and for this demographics were key. If a company employed white males below the demographic threshold the company would not be complying with the section to ensure representivity. At this stage, white males could come in on the lower/entry levels as that was where they were underrepresented while being overrepresented in the upper management levels. The situation was the reverse for black South Africans. The Act in totality covered these issues.

Ms Ntsoaki Mamashela, DoL Director: Employment Equity, added that section 19 required companies to do a proper work force profile analysis for each employment level and benchmark it against the economically active population to determine the over and underrepresentation of all population groups. This was how the Department was able to see if it matched the national or regional demographics. Companies needed to ensure there was equal representation of all racial groups across all occupational levels in line with the economically active population. If the company was unable to do so they needed to put in alternative measures with succession planning, mentoring and coaching for the transfer of skills to a designated grouping in line for succession. The provisions of the Act safeguarded against these obsolete barriers.    

Mr van der Westhuizen said that if this was so, the heading would not be white males and foreign nationals as the non-designated group.

The Chairperson repeated it would not be the Azanian definition where all white people in the country were considered foreigners. He highlighted lines from a poem which compared the revolution to a flood and which were appropriate to the discussion in redressing the wrongs of the past and levelling the playing field which would tamper the existing contours. The intention of the EE Act was not to strike fear that certain groupings of the SA population would be relegated to junior citizens.

Mr Motau said they were going to discuss the controversial issues.

The Chairperson joked and thought there were no controversial issues.

Mr Mkalipi said the areas of non-agreement related to Schedule 1 which dealt with maximum permissible fines that may be imposed for contravening this Act. Business feared there would be duplication of fines with sections 16 and 17. These sections talked to the issue of consultation and non-compliance. Business feared they could be fined for not complying with both sections. The Department did not think this was an issue as the Act made it clear there could be a duplication as both sections spoke to the same issue.

Mr Mkalipi said another area of disagreement was section 20 of the Act which dealt with the employment equity plan. Business was prepared to accept this section if it meant the Department could only go to court if the company basically did not have a plan not if the plan was there but was not compliant with section 16. Business felt compliance was a judgement call. Others opposed this section because they did not want anything to go to court. The disagreement with this section was about the decision about going to Labour Court. 

Mr Motau said the use of the word “may” allowed for discretion.

Mr Mkalipi explained that the Department could not act on behalf of the employees and their complaints without dealing with the company first. Inspectors needed to establish a prima facie case which could only be done by contacting the company to get the information and obtaining an undertaking. This was a process which would stay in place. If the company did not cooperate, then the decision could be taken to court. This was so that the Department could cover itself. If the inspector did obtain an undertaking from the employer there was no need to issue a compliance notice as there was an understanding. If the employer did not meet the agreement, it could then be enforced by the court. The central issue was obtaining an undertaking to be fair to all sides. 

Mr Mkalipi said the next area of disagreement was section 36. The Department wanted to go directly to the Labour Court when the employer did not comply and contravened sections 20, 21 or 23 for not having an EE plan. Employers wanted the Department to issue compliance orders if they did not have a plan. The compliance order was viewed as a promise/commitment that the employer was going to come up with a plan and comply with the law. The Department wanted to skip the commitment part for not having a plan and go directly to court with such companies because this had been the law since 1995.

The Chairperson said this was akin to a breach of promise and Mr Mkalipi agreed.

Mr Mkalipi said Sections 39 and 40 would delete objections and appeals against compliance orders. The law currently stated that inspectors needed to obtain an undertaking from employers and a commitment. If the employer did not cooperate, the inspector could issue a compliance order but the employer could object against this. Following an objection against the compliance order, the employer could appeal before going to the Labour Court. No other law had such steps for an administration decision and employers should not have the right to appeal or object to compliance orders but simply make their case in court which would shorten the process of enforcement. Employers supported the current long process because it made it very difficult to reach the ultimate stage of going to court. This did not mean employers could write letters to the DG. Parliament wrote letters to Ministers every day which they did not like because it gave them lots of work but they responded as their responsibility. If employers felt strongly that the case was misplaced by the inspector they could write a letter to the Ministry as it attended to all these cases. The Department did not want to waste time and taxpayers’ money on cases which were irrelevant. The objective was not to delay the process with appeals and objections. 

Mr Mkalipi said the last issue was that fines were linked to turnover which was not a legal issue. 

Mr Motau said the turnover issue was one of the things he believed could actually be manipulated to the disadvantage of the Department. The problem with turnover was that a business would not have money to pay. Everyone agreed they needed to be fined and a significant amount but the question was how best to do this.

Mr van der Westhuizen asked if turnover in Schedule 1 was related to being a designated employer or not.

Mr Mkalipi said the fine was linked to employers who were required to do certain things which spoke to sections 20, 21 and 44. Section 20 was about the plan and if the employer was not a designated employer this did not apply to that employer. Section 21 also did not apply to non-designated employers. The issue that the Department 'might not win' did not come in because they could explain it in court and have covered both ends.   

Mr Motau said it was an interesting discussion but business would always find a loophole even when they could afford to pay the fine.

Mr Mkalipi did not dispute this as business would always look for loopholes in any law and they employed the best lawyers to do so. It was the job of Parliament as lawmakers to close these loopholes.

The Chairperson said there were no very controversial issues on this Bill as all political parties agreed to employment equity and BEE. Business would always try to save money as it was their job to make money. Parliament had the job of finding a balance. Business made the rules as the golden rule was that he with the gold ruled. However, there needed to be some protection for those without the gold. 

Committee Oversight Report
The Committee established that  the Members present did not form a quorum so the Committee Oversight Report also on the agenda could not be adopted. The Chairperson was concerned that Members were not taking the Committee seriously but he would take this up with the relevant structures of Parliament.

Mr van der Westhuizen joked that he expected to see Members on the chairs outside the Chief Whip’s office over the next few days.

The Chairperson said there would be questions of election manifestos and such.

Other Committee business
The Committee would next be meeting 17 and 18 September.

The Chairperson said that he had met last week with the Auditor-General to discuss the Compensation Fund performance because the strategic objective was to turn the Compensation Fund around and make it perform like other entities in DoL. He noted there were issues of leadership within the Department which affected the Fund but the Unemployment Insurance Fund (UIF) was doing well and there was improvement with all other entities but this was not the case with the Compensation Fund, with talk of possible corruption. The intention of the Committee was to have clean governance and clean audits in 2014. All efforts should be focused on the Fund. The Fund now had a new audit committee but he suggested the Committee meet with the outgoing committee so that they could conduct an exit interview, discuss the issues that had happened during their tenure, the challenges faced and what was needed for a turnaround. He said exit interviews were done with most boards of directors and there was nothing wrong with the Committee speaking to the outgoing audit committee. Thereafter, the Committee could meet with the new audit committee to discuss the way forward to turn the Fund around. The most painful thing about the Fund not performing was that most people who had problems with compensation were people who were less fortunate, could not understand contracts and were dealing with a business which was not willing to part with money or think of the impact of non-compliance on such people. This meeting would take place on Tuesday, 17 September 2013.

On Wednesday 18 September 2013 the Department would present their Budgetary Review & Recommendation Report (BRRR) to SCOPA. He urged Members to attend this meeting and as they could benefit from it. The Committee would ask the same questions as SCOPA and could add even more as the Committee interacted with the Department all the time, more than SCOPA did. This could help achieve the goal of clean audits by 2014.

He noted the Committee had been invited to a NEDLAC discussion session on 19 and 20 September in Gauteng.

The meeting was adjourned.