MAKING EQUAL TREATMENT WORK FOR YOUR BUSINESS -presented by- Jonathan Goldberg
2 Agenda Background Amendments Requirements Risks Opportunities Business Case EQT System
3 Background The Employment Equity Act, introduced in 1998 prohibited unfair discrimination in all employment policies and practices, seeking to address inequalities of the past. Section 27 (Income differentials) required employers to progressively reduce disproportionate income differentials subject to guidance as may be given by the Minister. Disproportionate was not defined, but the popular interpretation was to close the Apartheid Wage Gap, in our opinion an inadequate or incomplete definition.
4 Employment Equity Amendment Act Labour Relations Amendment Act Effective 1 August 2014 Effective 1 January 2015 Prequalification: None Wording: Race, sex, gender or any arbitrary ground in terms and conditions of same employer performing the same work or work of equal value based directly or indirectly on race, sex, gender or any arbitrary ground is unfair discrimination Prequalification: Less than R205 433 Three months Wording: Equal treatment on the whole to performing the same or similar work unless there is a justifiable reason Justifications: Fair and rational application: Seniority or length of service Qualifications, ability and competence Performance, quality or quantity Demotion Temporary position experience Shortage of skill Market value Any other factor that is not race, sex, gender or any arbitrary ground Justifications: Systems application: Seniority Experience Length of service Merit Quality and quantity of work Any other criteria of similar nature
5 Employment Equity Amendment Act Section 6 of the principal Act is hereby amended by: (a) the substitution for sub-section (1) of the following sub-section (1) No person may unfairly discriminate, directly or indirectly, against an employee, in any employment policy or practice, on one or more grounds, including race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language, and birth or on any other arbitrary ground.
6 Employment Equity Amendment Act (b) the addition of the following subsections (4) A difference in terms and conditions of employment between employees of the same employer performing the same or substantially the same work or work of equal value that is directly or indirectly based on any one or more of the grounds listed in subsection (1) is unfair discrimination. Comment: Not unfair to discriminate on (1) Inherent requirements of the job and (2) Affirmative action implemented as per chapter 3 of the EEA.
7 Employment Equity Amendment Act Section 10 of the Principal Act is hereby amended: (a) the substitution for subsection (6) of the following subsection (6) If the dispute remains unresolved after conciliation (a) any party to the dispute may refer it to the Labour Court for adjudication; or (aa) an employee may refer the dispute to the CCMA for arbitration if (i) the employee alleges unfair discrimination on the grounds of sexual harassment; or (ii) in any other case, that employee earns less than the amount stated by the Minister in terms of section 6(3) of the Basic Conditions of Employment Act; or
8 Section 6(4) Unpacked Employment Policy or Practice Section 6(1) prohibits unfair discrimination in any employment policy or practice recruitment procedures, advertising and selection criteria; appointments and the appointment process; job classification and grading; remuneration, employment benefits, and terms and conditions; the working environment and facilities; performance evaluation systems; promotion;
9 Section 6(4) Unpacked transfer; demotion; disciplinary measures other than dismissal; dismissal; 6(4) is not only remuneration it is all benefits as well. PERFORMING THE SAME WORK Work not identical or interchangeable BUT Sufficiently similar So that they can reasonably be considered to be the same Objective assessment of actual duties and responsibilities
10 Employment Equity Act Amendment (b) by the substitution in subsection (6) for paragraph (b) of the following paragraph: (b) any party to the dispute may refer the dispute to the CCMA for arbitration if all the parties to the dispute may consent to arbitration of the dispute. and (c) the addition of the following subsection (8) A person affected by an award made by a commissioner of the CCMA pursuant to a dispute contemplated in subsection (6)(aA) may appeal to the Labour Court against the award within 14 days shown, may extend the period in which a person may appeal. Comment: Easier access to the CCMA and Bargaining Councils. The full appeal, not review.
