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Date : 06/07/2006
Source: Department of Labour
Title: Mdladlana: Labour Law Conference


  Speech by the Minister of Labour, M Mdladlana, at the 19th Annual Labour Law Conference, Sandton Convention Centre, 6 July 2006

Theme: Labour law in the next decade: time for a change?

Programme Director
Leaders of Organised Business and Organised Labour
Academia
Labour law Specialists
Distinguished Guests
Ladies and Gentleman

I am indeed honoured to address this 19th Annual Labour Law Conference. The theme of this year’s conference is Labour Law in the Next Decade: Time for a Change? I want to start off by quoting an International Labour Organisation (ILO) report on The Changing Patterns in the World of Work released in 2006, which tells us that, and I quote,

“A study of 13 European countries between 1992 and 2002 reveals that employment stability of the workforce is beneficial to productivity levels, human capital investment and worker motivation.  In developing countries, one of the most pressing problems is that the majority of employment relationships are informal and insecure, hampering the developmental transition from the household-based economy to more complex and productive systems for organising productive work”. The report goes further to indicate that, “In industrialized countries, part-time work can reflect workers’ genuine needs and preferences, whereas in developing countries, many part-time jobs fall into the category of “time-related underemployment” consisting of individuals who would like to work more but cannot find sufficient work”. The report further indicates that, “For many firms, the option of outsourcing an increasing range of production or service functions, even to another country, is now feasible. This implies that firms also want to have the option to increase or reduce their workforce according to the choices they make about what to do and what to buy. In turn, this has led to the questioning of laws that restrain employers’ ability to employ at will and protect workers from the effects of employment instability”

In Denel vs JEF Gerber in 2005, the Labour Appeal Court was required to decide whether an employment relationship existed in the context of “triangular relationship”. Gerber sought to enlist the protection of the Labour Relations Act following her alleged unfair retrenchment by Denel. After assessing the evidence before it, the court found that Gerber was Denel’s employee.

In light of the burgeoning practice of using atypical workers who find it difficult to exercise their rights, I am of the view that the labour law should cushion and mitigate the adverse nature of atypical forms of employment and lack of protection for these workers. Just as a new born baby who is vulnerable and needs protection from the mother, so too will these vulnerable workers receive the adequate protection and guarantees from the government in their pursuit for decent work.

The intensification of globalisation and its ideological leaning towards flexibility in labour relations and the labour market, has raised important legal and sociological questions on our understanding of the role of labour laws, employment relations and their consequences. They are touching on the important subject of the Decent Work Agenda, especially in relation to social protection. To what extent are these debates posing threats and challenges towards the realisation of the Decent Work Agenda and social protection? The ILO report correctly points out that, whilst globalisation is sweeping across the globe and affecting everyone, its effects are not the same for the developed and developing countries respectively. This leads to my second proposition.

Assuming that we agree that the effects of globalisation are not the same across continents and countries, consequently, continental and country interventions on these matters cannot be the same. South Africa’s Comprehensive Labour Market Commission in 1995 recommended that the post apartheid labour market regulatory framework should be governed and underpinned by the principle of regulated flexibility.

This entails that the law will be responsive and accommodative of the different concerns of employers and employees. It will in essence, find a balance between security for workers and flexibility for employers.

In the past decade changes in the labour law have been subject to, and informed by this guiding principle. Changes thus far have also been sensitive to the needs of vulnerable workers and small business. Through the Basic Conditions of Employment Act (BCEA), I have promulgated various sectoral determinations to improve the working and living conditions of vulnerable workers. The sectoral determinations amongst others were promulgated for the domestic, agricultural, taxi and retail sectors. My Department is working hard on other sectors, such as hospitality, to ensure that workers enjoy similar benefits of the law.

