Issues surrounding labour legislation It is often overlooked that in terms of South African labour legislation, employers enjoy very many rights. This is not to say that our labour law is not slanted towards the rights of employees, indeed it is. The intention behind this is far from sinister, rather, it stems from the assumption that generally speaking, the employee is the weaker party and requires protection. It needs to be said, however, that the chief reason why employers often get themselves into tricky (and ultimately expensive) situations when it comes to labour law issues is not that the law is weighted against them, rather, they fail to familiarise them with legal requirements and do not follow prescribed procedure. This is one more area where most franchisees enjoy an advantage over their fully independent counterparts. In most instances, their network’s operations and procedures manual will provide guidelines. However, having a basic understanding of the issues involved in employing people is useful anyway and the following article provides that. The employment contract Writing in his publication What every South African employer should know, labour law expert Hylton Rubinstein makes the point that the employment contract forms the foundation of the employment relationship and should always be in writing. He also notes that our labour law distinguishes between permanent, temporary/fixed-term and casual employees and that each class is governed by a different set of regulations.
Issues surrounding labour legislation
It is often overlooked that in terms of South African labour legislation, employers enjoy very many rights. This is not to say that our labour law is not slanted towards the rights of employees, indeed it is. The intention behind this is far from sinister, rather, it stems from the assumption that generally speaking, the employee is the weaker party and requires protection. It needs to be said, however, that the chief reason why employers often get themselves into tricky (and ultimately expensive) situations when it comes to labour law issues is not that the law is weighted against them, rather, they fail to familiarise them with legal requirements and do not follow prescribed procedure.
This is one more area where most franchisees enjoy an advantage over their fully independent counterparts. In most instances, their network’s operations and procedures manual will provide guidelines. However, having a basic understanding of the issues involved in employing people is useful anyway and the following article provides that.
The employment contract
Writing in his publication What every South African employer should know, labour law expert Hylton Rubinstein makes the point that the employment contract forms the foundation of the employment relationship and should always be in writing. He also notes that our labour law distinguishes between permanent, temporary/fixed-term and casual employees and that each class is governed by a different set of regulations.
Minimum conditions of employment are set out in the Basic Conditions of Employment Act, No. 75 of 1997. You need to familiarise yourself with the basics of our labour legislation. There are several good reasons for this, with the following standing out:
While it would exceed the parameters of this article to enter into an in-depth discussion of the legislation that governs the employer/employee relationship, we will nevertheless attempt to clarify some of the issues that are often misunderstood:
1. The employment contract binds both parties
Employers know that once they have signed a contract of employment with an employee, they are bound by its terms but for some strange reason, they are not sure whether the contract is binding on the employee as well. The law is quite clear on this point. The moment an employee has expressed acceptance of a valid contract of employment by signing it, he or she is bound by its terms. In practice, this means that if, for example, the employee terminates the employment relationship without giving proper notice and/or fails to serve out the agreed notice period, the employer is entitled to impose a penalty payment. It is permissible to deduct this amount from the employee’s final pay.
2. Probationary period
It has become standard practice to build a probationary period into an employment contract. Given the practical difficulties surrounding the dismissal of an employee on the grounds of poor work performance, this is not surprising. What many employers overlook, however, is the fact that even during the probationary period, the employment contract may not be terminated at will. To avoid falling foul of the legislation, you should be aware of the following:
3. How confidentiality clauses differ from trade restraints
The question of confidentiality clauses and/or restraint of trade agreements causes much confusion. These clauses deal with different issues and in fact have nothing at all in common.
As long as the ex-employee has been informed at the outset of the confidentiality of certain information and the employer has taken reasonable precautions to protect it, the employer could take legal steps against him or her for misuse of this information. A claim could also be brought against a competitor who knowingly uses such information.
