Employment Equity compliance
- Legal compliance argument
All employers[i] who employ more than 50 employees or who have a turnover in excess of the amounts specified in the Employment Equity Act are legally obligated to comply with Chapter III of the Employment Equity Act, whilst all employers regardless of their size and turnover are obligated to comply with Chapter II of the Act.
As such these employers are required by law to submit statutory employment equity reports; compile and implement an employment equity plan; conduct employment equity and diversity awareness training, compile workforce profiles which are representative of designated employees (Africans, Indians, Coloureds, White Women and People with Disabilities) amongst the economically active population.
Failure to comply with the provisions of the Act will result in the Department of Labour issuing compliance orders, and if non compliance persists, approach the Labour Court to enforce such compliance orders. The Labour Court is further entitled to issue financial penalties for such non-compliance, ranging from R100,000 to R500,000 and up to R900,000 for repeated non compliance.[ii]
The Department of Labour has also undertaken to “name and shame” those organisations which have not complied with the provisions of the Act.
- Inspectors are checking for compliance with the Employment Equity Act by scrutinising whether designated employers are implementing EE plans and applying affirmative action measures to end unfair discrimination in the workplace.
- Inspectors are also checking the company’s workforce profile in comparison to the national economic active population demographics to establish equitable representation, workforce movement in relation to recruitment, promotion, termination, and skills development.
- The Cabinet was unhappy with the slow progress in the implementation of the Employment Equity Act by the designated employers.
- The Cabinet meeting resolved that the Commission for Employment Equity should conduct research and formulate strategies to address these challenges in the various industries.
- Defaulters may be prosecuted and if found guilty, a minimum fine of R500 000 00 may be imposed.
The Labour Court has been seized with a number of employment equity enforcement cases.[iii] In Director-General, Department of Labour v Win-Cool Enterprise (Pty) Ltd, the Court held as follows
- “This was an application by the Director-General of the Department of Labour (DOL) to have a compliance order that had been issued against the respondent made an order of the Court and to have a fine of R500 000 imposed on the respondent for contravening sections 16, 19, 20, 21, 22 and 23 of the EEA.
- The first aspect considered by the court was whether the fines for non-compliance with the affirmative action provisions of the EEA are criminal or administrative in nature. The resolution of this issue would determine, amongst others, what the elements of the contravention or offence are; who bears the onus of proving each element; and what standard of proof is required to discharge the onus.
- The court held that determining the nature of the contravention was a matter of statutory construction. After an analysis of the provisions of the EEA and a consideration of the legal position in the USA and Canada, the court held that:
- (a) contravention of the provisions of the EEA concerning employers’ affirmative action obligations constitutes a ‘regulatory’ contravention; (b) intention is not an element of the contravention; (c) the DOL bears the onus of proving, on a balance of probabailities,
- (i) that the employer is designated; (ii) that it contravened the relevant provisions of the Act; and (iii) the amount of the penalty that should be imposed.
- It held that it was:
- ‘To deny to an employer who fails or refuses to render workplaces more equitable, all the protections and privileges of an accused is justified. The purpose and scheme of penalty proceedings under the EEA are reasonable means of achieving the fundamental values of the Constitution. The rule of law is met.’
- Turning the possible defences that an employer might have, the court noted that, despite bearing merely an evidential burden, an employer who has failed to comply with an undertaking and a compliance order will be ‘hard pressed’ to find a credible defence:
- ‘Negligence and absence of intent as defences have better prospects of succeeding in the absence of an undertaking and compliance order or as a plea in mitigation. A substantive defence could relate to labour market conditions and whether they enable employers to comply with their employment equity plans.’
- As far as the amount of the fine for non-compliance was concerned, the court stated that the purposes of the penalty were deterrence and prevention: the amount of the penalty has to be sufficiently high that it makes commercial sense for employers to comply than to risk a penalty. Factors to consider were:
– the purpose of the EEA;
– the extent of the contravention;
– the period the contravention has endured;
– the reason for not complying;
– the maximum fine prescribed;
– any relevant considerations relating to the respondent.
