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Memorandum of Objects
Labour Relations Amendment Bill, 2012
Insertion of section 188B of Act 66 of 1995
This section is inserted to create more flexibility for employers in dealing with the dismissal of high earning employees. It does so without detracting from the rights of these employees not to be dismissed for reasons that would be automatically unfair under section 187, or their rights to seek redress for unfair labour practices defined in section 186.
At the heart of the change is the disproportionate cost, complexity, and impact on an employer’s operations of procedures to terminate the employment of high earning employees in circumstances where the reason for doing so may not fall clearly and neatly within the fair reasons for dismissal specified in section 188(1)(a)(i) and (ii). By way of example, an employer may reasonably and fairly wish to replace a senior executive to secure a change in tone and culture within the leadership team, because the executive does not fit or no longer fits within the leadership team, because internal or external circumstances have changed, or because the employer wants to embark on a new direction for the business or enterprise. These reasons do not comfortably fall within the reasons for dismissal specified in section 188, but are widely recognised as legitimate reasons to replace senior employees. In addition, senior executives in practice exercise the role of employer in many respects, and usually occupy a special position of trust in relation to the employer.
The uncertainty created by the application of section 188 in these situations leads to significant inflexibility and inefficiency at the top levels of a business or state enterprise. At the same time, the cost of asserting discipline and performance standards at senior levels is notoriously difficult to manage, and conflict at this senior executive level that results from efforts to terminate employment imposes significant constraints, measured in cost and efficiency, on both public and private sector employers.
The primary rationale for providing statutory protection against unfair dismissal, and for providing remedies for unfair dismissal as a species of unfair labour practice, is the inequality of bargaining power between employer and employee. Providing uniform protection against unfair dismissal to lower skilled or lower paid employees, on the one hand, and highly skilled or highly paid executives, on the other, fails to recognise the significant difference in bargaining power that employees in these categories have in negotiating employment contracts and in dealing with their employers during employment.
Senior executives and highly paid employees are generally able to influence to a material extent the terms on which they are engaged, and to make decisions about whether and on what terms to take up employment with a particular employer.
A number of comparable foreign jurisdictions exclude the application of dismissal protection to senior executive or highly paid employees. The amended section opts to apply the new provisions to employees earning above a specified remuneration threshold rather than by reference to their status or role within the employer’s enterprise. This approach will avoid the need for disputes about whether employees fall inside or outside an identified class of employee, that may give rise to costly collateral litigation.
It is intended that the remuneration threshold will be a relatively high threshold, in excess of R1 million per annum, with the actual threshold to be determined by the Minister from time to time taking into account the considerations set out in subsection (4) of the new section. The amendments do not preclude the termination of employment of high earning employees summarily or on shorter notice where this is justified applying the provisions of section 188.
In that event these employees, like all others, will be entitled to exercise the remedies provided by the LRA. Where employers elect, however, to give the minimum period of notice or any longer period provided for in the contract of employment, this will be deemed to be fair for the purposes of section 188, though it would not affect any claim brought under section 187.
The amendments seek to draw a fair balance between the rights and economic interests of employers, enabling employers to achieve efficiency and flexibility at senior levels, and the rights and interests of highly paid employees, who remain protected against arbitrary or summary action.
A transitional provision will make the new regime applicable to existing contracts of employment of employees earning above the threshold after two years. This will provide all parties with an opportunity to reconsider and, where necessary, to renegotiate the terms of the employment relationship during that period.
Amendment of section 189A of Act 66 of 1995
The section is amended to preclude a party from unreasonably refusing to agree to extend the period for consultation over a proposed retrenchment. It is also amended by deleting subsection (19), which set out the test for determining the substantive fairness of a dismissal under section 189A. Specifying the test to be applied in section 189A retrenchments has lead to uncertainty about whether and to what extent this should apply to cases of retrenchment where section 189 applies. The courts should retain their discretion to develop the jurisprudence in this area in the light of the circumstances and facts of each case and to articulate general principles applicable to all retrenchment cases.
Amendment of section 190 of Act 66 of 1995
The section is amended to eliminate uncertainty about the date of dismissal if an employee is dismissed on notice but paid all outstanding salary due to him or her before expiry of the notice period.
Amendment of section 191 of Act 66 of 1995
The section is amended to cater for any agreed extension of the conciliation period. The jurisdiction of the CCMA to arbitrate disputes about dismissals for operational requirements involving only one employee is clarified. In addition, the CCMA will have jurisdiction to arbitrate disputes about dismissals for operational requirements involving small employers - those employing less than 10 employees. This is aimed at providing cheaper and less formal adjudication in these circumstances.
