Labour Law Review

Summary of Issues and Amendments to the Labour Relations Act, Basic Conditions of Employment Act and Insolvency Act

1. Introduction

At the beginning of this year the Minister of Labour announced his intention to introduce legislative amendments to the Labour Relations Act, the Basic Conditions of Employment Act and together with the Minister of Justice, amendments to the Insolvency Act.

These amendments are a result of a review process conducted by the Department of Labour in 1999. The review concluded that the fundamentals of our labour market policy are sound and that the overall thrust of the legislative framework is correct. However it did identify aspects of our law which would require amendment to meet the following objectives:

Increase the sensitivity of our legal framework to the imperative to create jobs;
Address unintended consequences of some provisions of our laws;
Improve the application of the laws; and
Ensure the effective alignment of our laws with the changing labour market environment.

Inputs for these amendments have come from a range of sources. Organised business, organised labour, the black business council and the community constituency were all given an opportunity to identify areas of concern about our labour laws and propose amendments. The Department undertook an internal review and there were consultations with the Labour Court, CCMA and bargaining councils on issues which related to them.

A legal drafting team, working with the Departments of Labour and of Justice, have prepared three draft amendment bills. Amendments have been proposed in the following four areas:

Collective bargaining and bargaining councils;
Dispute resolution by the CCMA and the Labour Court;
Rights and responsibilities of employers and workers in the event of retrenchments, transfers of businesses and insolvency;
Basic conditions of employment and contractual relationships.

The amendments that have been proposed could be evaluated in a number of ways. They could be measured against the concerns and demands that either organised business or labour have put on the table. In this regard, the amendments would score high, but would not get a 100%. But they could also be measured against the extent to which they address the following imperatives of government:

employment creation;
improved labour market efficiency;
small business promotion and development;
improved protection for vulnerable workers;
reduction of negative perceptions by investors.

It is believed, measured against these imperatives, as a package they would score very high, close to 100%. This is what the amendments seek to achieve and the Minister of Labour calls on organised business and labour, on public commentators and the public, to evaluate the amendments in this way.

The document below seeks to summarise the proposed amendments as well as explain how these will address the above policy imperatives of government.

2. Collective bargaining and bargaining councils

The Labour Relations Act, as well as subsequent labour legislation on basic conditions of employment, skills development and employment equity, introduced many new challenges for collective bargaining, particularly at the sectoral level.

Since 1996, bargaining councils and the trade union and employer parties to these councils have as a result had to make many changes. The Department's assessment is that bargaining councils and the parties to councils have undergone a steep developmental curve and many have managed to transform in line with the new laws.

However, they have had not had sufficient time to significantly address transformational issues and ensure that councils become efficient labour market institutions offering quality and value added services to both employees and employers.

With this in mind, the amendments that are proposed in respect of collective bargaining are not far-reaching. The most significant improvements still need to occur through the actions of the parties within the existing legal framework.

The amendments that are being proposed are aimed at promoting the efficient functioning of bargaining councils and collective bargaining, particularly in relation to small businesses. They include:

To address the concerns of non-parties, councils will be obliged to allow non-parties to make representations to the councils concerning collective agreements that the Minister has been asked to extend to non-parties.
To assist councils enforce their agreements, more appropriate powers have been given to designated agents to monitor compliance with agreements. Their responsibilities include providing advice to small employers and non-union members.
The role of arbitration to resolve disputes has been clarified and enhanced. To ensure independence, arbitrators will be appointed by the CCMA.
To improve the oversight over bargaining councils, the powers of the Registrar to investigate alleged irregularities and non-compliance with the Act are increased and the procedure to verify the representativity of councils is enhanced.
To improve the oversight of medical schemes and pension and provident funds run by bargaining councils, the oversight of these funds has been transferred to the Registrar of Pension Funds and the Registrar of Medical Schemes respectively.
To speed up the process of establishing a rational framework for bargaining in the public service, the processes of designating, establishing, amalgamating and varying the scope of bargaining councils in the public sector has been clarified and greater autonomy given to the Public Sector Co-ordinating Bargaining Council.
To enhance worker participation at an enterprise level and promote more co-operative labour relations, the competence to initiate the establishment of a workplace forum has been extended from majority unions to one or more unions acting together with employees who form the majority of employees in the workplace, as well as the majority of employees in a non-unionised workplace. Workplace forums can also be set up in enterprises with fewer than 100 employees.