– the willingness and intention of the employer to comply, its attitude and conduct;
– any loss or damage suffered by the workforce or the DOL as a result of the contravention;
– any profit derived from the contravention;
– the extent to which the employer complies with all other laws and agreements that regulate employment;
– the investment of time, money and other resources that the employer makes in the development of the workforce;
– the effect of the penalty on employment;
– the nature and size of the employer;
– the industry in which the employer operates;
– the area in which the employer is located; and
– the deterrent effect of the penalty.
– All the criteria have to be considered cumulatively.
- ‘Affirmative action is politically sensitive. The adverse publicity that accompanies the mere complaint that an employer is not complying with the affirmative action provisions can tag the employer as racist, sexist, anti-democratic or counter-revolutionary. The Court imposes only monetary sanctions. Non-monetary sanctions, such as adverse publicity in the form of “name and shame” advertisements and disqualification from government contracts, may also accompany contraventions. Employers who are issued with penalties are as exposed to social stigma, ostracism from the community and social, psychological and economic harm as an accused1. They risk losing their physical liberty if they are cited for contempt of court for not complying with a compliance order and are as vulnerable to having their human dignity impaired as any accused. A sanction under the EEA can therefore be as odious as a conviction and a fine.’
- “The respondent’s defence that it intended to comply but that its labour consultant did not do the job is not good. There is a limit to which employers can outsource their affirmative action responsibilities. They are not relieved of any duty imposed by the EEA even when they assign managers to take responsibility for monitoring and implementing the plan which they must do. There is no evidence that the respondent assigned a manager to the task and delegating all his responsibilities to a consultant is no defence.’
- The court responded thus to the respondent’s assertion that it should be praised for employing mostly black people (at lower levels in the company):
- ‘Employing exclusively black workers was its notion of implementing employment equity. Such compliance as there has been was delayed, contrived, superficial and unconvincing. Apart from one so-called consultation, no other effort was made to engage the workforce.’
- It also added:
- ‘Mechanical compliance with the prescribed processes is not genuine compliance with the letter and spirit of the EEA. Compliance is not an end in itself. The employer must systematically develop the workforce out of a life of disadvantage. Disadvantage of all kinds is targeted by the EEA. Contrary to the submission for the respondent by employing exclusively black people and mainly women in low skilled jobs at low rates of pay cannot, without more, redress race, gender, sex or economic discrimination. Non-racialism is a façade if economic and other forms of exploitation persist. Equity is about creating jobs of quality that inspire the spiritual and material development of the workforce and thereby, economic growth.’
- Establishment of Employment Equity consultative forums
The Employment Equity Act stipulates that all designated employers are required to consult with its employees on the development, implementation and review of its employment equity plan.
The failure to consult with employees would constitute material non-compliance with the provisions of the Act and potentially result in compliance orders being issued against the employer.
The Labour Court has been rigorous in its enforcement of the requirement to engage in consultation. In Director-General, Department of Labour v Win-Cool Enterprise (Pty) Ltdthe court noted that “Apart from one so-called consultation, no other effort was made to engage the workforce.”
As stipulated in section 16 of the Act, an employer must consult with its employees or representatives nominated by them. Such consultation takes place is in the context of an employment equity consultative forum.
The Act provides as follows:
16. Consultation with employees.--
(1) A designated employer must take reasonable steps to consult and attempt to reach agreement on the matters referred to in section 17--
- with a representative trade union representing members at the workplace and its employees or representatives nominated by them; or
- if no representative trade union represents members at the workplace, with its employees or representatives nominated by them.
(2) The employees or their nominated representatives with whom an employer consults in terms of subsection (1) (a) and (b), taken as a whole, must reflect the interests of--
- employees from across all occupational categories and levels of the employer's workforce;
- employees from designated groups; and
- employees who are not from designated groups.