11 Employment Equity Act Amendment Section 11 of the Principal Act is hereby substituted with the following section: Burden of proof (1) If unfair discrimination is alleged on a ground listed in section 6(1), the employer against whom the allegation is made must prove, on a balance of probabilities, that such discrimination (a) did not take place as alleged; or (b) is rational and is not unfair or is otherwise justifiable. (2) If unfair discrimination is alleged on an arbitrary ground, the complainant must prove, on a balance of probabilities, that:
12 Employment Equity Act Amendment (a) the conduct complained of is not rational; (b) the conduct complained of amounts to discrimination; and (c) the discrimination is unfair. Comment: Let s debate this one
13 Amendments The 2014 Amendment Act changed s27 to read: Income Differentials and Discrimination by virtue of a difference in terms and conditions of employment contemplated in terms of section 6 (4).. and.. received in each occupational level of an employer s workforce.
14 Amendments The 3 key focus areas of the amendments to Section 6 of the Act are: 1. Discrimination is prohibited on any listed or arbitrary ground 2. Equal work is explained as. employees of the same employer doing work of the same or substantially the same value. 3. The criteria and methodology for assessing work of equal value may be prescribed by the Minister. The greatest risk to employers is how employees and /or trade unions will interpret the law.
15 Requirements The core requirements of the amended EEA Regulations are: 1. Jobs must be objectively assessed. 2. Differentiation is allowed on rational grounds 3. Any evaluation criteria must be applied in a proportionate manner. Whilst the EEA Regulations do mention a number of criteria that should be considered in the assessment of jobs, the primary focus of the EEA is for Occupational Levels [OLs] differentiation.
16 Occupational levels D I F F E R E N T I A L Range of job COMPARATIVE Range of job RELATIVE WORTH
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18 CODES OF GOOD PRACTICE ISSUED BY DEPARTMENT OF LABOUR
19 Comparing apples with apples According to the legislation and the Code, determining equity should be done utilising three key elements, as outlined in section 4.4 of the Code. 4.4. When examining whether the obligation to apply pay /remuneration equity in the workplace is being complied with, three key issues require scrutiny- 4.4.1. Are the jobs that are being compared the same, substantially the same or of equal value in terms of an objective assessment? 4.4.2. Is there a difference in the terms and conditions of employment, including pay/remuneration, of the employees in the jobs that are being compared? 4.4.3. If there are differences in the terms and conditions of employment, can these be justified on fair and rational grounds?
20 Determining the value of a job The basic criteria commonly used to evaluate the value of a job, as indicated in section 5.4 of the Code, include: The responsibility demanded of the work, including responsibility for people, finances and material. The skills, qualifications, including prior learning and experience required to perform the work, whether formal or informal. Physical, mental and emotional effort required to perform the work. The assessment of working conditions may include an assessment of the physical environment, psychological conditions, time when and geographic location where the work is performed.
21 Assessing equality Section 8 of the Code provides guidance on the process to be followed in assessing and managing compliance with Equal Pay for Work of Equal Value. Factors provided within the Code, that should be considered when embarking on an analysis, include: utilise a job evaluation and/or grading system that is fair and transparent; select a method of comparing pay/remuneration, both in money and kind, in the relevant jobs: this can be done by using either the average or the median earning of employees in the relevant jobs as the basis for pay/remuneration comparisons or by using another method that will compare pay /remuneration in a fair and rational manner; where differentiation is found not to be justifiable, determine how to address inequalities identified, without reducing the pay/remuneration of employees to bring about equal remuneration; and monitor and review the process annually.
22 Given : Employment Equity Act : Form EEA9 Framework Numerical Filter 6 5 4 3 2 1
23 Employment Equity Act : Form EEA4 Income Differentials Numerical Filter 6 5 4 3 2 1
Numerical Filter Case Study : Form EEA4 Income Differential Submission Summary 24 From Payroll Data From Payroll Data Maximum divided by Minimum Ranges too large many risks Total divided by Number
25 Case Study : Form EEA4 Income Differential Submission : Structure Mapping to Equal Pay EPEW = Equal Pay Filter to be created by the system Purpose to minimise organisational disruption
26 Case Study : Form EEA4 Income Differential Submission : Structure Aligned to Equal Pay Defendable ranges unique to each organisation
27 BUSINESS IMPACT WHAT YOU NEED TO CONSIDER
28 Risks Increased wage cost Complex benefit administration Subjectivity One size fits all approach Noncompliance
29 Opportunities Redress outdated practices Align cost with productivity Compliance (defendable) Customised Pay Structure & Work Definition for your unique business requirements
30 OUR PHILOSOPHY YOUR UNIQUE OPERATIONAL REQUIREMENTS
31 Business case The Equal Treatment principle provides an opportunity to simplify the process back to the origins of formal employment, i.e. the VALUE EXCHANGE EQUATION Reward for Contribution Pay Cost Results