4. Exclusions from protection
Employees whose annual earnings exceed a certain threshold, currently R115772, are excluded from most of the provisions contained in the Basic Conditions of Employment Act of 1997 that deal with the regulation of working hours. High-income earners are not the only ones who are excluded from certain forms of protection. Others who fall into this category include:
The rationale behind these exclusions is that individuals who fall into the categories listed above are deemed to possess special skills and are usually highly sought after. This should give them sufficient negotiating power to secure terms that protect their own interests but this does not give employers the right to abuse them.
Statutory requirements for the employment contract
The Basic Conditions of Employment Act No. 75 of 1997 makes it compulsory for employers to provide their employees (except employees who work for less than 24 hours per month) with a written contract of employment or a letter of appointment that clearly sets out the nature of the employment relationship and the rights and obligations of both parties. The following is a summary of the minimum information such a contract should contain:
Other labour law issues
In addition to the Basic Conditions of Employment Act, employers should familiarise themselves with the following pieces of legislation:
The Labour Relations Act (LRA)
This act applies to any employment situation, regardless of the size of the employer’s company. A major portion of this Act deals with dispute resolution, which is dealt with by the CCMA (Commission for Conciliation, Mediation and Arbitration) and the Labour Court.
Many of the decisions made by these bodies explore the fairness of the employer’s actions. An act of an employer would be seen in labour law to be unfair if it infringes upon an employee’s rights and is one-sided, unnecessary and/or considered inappropriate and/or considered excessive when examined in the light of a given set of circumstances.
Another term that is frequently used in labour law is “reasonableness”. Although it is almost inevitable that any definition of this term will be subjective, the Labour Court provides some guidance. In the case of Auf der Heyde versus University of Cape Town (2000, 8 BLLR 877), the definition of “reasonable expectations” advanced by the Labour Court reads as follows: “… an equity criterion, ensuring relief to a party on the basis of fairness in circumstances where the strict principles of the law would not foresee a remedy.”
Labour law expert Ivan Israelstam offered a more practical definition, which is perhaps of more use to the average employer. Writing in The Star Workplace, he defines reasonableness as: “… a situation, decision or viewpoint based on objective thinking, the facts of each case and a balance between the rights and legitimate needs of the parties concerned.”
The Employment Equity Act (EEA)
South Africa has a legacy of discrimination in relation to race, gender and disabilities that has denied access to opportunities for education, employment, promotion and wealth creation to a large segment of South Africa’s peoples. The Employment Equity Act, No. 55 of 1998 issued in terms of Section 25(1)), was passed to address this issue and is administered by the Department of Labour.Who is affected?
As can be seen, the potential impact of the Act on the operation of a small business is wide-ranging but in the light of its complexity, a detailed discussion would exceed the parameters of this article. Comprehensive information is available from the regional offices of the Department of Labour (DoL) and from the DoL’s web site – www.dol.gov.za – which, by the way, is well presented and extremely user-friendly. In addition, we would advise you to seek competent professional advice from a labour law expert, preferably before you have a potential problem on your hands.
The Skills Development Act (SDA)
This aim of this Act is the furtherance of lifelong learning and the facilitation of upward mobility of South Africa’s workforce. To create a sound financial footing for this noble goal, the Act compels employers to pay a levy calculated as a percentage of their enterprise’s payroll, which is currently set at 1%. Please note the following:
The promulgation of the Skills Development Act has led to the creation of sectoral training bodies, known as SETAs, which are responsible for the training of workers in specific industry sectors. The good news is that subject to certain conditions being in place, companies are entitled to claim part of their skills levy contributions back in the form of cash grants, to be used towards approved staff training schemes.