3. Dispute resolution by the CCMA and the Labour Court

The 1995 Labour Relations Act revolutionised dispute resolution in South Africa. It replaced the ineffective conciliation boards and Industrial Court with the Commission for Conciliation, Mediation and Arbitration (CCMA) and the Labour Court with the same status as the High Court.

The LRA supplemented by Codes of Good Practice, codifies our law relating to unfair dismissal. This has led to far greater certainty. The new system is speedier, more accessible and cheaper for employer and employee parties. Neither business nor labour would want a return to the previous adversarial dispensation.

Nevertheless there have been significant teething problems. The majority of these require institutional and not legislative solutions. However both the social partners and the CCMA management have drawn the Department's attention to a significant number of changes that could be made to the law to improve the effectiveness and efficiency of dispute resolution.

It is the view of the Department that the problems of application have contributed considerably to the negative perception of our laws, particularly the perception that dismissal is onerous and expensive. Small businesses have often had to bear the brunt of these application problems.

In the area of dispute resolution, what is in the interests of small employers is also often in the interests of the employees of small employers and other vulnerable workers. Some of the amendments that we have proposed will make the dispute resolution system even more accessible and expeditious for vulnerable workers.

The amendments that are proposed to improve the dispute resolution system, particularly for small business employers and or vulnerable workers, include:

Introducing a speedier one-stop process of conciliation and arbitration for individual unfair dismissals and unfair labour practices. This so-called 'con-arb' process will allow conciliation and arbitration to take place as a continuous process on the same day, if necessary.
Giving employers and employees an option to request by mutual consent the CCMA or a bargaining council to appoint an arbitrator to conduct a final and binding disciplinary enquiry. This will eliminate the duplication of proceedings involved in having both an internal inquiry and arbitration at the CCMA or Labour Court hearing. The employer would be required to pay a fee.
Deeming arbitration awards made by the CCMA, bargaining councils and accredited agencies in terms of the Act to be final and binding and to be capable of being enforced in the same manner as a court order. This will alleviate the need for an employee whose award is not complied with to approach the Labour Court to have the award made an order of Court.
Introducing a probationary period of six months for a new employee during which time an employer will have to meet a lower burden in establishing the substantive fairness of dismissal on grounds of incompatibility or a failure to meet work standards. Such a dismissal will however still have to follow a fair procedure.
Clarifying that employers do not have to hold a formal enquiry when contemplating a dismissal in relation to an employee's incapacity or misconduct but only to give the employee a right to state his/her case with the assistance of a fellow employee.

The amendments that we propose to address application problems include:

Providing that Labour Court judges have to be judges of the High Court and would thus have life long tenure. This will enable the Labour Court to attract and retain suitable judges. The Labour Court has the same status as the High Court.
Giving Commissioners discretion as to the amount of compensation that may be awarded when a dismissal is procedurally unfair, subject to a maximum award of 12 months’ wages. At the moment there is no discretion and unrealistically high amounts of compensation have been awarded, especially in cases affecting workers with short service.

Finally, while the majority of the social partners have treated the new dispute resolution system with respect and integrity, there are individuals and organisations who have brought frivolous and vexatious cases to the CCMA and Labour Court, attempt to delay proceedings unnecessarily or who mislead workers and employers into using their services as labour consultants at the CCMA.

There has thus been a need propose the following amendments to address this problem:

Giving Commissioners at the CCMA the power to deal with contemptuous conduct by one of the parties by referring his/her findings to the Labour Court which can confirm the findings and if appropriate impose a sanction for contempt.
Giving Commissioners greater powers to issue cost awards when frivolous and hopeless cases are brought to the CCMA. These will be according to guidelines and a fixed tariff.
Providing for labour consultants who want to represent their clients at the CCMA to be accredited. They could have their rights of appearance suspended or withdrawn or be charged with contempt if they abuse the process or do not comply with the Code.
Adding a requirement that the Registrar of Labour Relations must be satisfied that an applicant is a genuine trade union or employer organisation before registering it. This is to reduce the number of applicants, generally labour consultants, who seek registration so that they can represent employees or employers at dispute resolution proceedings of a trade union or employers’ organisation.
Enabling the Registrar of Labour Relations to wind up and cancel the registration of labour organisations that have ceased to operate as trade unions or employers’ organisations.