(3) This section does not affect the obligation of any designated employer in terms of section 86 of the Labour Relations Act to consult and reach consensus with a workplace forum on any of the matters referred to in section 17 of this Act.
17. Matters for consultation.--
A designated employer must consult the parties referred to in section 16 concerning--
- the conduct of the analysis referred to in section 19;
- the preparation and implementation of the employment equity plan referred to in section 20; and
- a report referred to in section 21.
18. Disclosure of information.--
(1) When a designated employer engages in consultation in terms of this Chapter, that employer must disclose to the consulting parties all relevant information that will allow those parties to consult effectively.
25. Duty to inform
(3) An employer who has an employment equity plan must make a copy of the plan available to its employees for copying and consultation.
In addition, the statutory employment equity Report, Form EEA2, page 10, which must be submitted on or before 1 October of each year, requires employers to address the following question:
The Report must be approved and signed off by the CEO of the organisation.
The duty to consult is further addressed extensively in the Code of Good Practice: Preparation, implementation and monitoring of Employment Equity Plans, for example:
7.2 Communication, Awareness and Consultation
7.2.1 All employees should be made aware and informed of – the content and application of the Act as preparation for their participation and consultation; · employment equity and anti-discrimination issues; · the proposed process to be followed by the employer; · the advantages to employees of participation in the process, and · the need for the involvement of all stakeholders in order to promote positive outcomes.
7.2.2 Employers are required to consult with regard to conducting an analysis, the preparation and implementation of the plan, and the submission of employment equity reports to the Department of Labour.
7.2.3 To ensure the successful implementation of a plan, employers should make every effort to include employee representatives in all aspects of the plan, especially the planning and development phases.
7.2.3 Managers should be informed of their obligations in terms of the Act, and training should be provided to them where particular skills do not exist. Examples of required training could include diversity management, coaching and mentoring programmes.
7.2.4 The communication of an employment equity strategy should focus on positive outcomes, such as the better utilisation of all of the employer’s human resources and the creation of a diverse and more productive workforce.
7.2.5 Communication should also include employees from non designated groups and focus on the contribution that can be made by them.
7.2.6 Consultation with employees should commence as early as possible in the process.
7.2.7 A consultative forum should be established or an existing forum utilised. The forum should include employee representatives reflecting the interests of employees from both designated and non-designated groups and across all occupational categories and levels of the workforce. Representative trade unions, where these exist, or representatives nominated by such trade unions must be included in the consultation process.
7.2.8 The employer should be represented by one or more members of senior management.
7.2.9 Consultation would include – · the opportunity to meet and report back to employees and management; · reasonable opportunity for employee representatives to meet with the employer; · the request, receipt and consideration of relevant information, and · adequate time allowed for each of these steps.
7.2.10 To ensure an informed and constructive consultation process, structured and regular meetings of the consultative forum or forums should be held.
7.2.11 The disclosure of relevant information by designated employers is vital for the successful implementation of the plan. Such information could include:
- the particular business environment and circumstances of the employer;
- information relating to the relevant economic sector or industry;
- relevant local, regional, and national demographic information relating to the economically active population;
- the anticipated growth or reduction of the employer’s workforce;
- the turnover of employees in the employer’s workforce;
- the internal and external availability for appointment or promotion of suitably qualified people from the designated groups;
- the degree of representation of designated employees in each occupational category and level in the employer’s workforce, and
- employment policies and practices of the employer.
7.2.12 All parties should, in all good faith, keep an open mind throughout the process and seriously consider proposals put forward.
7.2.13 Where a representative body or trade union refuses to take partin the consultation process, the employer should record the circumstances, in writing, including those steps that the employer has taken to communicate and initiate the consultation process. A copy of this document should be provided to the representative body or trade union concerned.
- Impact on Broad Based Black Economic Empowerment status
Compliance with the provisions of the Employment Equity Act and Skills Development Act represent one of the five pillars for scoring an organisation against the BBBEE scorecards published by the Department of Trade and Industry. Limited or non compliance with these two Acts will result in a low BBBEE ranking.
