The Solidarity employment equity agreement with government changes only one principle: that government cannot impose any penalties or disadvantages on employers who can show they have reasonable grounds for not complying with legislation.
The minister of employment and labour and labour union Solidarity concluded a settlement agreement at the CCMA on 28 June that will be published in the Government Gazette as part of the 2023 Employment Equity regulations and they also agreed that it will be made a court order, which will oblige companies to implement it.
With so many changes made to employment equity, will anything really change, companies want to know.
According to Lizle Louw (partner) and Amy King (knowledge lawyer at law firm Webber Wentzel) not much aside from the one principle of reasonable grounds.
They say anticipated changes to the employment equity landscape were prominent in 2023, and the settlement agreement must be considered in context to determine whether it changes anything for designated employers.
“It is useful to view the legislative developments over the past five years to appreciate where the contents of the settlement agreement come from and then cast a view forward to determine its practical implications.”
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Amending the Employment Equity Act
When the Employment Equity Amendment Act was first published as a draft bill in 2018, draft regulations were also published for public comment alongside it.
However, nothing more came of the 2018 draft regulations since, although the Amendment Act was assented to in April 2023, swiftly followed by draft employment equity regulations that set out proposed numerical targets for identified economic sectors.
Then, two weeks after the period for public comment on the 2023 draft regulations closed, reports of the settlement agreement on certain aspects of the implementation of affirmative action measures surfaced.
Louw and King say the settlement agreement repeats the general principles governing the lawful application of employment equity and include that affirmative action must be applied in a nuanced way, while government cannot impose an absolute barrier to employment on people from any group.
Employers are also not allowed to terminate the employment of any employee due to affirmative action.
The settlement agreement contains no new justifiable reasons for non-compliance with employment equity targets but it does record a further provision that no penalties or disadvantages will be imposed on employers who can demonstrate reasonable grounds for non-compliance, they say.
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2018 draft regulations
According to regulation 16(4) of the 2018 draft regulations, companies can request a certificate of compliance to do work for government if there are justifiable reasonable grounds for non-compliance with numerical targets. The reasonable grounds include:
- insufficient recruitment and promotion opportunities
- scarcity of qualified candidates from designated groups with the relevant qualifications, skills and experience
- CCMA awards
- business transfers
- mergers and acquisitions
- adverse business economic circumstances.
Louw and King say the contents of draft regulation 16(4) have now been repeated in the settlement agreement as factors that may justify non-compliance with targets set by employers and “any other targets”, which will therefore include sector targets.
The settlement agreement also records criteria to consider when companies prepare employment equity plans and reporting on employment equity. The criteria include:
- inherent requirements of the job
- the pool of qualified individuals
- the capacity to acquire the ability to do the job in a reasonable timeframe
- staff turnover and attrition and
- recruitment trends within the workplace.
“If these criteria look familiar, it is because some factors already appear in the Employment Equity Act under various scattered sections and the original wording of Section 42(2) of the act included some of these criteria for consideration in determining whether a designated employer was implementing employment equity in compliance with the act.”
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What happens to draft employment equity regulations now?
Amendments to the Employment Equity Act in 2013 removed these provisions but many designated employers continue to include them in their employment equity plans as a measure of best practice. These criteria do not appear in the Amendment Act or the 2018 and 2023 regulations, Louw and King point out.
Although the department and Solidarity also agreed that the contents of the settlement agreement would be gazetted as part of the 2023 Employment Equity regulations, Louw and King say it remains to be seen if the existing 2023 draft regulations will be withdrawn and reissued to incorporate the contents of the settlement agreement or if a second set of regulations will be published. Or will the 2018 draft regulations re-emerge?
Regardless of what happens, the agreement will affect designated employers. Louw and King say that designated employers can rely on the justifiable reasons for not complying with targets as recorded in the settlement agreement once the five-year implementation period for employment equity plans, which have been aligned to numerical targets, has lapsed despite the employer’s reasonable endeavours to meet its numerical goals fails.
“It is important to note that the five-year period may not start until the effective date of the Amendment Act is officially promulgated. Designated employers will then be able to challenge fines or penalties imposed on them if they do not comply with sector targets due to the justifiable reasons recorded in the settlement agreement.”
Louw and King say designated employers will also be able to incorporate the criteria when they prepare their employment equity plans.