The EEA Amendments & Draft Regulations: Fines, liabilities and powers of the department

Podcast

The EEA Amendments & Draft Regulations: Fines, liabilities and powers of the department

Podcast

00:00 00:00

Download MP3

Transcript

Nadeem Mahomed: Hi, everyone, welcome to CDH conversations. This is the third part in our series on the Employment Equity Act Amendments.

Just to recap, the effective date of the amendment is yet to be proclaimed by the President and the sectoral numerical targets were published on the 12^th of April 2023, providing interested parties with 30 days to submit any comments that they would like. Please also look out for our thought leadership guideline on the Employment Equity Act Amendments, which will be published shortly. In this podcast, I'm very happy to have Hedda, who is a director in our employment law department and Kgodisho, who's an associate in our employment law department to further the discussion on the Employment Equity Act amendments. Thank you Hedda and Kgodisho for joining us. Please continue.

Kgodisho Phashe: Thank you, Nadeem. And as Nadeem has mentioned, on Friday the 12^th of May 2023, the minister published draft five year numerical targets for the identified national economic sector, allowing interested parties to comment in 30 days. I'm sure everyone is aware by now that president Cyril Ramaphosa signed into law, the Employment Equity Amendment Act, and this Amendment Act deals with the new measures to promote diversity and equality in the workplace. And something that's very interesting which we'll be talking about in this podcast, is the introduction of numerical sectoral targets that are to be implemented by designated employers. And what we'll be particularly focusing on or discussing in this podcast today is the penalties which may be imposed in response to a designated employer's failure to comply with the sectoral target. And as Nadeem has introduced me, I'm Kgodisho Phashe, an employment law associate at CDH. Joining me today is Hedda. And Hedda, thank you so much for your time to discuss this pressing topic in our nation currently.

Hedda Schensema: Thank you, Kgodisho. As a point of departure, the amendments to the Employment Equity Act bring about a change to the definition of designated employer to restrict the application of these sections to reduce group of employers and relieve some of the administrative burden on smaller employers. One of the main objectives of the amendments is to introduce and to empower the Minister of Labour and employment to among other things, identify and set employment equity numerical targets for each national economic sector. I think such numerical targets are important and that they be seriously considered by designated employers. Here's the reason why:

The purpose of the numerical targets is to ensure equitable representation of suitably qualified people from historically disadvantaged groups based on race, gender, and disability, at all occupational levels in the workplace.

An amendment to section 42 aligns the assessment of compliance with employment equity with the new requirements relating to sectoral numerical targets. Therefore, it's very important for designated employers to comply with this. An amendment to section 53 of the Employment Equity Act, dealing with state contracts, provides that the minister may only issue a compliance certificate if the employer has complied with the sectoral numerical targets set by the minister for the relevant sector or has demonstrated a reasonable ground for non compliance.

Kgodisho Phashe: Thank you Hedda. Something that has been reported, which is quite fascinating, is that during the 2019 - 2022 period, the level of non compliance in terms of the Employment Equity Act was at a staggering 96%. Out of 860 employers who were inspected for compliance only 12 were found to be compliant. And in light of this, the government is now targeting non compliant businesses, specifically JC listed companies. And the government is imposing fines at a minimum of 1.2 million rand. Could you elaborate more on the different fines that are applicable to the non compliance with the Act?

Hedda Schensema: As a start, we need to revisit the Act and see who is granted the powers to seek an enforcement of such numerical targets. Section 36 of the Employment Equity Amendment Act revives the power of a labour inspector to secure an undertaking to comply from a designated employer. The national targets will apply to designated employers operating nationally, while the respective provincial targets will apply to employers operating in the respective province. A designated employer may not apply both the national and provincial targets, interestingly. And the minister has also not published targets for the semi skilled and unskilled levels. However, designated employers are required to take into account the economically active population demographics in respect of these levels, either nationally, or provincially. In their employment equity plans in terms of section 22(c) of the Employment Equity Act.

Section 42 of the Employment Equity Act has also been amended to include an assessment of whether an employer has complied with the sectoral targets set in terms of section 15(a). If after an assessment it is determined that the employer has failed to comply, Section 45 states that the director general may apply to the Labour Court for an order directing the employer to comply. Or if the employer fails to justify its non compliance with the request or recommendation, impose a fine, as you had already mentioned previously, Kgodisho, in accordance with schedule one. In the circumstances, non compliance with sectoral targets will have the same effect as non compliance with an Employment Equity Plan. As you've already mentioned, in terms of the shedule of the fines these are as follows:

• For no previous contravention, the fine could potentially be the greater 1.5 million or 2% of the employer's turnover.
• If the employer has a previous contravention in respect of the same provision, it would then be the greater 1.8 million or 4% of the employer's turnover.
• If the employer has a previous contravention within the previous 12 months or two previous contraventions in respect of the same provision within three years, the greater 2.1 million or 6% of the employer's turnover could be the imposed fine.
• And finally, three previous contraventions in respect of the same provision within three years could attract the greater 2.4 million or 8% of the employers turnover in respect of a fine.

Kgodisho Phashe:  Thank you for that, Hedda. Those are indeed hefty fines. This conversation actually reminds me of the case of the Deputy General in the Department of Labour versus Winco Industrial Enterprise where the court considered the principles underlying such fines. The first issue dealt with by the court was whether these issues will be treated as civil or criminal matters. The court found that a filing pose under the Employment Equity Act is not a criminal penalty, but a regulatory mechanism. Now what this means is that in enforcement proceedings under the Employment Equity Act, the presumption of innocence, the rule against self incrimination, and the test of proof beyond reasonable doubt, do not apply. However, the Department of Labour must still satisfy the court and a balance of probabilities that the employer indeed flouted a compliance order, and that the fine it seeks is justifiable and reasonable. Importantly the court mentioned and held that a range of factors must be considered when determining the appropriate fine and these factors include the following:

You need to look at the purpose of the Employment Equity Act. You need to look at the extent of the contravention, the period for which the contravention endured, the reason for non compliance. The employer's willingness to comply, the loss suffered by the workforce as a result of the contravention and the profit derived from it, the employer's compliance or otherwise with other labour laws, the employer's investment in the development of its workforce, the effect of the penalty on employment, and the deterrent effect of such a penalty.

This is exactly what a court needs to consider before imposing any of the above fines that you just referred to, Hedda.

Hedda Schensema: Kgodisho, thanks for the reminder. Very valuable information that all of our clients would definitely take heed of, because I think that the maximum penalty sought by the Department of Labour should be reserved for the most egregious violators and obviously for those who simply refuse to comply at all.

Kgodisho Phashe: Thank you, Hedda. That brings us to the end of our conversation today.

Hedda Schensema: Thank you.

Nadeem Mahomed: Thank you for joining us on this edition of today's conversations. Please look out for our next instalment in respect of the discussion on the Employment Equity Act Amendments. And thank you for listening, I look forward to having you again.