It is hoped that the overall impact of all the above-mentioned proposed amendments will enable the CCMA and Labour Court to focus on their core business in an efficient and effective manner. It should also reduce the caseload of the CCMA and the Labour Court and enable the CCMA to devote greater energies into the effective management of collective disputes and dispute prevention. This would lead to even greater stability in the labour market.

4. Rights and responsibilities of employers and workers in the event of retrenchments, transfers of a business and insolvency

In the context of high unemployment, large numbers of retrenchments and high levels of insolvency, the Department believes that it is most important to provide certainty to employers and employees as to their rights and obligations in such circumstances.

Further, the law should facilitate and encourage job retention and the search for alternatives.

With these objectives in mind and bearing in mind the requests of the social partners, the Departments of Labour and of Justice are proposing amendments to the processes that are spelt out in the Labour Relations Act and Insolvency Act in the event of:

Retrenchment (dismissals for operational requirements);
Transfer of businesses;
Liquidations or insolvency.

4.1. Retrenchments

Section 189 of the present Labour Relations Act together with a Code of Good Practice which was published last year sets out the procedures that should be followed in the event of retrenchments which include a requirement to consider alternatives to dismissal and extensive consultation.

However, the trade union movement has raised a number of concerns including that:

Employers do not take the procedures in the Act or Code seriously. They only go through the motions during consultations as they have already made the decision to dismiss before the consultations begin.
Unions struggle to obtain relevant information on the reasons for retrenchments.
The Labour Court is not able to evaluate the economic justifications given for retrenchments with the result that retrenchments are seldom judged to be substantively unfair.

To address these concerns and improve the application of Section 189, draft amendments have been proposed which seek to improve the operation of the consultation process and reinforce the original intention of the Act to encourage parties to find solutions to avoid or minimise retrenchment.

Amendments have been proposed which:

Puts the onus on the employer to prove that information that they refuse to disclose to trade unions in terms of Section 16 of the Act is not relevant. This will improve the ability of unions to gain access to information, which will allow them to participate meaningfully in retrenchment consultations.
Enable the Labour Court to ask for an expert to investigate an alleged unfair retrenchment and/or appoint assessors nominated by the parties to assist a Judge in dealing with a retrenchment matter.
Create an obligation on employers to report large-scale retrenchments to the Minister of Labour.
Allow for facilitators to be appointed by the CCMA or bargaining councils to facilitate the consultation process in the event of large-scale retrenchments for operational requirements and to assist the parties to give effect to the Social Plan.
Give the CCMA jurisdiction to arbitrate individual retrenchment disputes. At the moment such disputes go to the Labour Court, which is expensive and lengthy for dismissed workers.

The Department believes such provisions will enable and encourage an informed and constructive and genuine process of searching for alternatives and minimising unnecessary retrenchments. They will not make retrenchment more difficult in cases where there is a genuine operational requirement. These proposed amendments could thus contribute to avoiding job loss and enhance job retention.

4.2. Contracts of employment when a business is transferred

Closely related to the situation of retrenchments is the issue of contracts of employment when workers are transferred from one enterprise to another such as take-overs, privatisation, mergers, corporatisation and outsourcing. The section allows employers to transfer employment contracts in circumstances in which, prior to 1996, they would have had to retrench and offer re-employment to employees.

Both organised business and labour have complained about the lack of clarity of section 197. As a result we have proposed a complete revamp of the provision. The provision now, inter alia:

clarifies the circumstances in which a transfer is covered by section 197; and clarified the relationship between section 197 and the Insolvency Act.
allows the new employer to offer different terms and conditions of employment to transferred employees provided the new conditions are on the whole as favourable as those provided by the old employer or are agreed upon;
provides greater scope for agreements on the terms of a transfer;
provides for the transfer of organisational rights and recognition agreements;

The Department believes that the revamped provision will provide greater certainty and flexibility to local and foreign investors who may want to acquire local businesses and thus will assist to reduce negative perceptions about our labour laws.