You should make it a priority to talk to your sectoral SETA. Although not all SETAs are created equal, meaning that some are more effective in their service delivery than others, your SETA should be able to provide you with a host of useful information, including conditions for your firm’s participation in a learnership scheme and the award of training grants. You should also approach the regional office of the Department of Labour in your area for guidance. The impact of labour legislation
South Africa’s labour legislation covers ten stages in the employment cycle and it is important for every employer to be aware of these stages. They are the following:
1. Recruitment advertisement
For example, unless you are the head of a church and interviewing candidates for the position of parish priest, it would be safer not to ask job applicants about their religious affiliation. In most instances, it will have no bearing on the applicant’s ability to perform work-related duties.
2. Job interview
It’s important to keep notes that provide a summary of the proceedings during an interview and to note why a particular applicant was found to be unsuitable. These notes will be invaluable should a case of unfair discrimination be opened against you at the CCMA. It is therefore advisable to retain them for a reasonable period, say 8-12 months.
3. Hiring decision and employment procedure
Once you have decided to hire a person, put everything in writing but keep in mind that whatever you agree on must be within the boundaries of the relevant legislation.
A clause in the employment contract that purports to reduce the prescribed minimum leave period, for example, would not be worth the paper it is written on, even if the employee had willingly agreed to it. Trade restraints are another problem area; unless they are carefully worded and reasonable with regard to the geographic area they cover and extent of time for which they apply they could easily become unenforceable.
Probationary periods must be reasonable as well, and it is important to remember that even during the probationary period, prescribed procedures must be followed before an employee can be dismissed.
4. Working conditions
Business ethics and common sense combine to suggest that in the long term, only a happy and well-rested workforce will be productive. It is especially important to adhere to limitations on the number of hours employees are permitted to work. Remember, too, that the employer could be held responsible should an individual in his or her employ cause an accident due to fatigue.
The Employment Equity Act (EEA) places a responsibility on employers to train their workforce. As this makes perfect business sense anyway, it should not create too much of a problem for any employer and assistance schemes are available. Contact your SETA for details.
6. Motivation and advancement
Although smaller companies are currently exempt from the requirement to submit a formal affirmative action plan, it is good business practice to work towards this anyway. Make reasonable efforts to build a team that fairly reflects the ethnic composition of the country, provide training and mentoring, reward achievement and promote from within as far as this is practical and you’ll have little to worry about.
Important note: Legislation as it stands at present does not compel the employer to implement employment practices that impact negatively on the viability or competitiveness of the business.
Legislation prescribes that you keep formal records of work attendance, pay details and other statutory requirements pertaining to the employment of staff. We recommend that you expand on this requirement by noting achievements as well as problem areas in each employee’s personnel file and keep this file updated at all times.
8. Dismissal procedures
The dismissal process is governed by the Labour Relations Act, No 66 of 1995. Although it has to be said that the Act provides substantial protection to employees and the dismissal process has indeed become a veritable minefield, it would be wrong to assume that employees can no longer be dismissed. The key to effectiveness in this area is to let the employee know, in no uncertain terms, that a problem exists. This should be linked to the provision of reasonable assistance, for example by offering extra training and counselling. Once it has become clear, however, that the employee stands no reasonable chance of making the grade, swift action is called for. Such action must be seen to be firm, fair and consistent, and every step should be carefully documented.
8.1 Dismissal for poor work performance
Should an employee fail to make the grade, proceed as follows:
It is especially important to remember that the employee must be advised of his or her right to representation and he or she must be permitted to state his or her case. Should the termination be upheld, the employee is entitled to receive, in addition to any outstanding payments due to him or her, a Certificate of Service.
8.2 Termination for misconduct
This can be a tricky area and because circumstances tend to vary widely, professional assistance should be obtained before you take any steps. For your information, the following procedure will normally be followed:
The notification should be issued in duplicate and the employee should be asked to confirm that he or she has received it by signing one copy. The copy that has been signed by the employee should be filed in the employee’s personnel file.
Should an employee refuse to sign the copy of the notification, it would be advisable to have an independent witness who has observed delivery of the notification attest to the fact that the notification has been delivered.
The chairperson will make a decision based on the outcome of the hearing. Should this decision be unfavourable for the employee, it is customary to grant the employee the right to lodge an appeal.
