Less regulatory impact on smaller employers

The Bill intends to amend the definition of ‘designated employer’ by excluding employers who employ fewer than 50 employees, regardless of their annual turnover. This means that those employers will not be subject to the affirmative action provisions of the EEA. Voluntary reporting will also be done away with.

These amendments are a welcome relief from the regulatory burden already placed on small, medium and micro-sized employers. It will introduce greater flexibility into a sector which government has highlighted as being an important driver of South Africa’s post-COVID recovery plan. 

Sectoral targets

However, the Bill seeks to double-down on existing measures in the EEA to reach its aim of ensuring equitable representation of suitably qualified people from designated groups at all occupational levels in the workforce.

Firstly, the Bill seeks to introduce section 15A to empower the Minister to identify national economic sectors and determine numerical targets for those sectors. The Bill requires that prior to doing so, the Minister must consult with the Employment Equity Commission on the proposed sectors and targets he seeks to designate and to publish any proposals for comment.

The Bill also requires that the numerical targets set by employers must comply with the sectoral targets set by the Minister. When assessing compliance with the EEA, the Director-General will also consider whether the employer has complied with the sectoral targets set by the Minister. 

State contracts

Secondly, the Bill proposes that certain requirements must be met before the Minister may issue a certificate of compliance to a designated employer in terms of section 53. One of those requirements is the achievement of the sectoral targets set by the Minister. It is obvious that a failure to meet these requirements will have serious implications for employers who seek to perform work for the State.

Possible difficulties and litigation

The proposed insertion of section 15A and amendment to section 53 of the EEA will almost certainly lead to litigation. If implemented in its present form, the numerical targets set by designated employers in their employment equity plans would likely be rendered meaningless. This is so because the Minister’s targets are likely to be broad-based and will have little regard for targets which are tailored by individual employers to suit their employment equity plans.

Allowing the Minister to impose such targets unilaterally, without consulting stakeholders other than the Employment Equity Commission, will result in a ‘one-size-fits-all’ approach and will almost certainly be disruptive of existing or future employment equity plans of employers. Disagreements with and litigation over such approaches in the context of bargaining council agreements in various industries have been well documented in the recent past and similar difficulties are likely to arise here.

An important consideration will be which sectors are identified by the Minister and what targets are determined, how they are determined and to which employers in the sector they will apply. In the absence of consultation with the relevant stakeholders in a particular industry, it is difficult to understand how the Minister could arrive at any sort of informed or rational decision. Whatever the decisions are, they are likely to be contentious and could lead to protracted legal disputes regarding their legality and enforceability.

A conceptual problem with the amendments may also arise. It could be argued that the proposed amendments requiring a designated employer to meet the targets set by the Minister and to be assessed on this criteria, particularly before it may do work for the state is not really a ‘target’, but actually more akin to a ‘quota’. Our courts have found that quotas in employment equity plans are not permitted by the EEA and thus the amendments may not find favour with our Courts. In those circumstances, the provisions may be rendered unenforceable.

The Bill also does not provide an employer with an opportunity to apply for exemption from these new provisions. Employers who fail to meet the Minister’s targets may, however, provide a reasonable justification for their failure, although it is not clear to what extent the Minister would be willing to accept any variations given his recent utterances in the media. What constitutes a ‘reasonable justification’ is thus likely to become a contentious issue in due course.

Additional challenges

The amendments come amid a global pandemic which has already had a severe impact on employers and employees. In response to the lockdown, many employees have been retrenched (some 3 million by recent reports) and this may have impacted negatively on many employers’ employment equity plans. The situation is very uncertain, and many employers will be focusing their energies on staying afloat and saving jobs during the next few months.

Nevertheless, the Minister appears keen to implement the amendments as soon as possible given the slow rates of transformation in many of South Africa’s economic sectors. The Minister’s new approach to ensuring compliance with the EEA incorporates both the ‘carrot’ and the ‘stick’. Whether this approach will achieve its purpose remains to be seen.