4.3. Insolvency Act

The Department of Labour together with the Department of Justice is proposing amendments, which seek to align the Insolvency Act and Labour Relations Act and will:

Ensure that the workers are informed timeously of possible liquidations.
Provide that a provisional sequestration or liquidation suspend contracts of employment (rather than terminates which is currently the position) and regulates the rights of employees during this period.
Provides for a process of consultation between employees facing dismissal as a result of result of an insolvency and relevant stakeholders to attempt to reach consensus on appropriate measures that could be taken to save part of the whole of the business.

5. Basic conditions of employment and contractual relationships

The Basic Conditions of Employment Act (BCEA) provides a floor of rights for workers for all workers on issues relating to working time, leave, termination of employment and employer obligations.

The BCEA does not specify what conditions should apply in every instance and in every sector. It includes a number of mechanisms including Ministerial variations, sectoral determinations and collective bargaining, which can facilitate appropriate conditions of employment for particular sectors and circumstances.

In 1999 the Minister of Labour published a small business determination setting out different conditions for workers who work in enterprises of fewer than 10 employees. This year the Department is working on sectoral and Ministerial determinations for amongst others domestic and farm workers as well as workers in job creation schemes.

Therefore in our experience, the regulatory framework of the BCEA is sound and the challenge is to roll out the use of the mechanisms in the Act as speedily and as creatively as possible.

However, during the labour law review process a limited number of areas were identified which could be adjusted or refined to:

Enable the above process and thus ensure that the BCEA is more sensitive to the imperatives of job creation and small business development;
Respond more appropriately to present realities including increased casualisation so as to enhance the protection of vulnerable workers;
Improve the application of the Act, including in respect of enforcement.

These are discussed below.

5.1. Enabling job creation and small business development

The following amendments have been proposed which will enable a greater amount of variation from the statute:

The premium for working on Sunday has been removed. Work on Sunday is regarded in the same way as work on any other day but can be regulated by collective agreement. If employees work more than 45 hours in a week, including a Sunday, they will have to be remunerated at overtime rates. Workers are still entitled to rest days.
The notice periods on termination of employment have been reduced to one week in respect of the first six months of employment.
Bargaining councils will be able to increase the number of ordinary hours per week to above 45 hours by collective agreement. All the other protections to guard against the dangers of long hours including the duty to arrange working time with due regard to health and safety remain.
The Minister will be able to issue Ministerial or Sectoral Determinations which will be able to vary all the conditions of employment in the Act after seeking the advice of the Employment Conditions Commission.
Trade unions and employers will be able to increase the number of overtime hours worked per week from 10 to 15 hours by collective agreement.

We do not believe that these amendments will lead to significant increases in working hours since there are at least three other mechanisms that the Act provides for to prevent employers unreasonably increasing hours and thereby threatening the health and safety of workers.

5.2. Improving the position of vulnerable workers

Secondly, one of the key areas that the Department has sought to address is the position of vulnerable workers in atypical employment relationships, particularly the practice in the labour market, promoted by certain employer organisations such as COFESA to convert contracts of employment into contracts for service without altering the employment relationship, thus ‘converting’ genuine employees into independent contractors.

As a result an amendment has been proposed which creates a series of rebuttable presumptions as to whether or not an employment relationship exists. The effect of these is to provide that where a particular factor exists, the worker is presumed to be an employee unless the contrary is proved.

The effect of these proposed amendments would be to increase the number of vulnerable workers in atypical employment who would receive the effective protection of labour law including the right to lodge a dispute in the event of an unfair dismissal or unfair discrimination and the right to basic conditions of employment.

5.3. Improving the application of the statute

Thirdly, a few amendments have also been proposed to address problems with the application and enforcement of the Act. These amendments:

Give the Labour Court a clear power to impose fines on employers who do not comply with basic conditions of employment. This power is not explicitly stated in the present law;
Ensuring that administrative delays in orders being made orders of the Labour Court do not prejudice employees who are seeking a remedy.
Deem the wage determinations made under the old Wage Act, including those in respect of sectors such as retail and hospitality to be sectoral determinations so that they can be enforced in terms of the new enforcement provisions of the BCEA;
Provide that the small business determination supersedes wage determinations so that it covers all employers who employ less than 10 employees except those within the scope of bargaining council agreements;
Provide for the publication of a schedule clarifying what payments in cash or in kind should be included or excluded from the calculation of remuneration for purposes of notice pay, severance pay and annual leave pay.