9. Formal dispute resolution proceedings
The Labour Relations Act, No. 66 of 1995 provides that if a dispute in the workplace cannot be resolved internally to the satisfaction of an aggrieved employee, this employee has the right to declare a dispute. He or she then has access to a series of institutions ranging from the CCMA to the Labour Appeal Court. As the matter moves forward through these channels, the legal process becomes progressively more time consuming, formal and expensive. Common wisdom has it that even if you are convinced that you have an ironclad case, it is usually advisable to seek an early settlement.
9.1 The CCMA
The CCMA is a dispute resolution body that functions at two levels:
Con-arb: Although the CCMA process is far quicker than proceedings at the Labour Court, it is time-consuming nonetheless. If conciliation is unsuccessful, an arbitration hearing will be scheduled for a later date which could be weeks or even months off.
Under this scenario, the parties have no time to prepare new evidence or arguments. They move straight into arbitration, thereby significantly simplifying and speeding up the process.
9.2 The Labour Court and the Labour Appeal Court
If a dispute is referred to the Labour Court, a Labour Court judge will hear argument, consider all the relevant facts and then make a decision. Should one party disagree with the Court’s findings, he or she is entitled to refer the matter to the Labour Appeal Court. As we have indicated earlier, proceedings before the Labour Court and the Labour Appeal Court tend to be time consuming and expensive.
It makes good business sense to make every reasonable effort to avoid a dispute reaching this stage in the first place. If this cannot be avoided, proceedings should certainly not be prolonged.
Most cases that come before a Labour Court deal with claims for unfair dismissal. The Labour Relations Act recognises only three grounds on which an employee may be dismissed, namely:
10. Recent developments on the labour law front
This concludes the overview on labour law except for some developments in case law employers should be familiar with.
10.1 Constructive dismissal
In section 186(e) of the Labour Relations Act, a constructive dismissal is defined thus: “When an employee terminates a contract of employment with or without giving notice because the employer made continued employment intolerable for the employee.”
In plain English this means that an employee can resign, seemingly of his or her own free will, but usually in the wake of some long-simmering disagreement with the employer that, in the employee’s opinion, wasn’t adequately addressed. Having resigned under these circumstances, there is nothing stopping the employee from approaching the CCMA to claim “constructive dismissal”. What the employee is in fact saying is that he or she did not really want to resign but was forced to do so by circumstances that were either imposed or tolerated by the employer. As employees become increasingly militant, this could evolve into a serious problem.
By far the largest number of cases of alleged unfair retrenchment that come before the Labour Courts arise from the fact that the employer did not follow the prescribed procedure. Experts seem to agree that by and large, the Labour Courts are fairly flexible on the employer’s reasons for retrenchment. They are, however, unforgiving if it emerges that the prescribed retrenchment consultation procedure was not followed.
In this context, it is important to understand that employers are not required by law to negotiate with their workers until they reach consensus on retrenchments. They are merely required to consult with the employees or their union representatives before taking this step. The difference between the terms negotiation and consultation is critical. If there were a requirement to negotiate retrenchments, the parties would have to agree on this step before it can be implemented. This is not the case, however, as all the law asks is that the employer provides the affected employees and their representatives with relevant information and makes a good-faith attempt to reach consensus; it is not necessary to reach agreement.
10.3 Culpability as a result of inaction
It is common knowledge that employers are responsible for the physical well-being of employees at the workplace, for example by providing safe working conditions and safety equipment. What is less well understood is the fact that our law goes well beyond these basic requirements by placing an obligation on employers to ensure the emotional well-being of its employees as well. This includes an obligation to ensure that employees are not exposed to things like sexual harassment or victimisation by the company’s managers etc.
If it can be shown that senior management of a company was less than diligent in preventing such victimisation, the company can be held responsible. In legal terminology, this is known as vicarious liability.
