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Tinkering with the labour market: amendments to the LRA now imminent

10 January 2014
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After lengthy negotiations in NEDLAC, the statutory forum for engagement between social partners, no agreement could be reached on some of the key government proposals. In March 2013 government went ahead, presenting a draft Bill to the Parliamentary Portfolio Committee. This drew negative reactions from both business and labour constituencies. Although government proposed significant additional rights for lower paid workers hired through labour brokers, with full “equal treatment” after a six month period of employment, this fell far short of banning the practice, as COSATU had consistently demanded. COSATU was also unhappy with government’s proposal to reintroduce strike ballots. Business, for its part, believed that the additional regulation of labour broking and other “non-standard” employment arrangements would result in significant job losses.

The Bill then found itself the subject of further scrutiny in the Parliamentary Portfolio Committee. The media reported that a deal had been struck in side meetings between the ANC and COSATU to drop the additional regulation of strikes. In the Committee itself, a number of members pressed to reduce the six month period of employment within which labour broking arrangements could continue as before.

The strength of the trade union lobby in the Portfolio Committee became evident. In the version of the Bill that emerged from the Portfolio Committee some months later, to be voted on by Parliament on 20 June 2013, the new strike provisions had been dropped and the six month window period for non-standard employment arrangements had been reduced to three months. A proposal to reduce dismissal protection for high earning employees had also been dropped by the Portfolio Committee.

In a twist of events, Parliament was unable to pass the Bill into law on 20 June after the opposition left the House in protest, citing in particular the negative impact of the amendments on jobs. The House was left without a quorum, leaving the Bill to be resubmitted in the coming “term”.

Absent any further dramatic twist in the tale, we expect that the amendment Bill will be passed into law and brought into effect either during the last quarter of 2013 or at the beginning of 2014. Their most dramatic impact will no doubt be the additional regulation of labour broking and other forms of non-standard employment, specifically fixed term contracts and part time employment. Additional protections will apply to employees who earn below the earnings threshold established by the Basic Conditions of Employment Act, currently zar193 805 per annum. With certain limited exceptions, employees in each category of non-standard employment earning below this threshold will become entitled to the same rights as full-time indefinite employees after three months in employment, and will then be entitled to be treated on the whole not less favorably than their previously more secure counterparts in the workplace.

It is clear that an immediate impact of these changes will be to improve the job security of employees in this class. But this will come at a cost. There is little doubt that the increased cost of doing business will have a corresponding negative impact on the number of jobs available at current levels of investment.

The amendments will also be introduced in the dark shadow of the Marikana tragedy. A July 2013 report by UCT’s Development Policy Research Unit estimates that almost 50 million working days were lost to strike action in South Africa over the period 1999 to 2011. Although the early trends between 1999 and 2002 were a sharp decline in strike action, attributed at the time to the positive effect of the new dispute resolution procedures introduced by the lra in 1996, there has been, with the exception of relatively low strike levels in 2008 and 2009, a consistent trend of high or increasing strike levels since then. Of even greater concern than the number of strike days lost to the labour market has been the growing trend of violence accompanying strikes. The question of whether and how to regulate the problem has, for the most part, been deferred.

It is possible that one apparently small change to the powers of the Labour Court might have a significant impact on strike violence. The Court will be able to interdict even protected strikes if strike related picketing and protest gets out of hand. Much will depend on how readily that power is exercised by the Court’s judges. It is probably unduly optimistic to think that changes to the law will have a significant impact on the culture surrounding strikes. Most commentators point to low levels of trust between collective bargaining partners and growing levels of dissatisfaction at the state of basic services in worker communities as the main causes of increasingly adversarial strike action.

The LRA amendments do include a measure aimed at improving the efficiency of exemption procedures applicable to bargaining council agreements that have been extended to non-parties. But this change is unlikely to stop the groundswell of opposition by smaller employers and their employers’ organisations to industry arrangements that impose collective bargaining outcomes on non-parties.

It is a pity that the Parliamentary Portfolio Committee did not endorse the government’s proposal to water down dismissal protection for high earning employees. This was a valuable opportunity to demonstrate that high levels of protection against dismissal, which are widely perceived to limit employment flexibility and so stand as a strong disincentive to taking on new workers, can be relaxed in a way that does not violate the constitutional right to fair labour practices.

Ultimately the amendments do no more than tinker with, and in some respects tighten up, existing labour protection. They offer no sign of the visionary thinking or concerted action that is likely to be necessary to realize the objectives of jobs-rich growth envisaged by the National Development Plan. An opportunity missed.