Programme Director, whilst there is little evidence on the effects of the sectoral determinations on the working and living conditions of these vulnerable workers, I am tempted to note a study by Tom Hertz. In a study titled “The effects of minimum wages on the employment and earnings of South Africa’s domestic service workers”, Tom Hertz argues that the real wages, average monthly earnings and total earnings of all employed domestic workers have risen since the regulations came into effect. Similarly, we have seen steady growth in employment in this sector. This is a positive observation – domestic work is regulated and workers are protected, whilst similarly people have continued to be employed in the sector. We need to also look at the effects of sectoral determinations in other sectors to see whether they also give us as positive a picture as we have seen in the domestic sector. In 1999, I promulgated a Ministerial determination on small business as well as amendments to labour legislation, most notably the Labour Relations Act in 2002. The Ministerial Determination on small business, which applies to concerns of employers employing less than ten workers, varies four conditions of the Basic Conditions of employment to make it easier for smaller business concerns to comply with the Basic Conditions of Employment Act of 1997. Firstly, it extended the maximum number of overtime hours that an employee can work in a week from 10 to 15 hours; Secondly, it reduced the rate of payment for overtime work from time and half in the BCEA to time and a third for the first ten hours of overtime per week; Thirdly, it allows averaging of working hours up to four months by written individual agreement whereas the BCEA only allowed averaging by collective agreement. In 2002, the Labour Relations Act was amended to further accommodate the needs of small business. The amendment has made dismissal procedures easier for small businesses. Section 188A, provides for an agreement for pre-dismissal Arbitration where an employer may, with the consent of an employee, request a Council, an accredited agency or the CCMA, to conduct arbitration into allegations about the conduct or capacity of that employee. These amendments clearly demonstrate the flexible approach adopted by government in relation to labour law. However, changes have not only favoured employers, but have also addressed the employee concerns. The most noteworthy example were the amendments made to section 200A of the Labour Relations Act (LRA) and Section 83A of the BCEA in relation to the problem of independent contractors.  These sections state that a person who works for, or render services to, any other person is presumed to be an employee, regardless of the form of contract, if it can be proven for example that the person’s hours of work are subject to control or direction by another person. Changes to these sections were mainly triggered by changes in the nature of work in recent years that have spawned the rise of atypical employment relations such as casualisation and externalisation, the latter of more concern as it includes practices of subcontracting, outsourcing and the use of labour brokers. These trends, as alluded to earlier in the ILO report, are widespread in South Africa as in countries such as the United Kingdom and the United States.  Despite these interventions by government, we however continue to hear outcries about a rigidlabour market in South Africa. Instead of simply ignoring these outcries, which would have been very easy to do, we decided to engage those complaining about our labour market so that they could explain better the issues directly to us. We needed to be told what they meant in the first place by a rigid labour market. Secondly, we requested these people to point us to specifics in our labour laws, which are rigid. Thirdly, we needed to also be given possible solutions to the aspects that they could identify as problematic.

We commissioned experts to write papers for us and also held two Ministerial Roundtables on these matters.

What we received in response to these questions was not what we had expected. Firstly, we were told that broader growth and development issues – specifically the macro economy and trade - need to be taken into account when debating the labour market. To quote one of our social partners, “the labour market is the “third element” on these debates”. Bhorat and Cassim (2004) argue that “…based on a review of the literature on unemployment in South Africa, we can conclude that the unemployment problem is not exclusively a macroeconomic problem, or a trade policy problem or, for that matter, a labour market problem”. Our current levels of economic growth, around 4%, are simply insufficient to create the number of jobs we need to create, and our current levels of both domestic and foreign investment are simply insufficient to create the number of jobs we need to create. Equally, the reasons we are not seeing the kinds of growth and investment we need to create jobs and eradicate poverty, are also not limited to the labour market. For example, the cost of banking and telecommunications in South Africa are much higher than you find in most developed economies - banking in South Africa costs double compared to banking in the United Kingdom. Our transport infrastructure is also too weak to spur a sustained economic growth trajectory – the next World Cup in four years time has to find this problem fixed. In trade, the key question to ask is whether the trade reforms embarked upon by the democratic state have induced productivity growth or constrained it.