10.4 Unfair dismissal
In a case brought before the CCMA, a commissioner found that incarceration of an employee does not automatically constitute grounds for dismissal. The facts before the commissioner were that the employee had notified his employer of the reasons why he could not attend work after having been arrested. At that time, he was unable to estimate the duration of his stay in jail.
In a thinly disguised attempt to show that correct procedure had been followed, the employer arranged a disciplinary hearing, knowing full well that the employee who was in jail at the time would not be able to attend. The hearing proceeded in the employee’s absence and he was dismissed on the grounds of being unable to render service.
The commissioner found that as the company knew the reasons for the employee’s absence and that he fully intended to return to work, a temporary replacement should have been employed, pending the absent employee’s release from jail. In the event, the employee was freed after one month but was told by the company that his position was now occupied by a permanent replacement.
Not surprisingly, the commissioner ordered the company to reinstate the employee. This created a dilemma for the employer who now had two employees, no valid reason to fire either one of them but only one post. Although the commissioner did not elaborate on this aspect, expert comment suggests that if the jail sentence of the employee had extended over a lengthy period, say one year or more, the company would have been entitled to dismiss the employee based on his inability to render service.
10.5 Discrimination on grounds of age
Dismissal based on the age of an employee is automatically unfair. What, then, is the situation if an employee reaches the age at which most individuals want to retire, say 60 or even 65, but has no wish to do so?
In a recent case before the Labour Court, the following findings emerged:
10.6 Sick leave
The question of sick leave causes much confusion in the workplace but the law is quite clear on this. Some of the myths surrounding sick leave are the following:
10.7 Aids in the workplace
Still on the issue of employee health, Aids is a serious threat to businesses of all sizes, including small businesses. Although South Africa records the highest incidence of Aids throughout the world and the illness can no longer be wished away, employers are slow to recognise its potential impact on their workforce. Indeed, very few small to medium enterprises have appropriate policies in place. Given the pressures of building a small business, this may be understandable but it is also extremely short sighted. Just consider this: in the absence of a proper plan of action, should one out of two individuals employed by a small company fall victim to the ravages of Aids, the company’s workforce will have been cut in half. Should the owner of the enterprise be affected it would almost certainly lead to the demise of the enterprise.
The use of fixed-term labour
Employers who are new to the game often think that they can escape obligations imposed by labour legislation – which they consider to be unnecessarily onerous – by using casual labour. This is a fallacy and can lead to dangerous consequences.
If the same individual is hired as a fixed-term worker, often called a “casual labourer”, on a regular basis, he or she soon begins to enjoy automatically the same protection under labour law as permanent employees.
If, for example, a fixed-term employee works regularly on a specific day of the week, let us say every Thursday, and during the course of one week, Thursday happens to be a public holiday, this employee would be entitled to be paid for the day. If required to work on that day, he or she must be paid at the holiday rate. In this context, you should know that the repeated renewal of fixed-term contracts will automatically lead to the creation of a reasonable expectation of permanent employment. This would then form the foundation for a claim that the contract is deemed permanent.
Although employers love to hate labour legislation, recent developments suggest that overall, its implementation has had a positive impact on employer-worker relations. Broadly speaking, the negotiating climate during wage negotiations has become much more cordial, especially in the field of organised labour. This has resulted in a welcome drop in the number of days lost due to strike action and is a direct result of improvements in dispute resolution mechanisms.
The new order has created greater predictability around employer-employee relations. For example, wage negotiations are now conducted in a positive and cordial bargaining atmosphere, very different from the adversarial stance that was routinely displayed by both parties in the not so distant past. As a result, the number of shifts lost due to strike action fell significantly and should this trend continue, it will have an enormous impact on labour productivity.
Acknowledgement - This article is an edited extract from the SME manual Eric Parker’s Road Map to Business Success, published by Frontrunner Publishing and available from book stores countrywide.