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Amendments to the Employment Equity Act looming

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Since its inception in 1998 and the end of the first reporting period in the year 2000, the Employment Equity Act 55 of 1998 (the EE Act) saw 14 annual reporting periods before the recent amendments. The amendments are contained in the Employment Equity Amendment Act 47 of 2013 which was published for general information on 16 January 2014 and will take effect on a date to be announced in the Government Gazette. Coupled with these enhanced provisions, the EE Act will have far-reaching implications for non-compliant employers. Amendments to the regulations are currently also in the pipeline and are soliciting widespread comment from business.

In terms of section 21 of the EE Act all designated employers are required to submit their annual employment equity (EE) report by a certain date, normally the first working day of October. Electronic filing is also allowed.

WHO ARE DESIGNATED EMPLOYERS?

The designated employers referred to in section 21 are:

An employer who employs 50 or more employees

An employer who employs fewer than 50 employees, but has a total annual turnover that is equal to or above the applicable annual turnover of a small business in terms of Schedule 4 to the EE Act

A municipality, as referred to in Chapter 7 of the Constitution

An organ of state as defined in section 239 of the Constitution, but excluding the National Defence Force, the National Intelligence Agency and the South African Secret Service, and

An employer bound by a collective agreement in terms of sections 23 or 31 of the Labour Relations Act, which appoints it as a designated employer in terms of this Act, to the extent provided for in the agreement

Schedule 4 was amended to significantly increase the total annual turnover threshold that an employer must exceed in order to be classified as a designated employer. A new section 64A empowers the Minister of Labour to adjust this annual turnover threshold to counter the effect of inflation.

The categorisation of employers as small and large for purposes of determination of the frequency of reporting will no longer apply once the amendments become operative. Employers were previously categorised as small or large. Small employers under the previous regime had to report once every two years while large employers, had to submit their EE reports annually.

All designated employers will now be required to submit annual reports on their employment equity progress and the implementation of their affirmative action plans. In terms of the amendments to section 55(2) the Minister’s power to make regulations providing for separate and simplified forms and procedures for employers that employ fewer than 150 employees should be discretionary.

WHAT’S NEW?

The most salient amendments to the EE Act are the following:

Designated groups: Although the forms have always incorporated reference to citizens, the definition of “designated groups” now ensure that beneficiaries of employment equity are limited to citizens of South Africa by birth or naturalisation, or persons that would have been entitled to citizenship but were precluded by the policies of apartheid. This amendment is consistent with changes to the Broad-based Black Economic Empowerment Act 53 of 2003 (the BEE Act).

Unfair discrimination: The newly introduced section 6(4) deals specifically with unfair discrimination against employees doing the same or similar work or work of equal value. A differentiation based on the section 6(1) prescribed criteria or any other arbitrary ground will amount to unfair discrimination unless the employer can show that differences are based on fair criteria such as experience, skills and responsibility. The amendment of section 6(1) thus clarifies that discrimination is not permitted on the criteria listed in that section, or on any other arbitrary ground. In addition section 10(6) was amended to now allow parties to an unfair discrimination dispute to refer the dispute for arbitration. At present, all unfair discrimination claims fall within the exclusive jurisdiction of the Labour Court. Section 6(5) furthermore empowers the Minister of Labour to publish a code of good practice on accessing work of equal value contemplated in section 6(4). The new section 10(8) allows a person affected by an arbitrator’s award to appeal to the Labour Court and a new section 48(2) sets out the awards that a commissioner of the Commission for Conciliation, Mediation and Arbitration (CCMA) may make when hearing an unfair discrimination claim.

Psychometric testing: Section 8 of the Act was amended and determines inter alia that employees may only be subject to psychometric tests that have been certified by the Health Professions Council of South Africa, or another body which is authorised to certify such tests.

Enforcement measures and penalties:

The Director-General of the Department of Labour is now empowered to apply to the Labour Court to impose a fine on an employer who fails to prepare or implement an employment equity plan or who fails to file the required return.

Amendments to sections 36, 37, 39, 40, 42 and 45 seek to promote enhanced enforcement measures and prevent the use of reviews as a mechanism to delay the enforcement process.

The powers of a labour inspector to issue a compliance order was clarified and applies to specific provisions. By the same token the provisions for objections and appeals against compliance orders are repealed.

The Minister of Labour is empowered to make regulations for circumstances under which an employer’s compliance should be assessed with reference to the demographic profile or the national or regional economically active population.

Amendment to sections 59 and 61 increase the maximum fines for criminal offences from R10 000 to R30 000.

The maximum fines that may be imposed in terms of the Act for the contravention of certain provisions indicated are set out in Schedule 1 (see table 1). An employer’s turnover may be taken into account in determining the maximum fine that may be imposed for substantive failure to comply with the Act.

The Act now states that fines are payable into the National Revenue Fund referred to in section 213 of the Constitution.

CONCLUSION

The amendments to the EE Act will affect all designated employers and it will be advantageous to keep track of the changes to the Act to ensure that you do not fall foul of the law. ❐

Table 1 Schedule 1 of the Employment Equity Amendment Act

Previous contraventionContravention of any provision of sections 16 (read with 17), 19, 22, 24, 25, 26 and 43(2)Contravention of any provision of sections 20, 21, 23 and 44(b) 
No previous contraventionR1 500 000The greater of R1 500 000 or 2% of the employer’s turnover
A previous contravention in respect of the same provisionR1 800 000The greater of R1 800 000 or 4% of the employer’s turnover
A previous contravention within the previous 12 months or two previous contraventions in respect of the same provision within three yearsR2 100 000The greater of R2 100 000 or 6% of the employer’s turnover 
Three previous contraventions in respect of the same provision within three yearsR2 400 000The greater of R2 400 000 or 8% of the employer’s turnover
Four previous contraventions in respect of the same provision within three yearsR2 700 000The greater of R2 700 000 or 10% of the employer’s turnover

 

Author: Mathapelo More CA(SA) is Project Manager: Sustainability and Governance at SAICA