/ 14 January 2011

Red flags raised over labour Bills

Red Flags Raised Over Labour Bills

A regulatory impact assessment of controversial proposed changes to labour laws gazetted last month has warned that major damage could be inflicted on the labour market if some provisions are put into effect.

The assessment was conducted by the University of Cape Town’s Development Policy Research Unit, UCT labour law specialist Paul Benjamin and a consultancy, SBP, for the labour department and the presidency at the end of last year. The aim was to examine the likely effects of the amendments on the state, regulatory bodies and the economy.

Legislative proposals include the scrapping of Section 198 of the Labour Relations Act (LRA), which deals with temporary employment services, including labour broking. They also include new definitions of “employer” and “employee” and provide that all temporary workers are deemed to be permanent unless an employer can justify why a position should be exempt.

The changes came in amendments to a suite of laws including the LRA, the Basic Conditions of Employment Act and the Employment Equity Act.
However, the labour department said this week that it had responded to a number of issues raised in the assessment by incorporating changes to the Bills that were published in December and would continue to deal with other issues through Nedlac.

Some of the red flags raised by the assessment relate to proposed amendments to the definitions of “employee” and “employer” in labour law, which it says could undermine existing workers’ rights. It notes that the amended definition could result in the majority of workers now considered “employees” losing that status and the legal protection it gives them.

It says that the effective ban on temporary employment services could be constitutionally challenged, could cause increased job losses and unemployment, could raise the administrative burdens of employers and employees and could accelerate the casualisation of labour.

Temporary vs permanent
The assessment warns that the provision declaring all temporary work permanent could increase the cost of doing business to such an extent that employers would opt to shed temporary workers rather than keep them on. And, although the number of permanent employees could rise, companies would be unlikely to hire many contract workers, resulting in a rise in overall unemployment.

The department said it had taken account of the findings, including the calculation of fines for non-compliance with the Employment Equity Act, which, it is now proposed, should be an escalating percentage of turnover rather than a fixed percentage.

The report warns that a possible ban on services such as labour broking could be constitutionally challenged, as it violates the right to choose a trade, occupation or ­profession freely.

A ban on these services could also inadvertently affect the financial and business services sector, which, the report argues, has been among the most effective in creating jobs since 1995.

It notes that the sector has created almost a million jobs since 1996 and that within this tally 77% of jobs were created in the subsector “business services not elsewhere classified” or “other”.

“Labour recruitment and provision of staff; activities of employment agencies and recruiting organisations and hiring out of workers [labour broking activities]” form a major element of this subsector, according to the report.

It notes that “by repealing temporary employment services a major source of job creation over the past 14 years would be lost and almost certainly curtailed”.

The labour department conceded that the proposed deletion of the LRA’s Section 198, which governs temporary employment services, was a contested issue.

“It is important to note, however, that the proposed legislation does not prevent the operation of temporary employment services but restricts their ability to be employers of workers who are placed with clients,” said Thembinkosi Mkalipi, the department’s chief director for labour relations.

“Temporary employment services will still be able to place people in work and, if the demand is there for temporary placements, this could continue and should not necessarily have a negative impact on employment.

“What may emerge from the process of consultation in Nedlac, and the wider process that the department is embarking on, could well result in a different approach to the amendments to that contained in the current Bills,” he said.