How will the new amendments to labour laws affect my business?

by Jan Truter of LabourWise

There are some important changes to labour laws that are due to come into effect soon, most likely on 1 August 2002. These changes can be found in the Labour Relations Act, Basic Conditions of Employment Act and the Insolvency Act.

The main reasons for the amendments are to improve the practical application of these laws, as well as to address the unintended consequences of these laws that have given rise to negative perceptions.

The amendments have been the consequence of a labour review that was done in 1999, the publication of draft amendments bills, followed by extensive debate by the representatives of Government, Labour and Business. The input of all parties, including employer organisations, non-governmental organisations and members of public were taken into consideration. It is hoped that the majority of concerns have been adequately addressed.

Some of the most important changes that are likely to be of practical significance for SMME’s are summarized on this page.

AMENDMENTS TO BASIC CONDITIONS OF EMPLOYMENT ACT

Overtime: There is currently a daily overtime limit of 3 hours. This is being scrapped. The weekly overtime limit of 10 hours would remain in place, but might be increased by collective agreement (i.e. with a trade union) to
15 hours overtime per week. [Bear in mind that businesses that employ less than 10 employees are different - they would still, subject to certain conditions, be able to require employees to work up to 15 hours overtime per
week]

Remuneration: The items that are to be included in the meaning of “remuneration” will be clarified. Most of the allowances and contributions by the employer to benefit funds will be considered as part of remuneration.
The Minister will define these in an administrative determination.

Termination of employment: Notice period for first six months (was 1 week for the first 4 weeks, and 2 weeks thereafter) will be reduced to 1 week. It will also be easier to terminate the services of probationers (See also
amendments to Labour Relations Act regarding probationary employees).

Independent Contractors: Regardless of the form of contract that has been signed, there will be a presumption that a person is an employee (i.e. the employer would have to prove otherwise) if any of the following are present:

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Employer controls or directs manner in which work is done;
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employer controls or directs hours of work;
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where a person works for an organisation, the person is a member of the organisation;
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person works average of at least 40 hours per month over the last three months;
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person is economically dependent on another person or organisation;
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person is provided with tools or trade equipment by a person or organisation;
-
person works for only one person or organisation.

This amendment could have far-reaching implications, not only for businesses wanting to enter into an independent contracting arrangement with a person, but also for existing independent contracting relationships that might now be considered to be employment relationships.

Wage Determinations: A Wage Determination will be deemed to be a “Sectoral Determination”. This means that the Wage Determination prevails over the Basic Conditions of Employment Act with regard to any matter that is regulated by both.

AMENDMENTS: LABOUR RELATIONS ACT

Conciliation/Arbitration (Con -Arb.): Conciliation could be followed immediately by Arbitration (on the same day) in order to expedite matters in the CCMA.

Enforcement of CCMA awards: A CCMA award would be immediately enforceable. An employee will not have to go to Labour Court first, but would be able to directly approach the Sheriff of the Court for a warrant of execution in the case of a compensation award. Other awards, such as an award of reinstatement, would be enforceable by the Labour Court on the basis of contempt proceedings.

Probationary Employees: An employer would be required to prove procedural fairness, i.e. opportunity to state case, opportunity to be assisted by fellow employee and one weeks’ notice. Less compelling reasons would be required for the substantive fairness of the dismissal during probation than after the probationary period.

Disciplinary Hearing by CCMA: In order to avoid duplication of hearings/evidence, employee and employer could agree that a matter be arbitrated by the CCMA. The employer would however be required to bear the cost. The outcome will be final and binding, but subject to review in the Labour Court.

Retrenchments - Several important changes:

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A joint consensus-seeking approach is required.
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Where an employer employs more than 50 employees and contemplates retrenching more than a defined number of employees (depends on numbers employed/likely to be effected), then the parties can agree to the appointment of a facilitator.
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At least 30 days after the notice (inviting consultation) must elapse to allow for consultation. In the case where a facilitator has been appointed this period is 60 days.
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Employees may strike and the employer may lock out in certain circumstances.
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The Labour Court may be approached on an urgent basis if procedure has not been followed.
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The powers of the Labour Court are defined to cater for different circumstances.

Disclosure of Information: An employer who does not want to disclose information in the case of a retrenchment, would have to prove that information is not relevant.

Individual retrenchments: The CCMA would be able arbitrate individual dismissals for operational reasons, where this has hitherto been the domain of the Labour Court.

Unfair Labour Practices: Unfair labour practices would have to be referred to CCMA within 90 days after the employee becomes aware thereof. The CCMA would have the jurisdiction to make an order on terms that it deems reasonable, including reinstatement, re-employment or compensation.

Unfair procedure in the case of dismissal: The Labour Court/CCMA would have a broader discretion regarding compensation. The maximum total compensation for both procedural and substantive unfairness would be 12 months in cases other than automatically unfair dismissals.

Transfer of Business: The transfer “as a going concern” has been clarified as follows:

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Automatic substitution of new employer for old employer.
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The rights and obligations of the employee and new employer remain the same as they were between the employee and the old employer.
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Terms and conditions of employment may be changed, provided that they are on the whole not less favourable (except where there is a collective agreement, in which case terms and conditions may not be changed).
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Transfer to pension, provident, retirement or similar funds would be in order.
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Resignation due to terms and conditions of employment being changed could amount to constructive dismissal.
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The new employer would be bound to collective agreements and arbitration awards that bound the old employer.
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The old employer would have to take reasonable steps to ensure that the new employer can meet the obligations in respect of leave pay, severance pay and other monies payable to the employees.
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In the case of insolvency or scheme of arrangement, the new employer (liquidator) would be automatically substituted for the old employer, but rights and obligations would not be transferred.

AMENDMENTS: INSOLVENCY ACT

Notification: Employees/Unions would have to be notified of an application to sequestrate.

Employment contracts: Contracts of employment would be suspended (not automatically terminated) pending consultations with the appointed trustee regarding ways to save or rescue the organisation. The contract would terminate 21 days after appointment of trustee.

Severance pay: Employees would be able to claim severance pay from the insolvent estate.

Jan Truter, www.labourwise.co.za

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