BBBEE rankings are important for purposes of government and parastatal tenders; and maintaining an organisation’s preferred supplier status with other organisations. As a result, whilst a specific company may not apply for public tenders, it may nevertheless be forced to be rated by an accredited BBBEE agency to maintain its supplier status. For example, a large hotel chain may insist that its suppliers be rated in order that its own BBBEE ranking is improved. Many such organisations are in future only utilising suppliers with higher BBBEE rankings in order to improve their own BBBEE status.
The five pillars of BBBEE are:
- Management Control,
- Employment Equity and Skills Development,
- Preferential Procurement,
- Enterprise Development and
- Socio-Economic Development)
- Rational argument
4.1 Customer Service
Organisations are increasingly recognising that in order to satisfy customer / end-user expectations and service delivery, their own workforce profiles need to mirror their client base. A simply illustration of this would be in the motor industry, where the majority of new vehicle owners are women, yet the majority of motor vehicle service organisations are still male dominated. Increasingly these companies are now employing female motor mechanics and customer service reps to meet this emerging market.
4.2 Workforce Planning
When viewed against a broader canvas, employment equity planning is less about setting race and gender numerical targets and more about identifying future workforce profiles and identifying and developing those skills necessary to meet future workforce requirements. The reality of the South African workplace is that future skills can only be found in significant numbers amongst the Black African population.
The current scarce skills quandary facing South Africa (and indeed many other countries) should be a cause of concern for any rationally minded employer pursuing long term strategic goals.
There are very close parallels between setting EE numerical targets and workforce planning. What is in fact required by employers is to firstly determine their long term workforce requirements, and thereafter to determine the race and gender profiles of this workforce in accordance with their employment equity statutory obligations.
- International Perspective
Employment equity is not a novel South African initiative. The reality behind our current legislation is that it is based directly on (and in fact funded by) the Canadian Employment Equity Act.
Similar employment equity legislation can be found in Namibia, whilst race, gender and disability related legislation can be found in all first world developed and developing economies:
United States of America
§ EEOC Enforcement Guidance on Reasonable Accommodation and Undue Hardship Under the Americans with Disabilities Act
§ In Canada, the obligation to provide reasonable accommodation is enshrined in federal and provincial human rights statutes as well as judicially interpreted into the general non-discrimination clause of the Canadian Charter of Rights and Freedoms (paragraph15).
§ Reasonable accommodation is also legally required through the Employment Equity Act. According to paragraph 5(b) of that Act (Employer Obligations), “every employer shall implement employment equity by . . . making such reasonable accommodations as will ensure that persons in designated groups achieve a degree of representation in each occupational group in the employer’s workforce that reflects their representation in society.”
§ Summary of reasonable adjustment rules: Where a provision, criterion or practice (including also any 'arrangements') applied by or on behalf of an employer places a disabled person at a substantial disadvantage in comparison with non-disabled people, the employer is obliged to take such steps as it is reasonable, in the circumstances, for him to have to take in order to prevent the provision, criterion or practice having that effect. 'Substantial' means only more than minor or trivial. The employer sometimes has a 'lack of knowledge' defence. The legislation gives examples of adjustments, and of factors to be taken into account in deciding what is reasonable.
§ The United Kingdom’s Disability Discrimination Act of 1995 legislates the duty of employers “to make adjustments” (paragraph 6.1). This duty applies where “any arrangement” or “any physical feature of premises” of employer “place the disabled person concerned at a substantial disadvantage in comparison with persons who are not disabled.” In such a case, “it is the duty of the employer to take such steps as it is reasonable, in all the circumstances of the case, for him to have to take in order to prevent the arrangements or feature having that effect”.
