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The Labour Relations Amendment Act: Bottom Line Impact for Employers

The Labour Relations Amendment Act: Bottom Line Impact for Employers

The Labour Relations Amendment Act 6 of 2014 has come into effect. It will significantly change the way South African employers do business with regards to employing people. The changes will push up costs of doing business with labour brokers. They will also force employers to use labour brokers only when they have to and for a limited duration. Below are some important areas which employers have to be aware of with regards to the changes.

Automatically Unfair Dismissals

Dismissals for issues of mutual interest are significantly affected by the changes to s187 (1) (c) of the LRAA. The amendments make it difficult to dismiss employees for operational requirements where the employee refuses an alternative to a dismissal. The LRAA stipulates that a dismissal is automatically unfair, if the reason for the dismissal is a refusal by the employee to accept a demand in respect of any matter of mutual interest between them and their employer. Changing the terms and conditions of employment may also be a challenge when the employer is restructuring.

Temporary Employment Service (TES)

The new protections regarding TESs or non-standard form of employment only affect employees who earn below the R205 433.30 threshold. There are some significant changes with regards to TES as well. These start with the definition of a TES itself. Temporary service means work for a client by an employee:-

  • For a period not exceeding three months; or
  • As a substitute for an employee for a client who is temporarily absent; and
  • In a category of work for any period of time in terms of a collective agreement concluded in a bargaining council, by a sectorial determination or by the Minister.

It is important to note that where an employee is performing work for a TES client but does not fall within the above definition will be DEEMED:-

  • to be an employee of the client and the client the employer; and
  • DEEMED to be employed permanently by the client;
  • Termination of employment by the TES in order to avoid the employee falling within the definition of a permanent employee constitutes a dismissal; and
  • An employee employed through a TES must be ‘treated on the whole not less favourably than an employee of the client performing the same or similar work, unless there is a justifiable reason for different treatment.’

The above changes have an effect of limiting the use of labour brokers. The government seem to want to force employers to use labour brokers only when they HAVE to. Employers (both TESs and clients) have three (3) months from commencement of the LRAA to comply with the provisions of the LRAA. It is important for employers employing people through TESs to relook at service level agreements with TESs to ensure that that they cater for these changes.

It will also be important for employers to relook at their staffing numbers to ensure that they have adequate numbers of employees they require.

Fixed-Term Contracts

The LRAA also introduces some significant changes to fixed term contracts. Fixed term contracts are defined to mean a contract of employment that terminates on:-

  • An occurrence of a specified event;
  • Completion of a specified task or project;
  • A fixed date, other than the employee’s normal or agreed retirement age.

The LRAA makes some important exclusions with regard to fixed term contracts. These are:-

  • Employees earning in excess of the threshold prescribed by the Minister; and
  • An employer that employs less than 10-employees, or less than 50 employees and has been in business for less than two (2) years unless:-
  • The employer conducts more than one business; or
  • The business was formed by the division or dissolution for any reason of an existing business; and
  • Fixed term contracts allowed by statute, sectorial determinations or a collective agreement.

The exclusions regarding employers that employ 10 or less people or less than 50 but has been in business for less than two years are meant to exempt small employers from these clauses. Fixed term contracts in contravention of the Act will be treated (deemed) to be permanent contracts.

Where an employer renews a fixed term contract in line with exceptions stated above, the renewal must:-

  • Be in writing and specifically state the reason why it is renewed successively.
  • An employee employed on a fixed term basis for period longer than three (3) months must be treated the same as permanent staff doing same or similar work unless there is a justifiable reason for different treatment.
  • The changes above come into effect three (3) months after the LRAA has come into effect for existing fixed term contracts.

The employer bears the responsibility to prove that there was a justifiable reason for a fixed term contract that is longer than three (3) months.

Conclusion

It is clear that the above changes will impact on a lot of employers. Very few companies do not have either employees employed through a labour broker or on fixed term contracts. In coming up with these changes, the Department of labour was faced with a near impossible task of meeting the needs of the employers and labour demands. It is, at this stage, too early to say how successful have they been in this task.

Employers on the other hand should be looking at the service level agreements with their TESs. The fact that an employee employed through a labour broker has to be treated in the same way as a permanent employee has far-reaching consequences for TES’s clients.

Tennyson Mahlambi

Bruniquel & Associates (PTY) LTD