The general picture that has emerged for South Africa is that these reforms have had no impact on either job losses or job creation – thus their impact on growth has generally been indifferent.                     Secondly, we are told that there is nothing wrong with our broader labour legislative environment. However, there are areas within our laws that are producing some unintended consequences, and others which are largely institutional problems/inefficiencies/overload. H Cheadle in his paper argues for the retention of sector level bargaining but points out that it is under threat unless radical steps are taken to overhaul its operation. He also argues that there is too much judicial regulation of the individual employment relation. P Benjamin in their paper on the efficiency of the CCMA on the other hand tell us that there has been a significant rise in cases where parties to conciliation and arbitration raised legal constraints before the start of the process, which either prevents the commissioner from hearing the case or delays the hearing.  There is also evidence of significant variations in the outcome of arbitrations between regions. Also, considerable use is made of the con-arb process, while on the other hand virtually no use is made of the pre-dismissal arbitration. S Godfrey and J Theron’s paper on bargaining councils and the effect on SMMEs tells us that the coverage of the BCEA and sectoral determinations is much more significant than bargaining councils, while the extension of agreements covers a very small proportion of the labour market. According to the Labour Force Survey, bargaining councils cover 25% of the total labour force, while extension of these agreements only affects 4.6% of the total workforce.

Furthermore, we know that the enforcement capacity of both councils and the Department of Labour is limited, which likely translates into relatively high levels of non-compliance. For the 4.6% of the total workforce potentially affected by the extension of collective agreements - the exemption systems of councils appear to be functioning well; the number of exemptions is increasing; and the number of appeals against refusals is low. Most exemption applications come from small firms and many more exemptions come from non-party firms, than party firms. Furthermore, many councils appear to be sensitive to the problems faced by small firms, with blanket exemptions being used by some to accommodate small and new firms. However, in many countries, far more workers benefit from collective agreements. For example, in European Union Member States, about 78 per cent of workers were covered by collective agreements in 2001. The EU figures are high because of the continued strength of industry bargaining and the use of voluntary or legal procedures to make agreements binding on all employers in the sectors concerned.

Thirdly, it has become increasingly clear to us that there are a number of critical areas where we simply lack sufficient information to make proper judgements of the impact of our interventions. For instance, the impact of our Ministerial determinations of 2002 remains unclear. There is a need to look at the impact of variations, exemptions, and sectoral determinations on small business since the Ministerial Determination of 2002; there is a need to further look at collective bargaining trends, the coverage of collective agreements and the extension of collective agreement to non-parties; there is also a need to look at broader regulatory burdens facing micro-enterprises generally and not only those limited to the labour market; the extent to which it is difficult to hire and fire needs to be further explored using empirical data.  The research would need to explore areas of possible tweaking to unblock any unintended consequences emanating from the implementation processes, and must assist in identifying pervasive employer/employee practices that potentially create difficulties.

Lastly, it would seem that a bigger part of the debate on the labour market in South Africa is simply ideological, and in some cases mischievous. How does one explain for instance, the outcry we have been seeing on the coverage of collective agreements when their coverage if so low compared to developed economies whose labour markets are punted as flexible? How does one explain the thousands of job losses reported by Statistics South Africa in their Labour Force Surveys when we are told it is difficult to hire and fire? How does one explain the millions of our people in insecure and atypical work when our labour laws are that rigid? All these data and trends, independently verified, point to a certain degree of mischievousness that we need to always guard against.

As the clamour for a more deregulated market amplifies and gains strength, like a colossal Tsunami with the noble and virtuous intention of reducing unemployment and poverty, we must be mindful of the destruction this Tsunami could potentially have for the rights of vulnerable and marginalised workers.

An unfettered and deregulated labour market will not only leave vulnerable workers with no recourse against unfair labour practices, but will also not afford them the opportunity to improve their lives as most atypical jobs are insecure and pay low wages with prospects for upward mobility virtually negligible.

As a member of the International Labour Organisation (ILO) and as a signatory to its conventions and practices, South Africa unequivocally supports and is committed to the ILO’s Decent Work Agenda. According to the ILO, the Decent Work Agenda is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organise and participate in the decisions that affect their lives, and equality of opportunity and treatment for all women and men. In addition, our commitment to the decent work agenda should be reflected in our attempts to reduce poverty, and to achieve equitable, inclusive and sustainable development.

Externalisation and casualisation if allowed to grow and spread unchecked will go against the fundamentals of the Decent Work Agenda because it does not afford workers security, social protection and prospects for personal development to name but a few.

I am not saying that there should be no flexibility in our labour market at all, to think in such a manner would be foolish and na

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