Amendments to Chapter IX of Act 66 of 1995 - non standard employees
Substantive amendments are made to Chapter IX to protect three categories of non-standard employees: employees placed by temporary employment services (TESs), employees engaged on fixed term contracts and part-time employees. Sections 198A, B and C extend significant protections to employees earning under the section 6(3) BCEA earnings threshold who are employed in these categories of work. The majority of these protections are only extended to employees after they have been in employment for six months. This creates an appropriate balance between the need to protect vulnerable employees against the potential for abuse and the need to permit short-term flexibility.
Amendment of section 198 of Act 66 of 1995 and insertion of section 198A - Temporary Employment Services
Section 198 has been amended, and a new section and further provisions introduced into the LRA, in order to address more effectively certain problems and abusive practices associate with temporary employment services (TES), or what are more commonly referred to as “labour brokers”. The amendments further regulate the employment of persons by a TES in a way that seeks to balance important Constitutional rights. The main thrust of the amendments is to restrict the employment of more vulnerable, lower-paid workers by a TES to situations of genuine and relevant “temporary work”, and to introduce various further measures to protect workers employed in this way.
Amendment of section 198 of Act 66 of 1995 - general provisions regulating temporary employment services
Section 198 continues to apply to all employees. It retains the general provisions that a TES is the employer of persons whom it employs and pays to work for a client, and that a TES and its client are jointly and severally liable for specified contraventions of employment laws.
A number of further general protections are introduced:
·An employee bringing a claim for which a TES and client are jointly and severally liable may institute proceedings against either the TES or the client or both and may enforce any order or award made against the TES or client against either of them.
·A labour inspector acting in terms of the BCEA may secure and enforce compliance against the TES or the client, as if it were the employer, or both.
·A TES may not employ an employee on terms and conditions of employment not permitted by the LRA, a sectoral determination or a collective agreement concluded at a bargaining council that is applicable to a client for whom the employee works.
·The Labour Court or an arbitrator may now rule on whether a contract between a TES and a client complies with the LRA, a sectoral determination or applicable bargaining council agreement and make an appropriate award. There have been rulings that these agreements lie beyond their jurisdiction.
·A TES must be registered to conduct business, but the fact that it is not registered is no defence to any claim instituted in terms of the section.
·A TES must provide an employee assigned to a client with written particulars of employment that comply with section 29 of the BCEA.
Insertion of section 198A of Act 66 of 1995 - temporary employment services for employees earning below earnings threshold
The new section 198A introduces key additional protections for more vulnerable workers. It applies only to employees who earn on or below the threshold prescribed in terms of section 6(3) of the BCEA.
Employees in this category are employees of the TES for the purposes of the LRA only if they are employed to perform genuinely temporary work, defined in the new section as “temporary services”. If they are not employed to perform temporary services, they are deemed for the purposes of the LRA to be employees of the client and not the TES. This means that, for the purposes of the LRA, employees are treated as the employees of the client if they work for a period in excess of six months. The only exception to this is employees who work as a substitute for an employee of the client who is temporarily absent. Temporary services may also be regulated by a collective agreement concluded in a bargaining council, a sectoral determination, or a Ministerial notice.
To prevent abuse of the six month period that constitutes temporary work, the section provides that a termination by a TES of an employee’s assignment with a client for the purpose of avoiding deemed employment by the client constitutes a dismissal. This means that the fairness of the termination of an assignment may be challenged in terms of the LRA.
Employees deemed under this provision to be employees of the client must be treated on the whole not less favourably than employees of the client who perform the same or similar work, unless there is a justifiable reason for different treatment. This means, for example, that if an employee is procured by a TES for a client for six months, but is kept on after the expiry of the six month period, then that employee must, unless there is a justifiable reason for different treatment, be paid the same wages and benefits as the client’s other employees who are performing the same or similar work. The amendments set out in section 198D what may constitute a justifiable reason for this purpose.
Insertion of section 198B of Act 66 of 1995 - fixed-term contracts for employees earning below earnings threshold
An amendment to section 186 - explained earlier - provides additional protection against dismissal for all employees employed on fixed term contracts.
Like section 198A, the new section 198B introduces additional protection for more vulnerable workers and applies only to employees who earn on or below the threshold prescribed in terms of section 6(3) of the BCEA. The section does not apply to employees who are employed in terms of a statute, sectoral determination or collective agreement that permits the conclusion of a fixed term contract. In addition, and in order to accommodate new and small businesses, the section does not apply to:
·an employer that employs less than 10 employees;
·an employer that employs less than 50 employees and whose business has been in operation for less than two years
These exclusions do not apply if the employer conducts more than one business or the business was formed by the division or dissolution for any reason of an existing business.
An employer is permitted to employ an employee to whom the new section applies on a fixed term contract or successive fixed term contracts for up to six months. An employee may be employed on a fixed term contract for a longer period if the nature of the work for which the employee is engaged is of a limited or definite duration or the employer can demonstrate any other justifiable reason for fixing the term of the contract. The period of six months may be varied by a sectoral determination or a collective agreement concluded at a bargaining council.