§ See also Disability Rights Commission’s Code of Practice: Employment and Occupation
§ In South Africa, reasonable accommodation is ensured through the Employment Equity Act No. 55 of 1998. According to that Act, reasonable accommodation means “any modification or adjustment to a job or to the working environment that will enable a person from a designated group to have access to or participate or advance in employment” (paragraph 1). The South African understanding of reasonable accommodation is that it applies to all persons, regardless of disability, in function of the general principle of non-discrimination. Thus, reasonable accommodation must be provided to ensure equal opportunities on account of not only disability, but other grounds for discrimination such as age and sex.
§ Spain’s 2003 Law on Equality of Opportunities, Non-Discrimination and Universal Accessibility of Persons with Disabilities provides for reasonable adjustment (Ajuste razonable).
§ The term “reasonable adjustment” is not expressly specified in Australia’s Disability Discrimination Act of 1992. Rather, the Act proscribes “indirect discrimination,” which, under the terms of the Act, requires the “removal of unreasonable requirements which disadvantage people with a disability” (paragraph 6).
§ New Zealand’s Human Rights Act of 1993 makes exceptions to the general prohibition of discrimination for both religion and disability by requiring the provision of “accommodation.” With regard to disability, the Human Rights Act specifies that different treatment based on disability is permitted where “the position is such that the person could perform the duties of the position satisfactorily only with the aid of special services or facilities and it is not reasonable to expect the employer to provide those services or facilities” (paragraph 29(1)(a). In this regard, it is always the duty of the employer to “take reasonable measures” to ensure the equal treatment of all employees regardless of disability.
§ The European Union has issued Directive 2000/78/EC which establishes a general framework for equal treatment in employment and occupation. The Directive requires, inter alia, that all Member States adopt disability nondiscrimination legislation by 2004. Article 5 of the Directive stipulates:
§ “In order to guarantee compliance with the principle of equal treatment in relation to persons with disabilities, reasonable accommodation shall be provided. This means that employers shall take appropriate measures, where needed in a particular case, to enable a person with a disability to have access to, participate in, or advance in employment, or to undergo training, unless such measures would impose a disproportionate burden on the employer. This burden shall not be disproportionate when it is sufficiently remedied by measures existing within the framework of the disability policy of the Member State concerned.”
§ Irish law mandates the provision of reasonable accommodation to persons with disabilities in two pieces of legislation: The Employment Equality Act of 1998 and the Equal Status Act of 2000. The Employment Equality Act (No. 21 of 1998) provides that “An employer shall do all that is reasonable to accommodate the needs of a person who has a disability by providing special treatment or facilities” (paragraph 16(3)(b)).
§ Israel’s Equal Rights for People with Disabilities Law, 5758 (1998) refers to the obligation to make “adjustments.” Section 6 provides that “within the framework of services provided in society and aimed at the general public, adjustments shall be made as required by the particular circumstances, and as stated in this Law” for persons with disabilities. This is in line with the “purpose of th[e] Law,” which is: [T]o protect the dignity and freedom of a person with a disability, to enshrine her/his right to equal and active participation in society in all the major spheres of life, and, furthermore, to provide an appropriate response to the special needs of a person with a disability, in such a way as to enable her/him to live with maximum independence, in privacy and in dignity, realizing her/his potential to the full (paragraph 2).
§ According to the Magna Carta for Disabled Persons of the Philippines, reasonable accommodation includes “(1) improvement of existing facilities used by employees in order to render these readily accessible to and usable by disabled persons; and (2) modification of work schedules, reassignment to a vacant position, acquisition or modification of equipment or devices, appropriate adjustments or modifications of examinations, training materials or company policies, rules and regulations, the provision of auxiliary aids and services, and other similar accommodations for disabled persons” (paragraph 4.h).
- Anger over anti-Indian quotas for Durban's top jobs
- 2017 EE online and manual reporting season
- Businesses owe R22m for employment-equity penalties
- DoL ends EE roadshows by stressing the need for compliance with legislation.
- Department of Labour reminds employers and stakeholders about the looming dates of Employment Equity reporting