The section sets out a non-exhaustive list of ten justifiable reasons for fixing the term of a contract.
An employee to whom the section applies who is employed for a period longer than six months is deemed to be employed for an indefinite period unless the nature of the work is of a limited or definite duration or the employer can demonstrate any other justifiable reason for fixing the term of the contract.
An employer who employs an employee to whom the section applies on a fixed term contract or who renews or extends a fixed term contract must do so in writing and must state the reason that justifies the fixed-term nature of the employment contract.
An employer bears an onus to prove in any relevant proceedings that there is a justifiable reason for fixing the term of the contract and that the term was agreed.
The new section contains additional protections for employees to whom it applies:
·An employee employed on a fixed-term contract for more than six months (or whatever period is determined by a sectoral determination or collective agreement concluded at a bargaining council) must be treated on the whole not less favourably than an employee on an indefinite contract performing the same or similar work, unless there is a justifiable reason for treating the employee differently. What may constitute a justifiable reason for this purpose is dealt with in section 198D.
·An employer must provide an employee employed on a fixed term contract with the same access to opportunities to apply for vacancies as it provides to an employee employed on an indefinite contract of employment.
·If a fixed term of longer than 24 months can be justified under the section, the employer must, on expiry of the contract and subject to the terms of any collective agreement regulating the issue, pay the employee one week’s remuneration for each completed year of the contract. The employer is not obliged to make this payment if, prior to the expiry of the fixed-term contract, it offers the employee employment or procures employment for the employee with a different employer which commences no later than 30 days after expiry of the contract and on the same or similar terms.
Insertion of section 198C of Act 66 of 1995 - part-time employment of employees earning below earnings threshold
Guided by provisions regulating part-time employees in the European Union, and the ILO Convention on Part-time Work (Convention 175, 1994), this section regulates the work of vulnerable part-time employees.
As with the new sections 198A and 198B, section 198C applies only to employees who earn on or below the threshold prescribed in terms of section 6(3) of the BCEA. For reasons specific to part-time employment, it does not apply to employees who ordinarily work less than 24 hours a month, or during the first six months of employment. And, as with section 198B, to accommodate new and small businesses the section does not apply to:
·an employer that employs less than 10 employees;
·an employer that employs less than 50 employees and whose business has been in operation for less than two years, unless the employer conducts more than one business or the business was formed by the division or dissolution for any reason of an existing business.
The new section defines part-time and comparable full-time employees, and requires employers to:
·Treat part-time employees on the whole not less favourably than comparable full-time employees doing the same or similar work, unless there is a justifiable reason for different treatment. What constitutes a justifiable reason for differentiation is dealt with in section 198D.
·Provide part-time employees with access to training and skills development that is on the whole not less favourable than the access applicable to comparable full-time employees.
·Provide part-time employees with the same access to opportunities to apply for vacancies as full-time employees.
Insertion of section 198D of Act 66 of 1995 - general provisions applicable to section 198A to 198C
This new section provides that disputes about the interpretation or application of sections 198A to 198C may be referred to the CCMA or a bargaining council with jurisdiction for conciliation and, if not resolved, to arbitration.
A justifiable reason for different treatment (referred to in each of the new sections 198A, 198B and 198C) includes different treatment which is a result of the application of a system that takes into account:
·seniority, experience or length of service;
·the quality or quantity of work performed;
·any other criteria of a similar nature not prohibited by section 6(1) of the Employment Equity Act, 1998.
Amendment of section 200A of Act 66 of 1995An amendment to this section extends the application of the presumption in the section as to who is an employee to other employment laws, and to a provision of the Insolvency Act dealing with rights of employees of insolvent employers.
Insertion of section 200B of Act 66 of 1995
A new section is inserted to prevent simulated arrangements or corporate structures that are intended to defeat the purposes of the LRA or any other employment law, and to provide for joint and several liability on the part of persons found to be employers under this section for any failures to comply with an employer’s obligations under the LRA or any employment law. This is particularly important in the context of subcontracting and outsourcing arrangements if these arrangements are subterfuges to disguise the identity of the true employer.
Amendment of section 203 of Act 66 of 1995
An amendment to this section permits the Minister of Labour to issue a code of good practice to be published in the Government Gazette where parties to NEDLAC have not been able to reach agreement on the code. The Minister can only do this if proposals relating to the code have been tabled at NEDLAC and NEDLAC has reported to the Minister that it has been unable to reach agreement on the code.
Amendment of section 213 of Act 66 of 1995
The definition section is amended by updating the reference to the Unemployment Insurance Act, and by amending the definition of what constitutes “service” of documents that are delivered in terms of the LRA by incorporating reference to rules made for the Labour Court, the Commission and bargaining councils.
Amendment of item 27 in Part H of Schedule 7 of Act 66 of 1995
This is a formal amendment to the transitional provisions to correct a typographic error introduced in the 2002 Amendment Act.