32 Equal Pay for WORK of Equal Value.
EQUAL TREATMENT DIAGNOSIS 33
34 Diagnosis & assessment tool Initial Consultation Client provides payroll /EEA9 data Base Report identifies potential risk Anomalies identified for further consultation Final Report with risk mitigation & corrective action Policy Development Work (job) Profiling Legal assistance Education/Awareness Implementing Corrective Recommendations the Action
35 Equal Pay for Work of Equal Value is not an end-game rather it s the opportunity for employers to start afresh, re-aligning cost with value creation.
UNFAIR DISCRIMINATION 36
37 The Logical Test Mbana v Shepstone & Wylie 2015 (6) BCLR 693 (CC) (7 May 2015) The Court described the prohibition of unfair discrimination in the EEA as being akin (thus not identical) to that in section 9 of the Constitution. The Court then explained the test for unfair discrimination in terms of the EEA as follows: 1. The first step is to establish whether the employer s policy differentiates between people.; 2. The second step entails establishing whether that differentiation amounts to discrimination. 3. The third step involves determining whether the discrimination is unfair. If the discrimination is based on any of the listed grounds in section 9 of the Constitution, it is presumed to be unfair. It must be noted, however, that once an allegation of unfair discrimination based on any of the listed grounds in section 6 of the EEA is made, section 11 of the EEA places the burden of proof on the employer to prove that such discrimination did not take place or that it is justified.
The Logical Test Section11 now requires the employer to prove that alleged discrimination did not take place or is rational and not unfair, or is otherwise justifiable. In the context of Convention 111 this must mean that alleged discrimination will pass muster only if it did not really affect the complainant adversely for example, being dealt with in terms of standard policies or, if it did, it was based on a reason other than a prohibited ground of discrimination (such as an inherent requirement of that job). This is also what the final Explanatory Memorandum to the Amendment Act tells us. It says that section 6 was amended to clarify that discrimination is not permitted, either on a ground listed in the section or on any other arbitrary ground 38
Arbitrary Discrimination 39 Ndela & others v Philani Mega Spar (2016) 37 ILJ 227 CCMA (17 March 2015) The employer offered a provident fund, which included savings, retirement, funeral and disability schemes, to all employees who had completed five years service. Certain employees who had less than five years service contended that this conduct was arbitrary and constituted unfair discrimination in terms of s 6 of the Employment Equity Act 55 of 1998. A CCMA Commissioner agreed with the employees, finding that there was no objective basis for the cut-off period of five years. The differentiation was arbitrary and lacking in logic and constituted unfair discrimination. The employer was ordered to extend the benefit to all employees.
40 Equal Pay The Arbitration WAR obo Members v Pioneer Foods (Pty) Ltd (WECT 2035-15) 3 August 2015 FAWU had entered into a collective agreement to deal with changes to the Labour Relations Act with specific reference to the employment of temporary employment service employees. The collective agreement stipulated that employees who were previously employed via a temporary employment service would be offered permanent employment with the employer. The employees subsequently lodged an equal pay for equal work dispute on the basis that they were being paid at 80% ratio of the grade of driver/salesperson position. In terms of the collective agreement the 80% ratio would apply to new entrants for the first two years where after remuneration would go to 100% ratio. The dispute was one of unfair discrimination (EEA): equal pay for work of equal value. The primary issue to be decided was whether the difference in remuneration can be justified on fair and rational grounds, and the CCMA found that it could not. It ruled that the lower payment amounted to unfair discrimination and that the decision to pay the employees 20% less than the rate prescribed for the particular grade was in conflict with the requirements of equal pay for equal work.
Equal Pay The Arbitration The employer contended that it is entitled to consider length of service in justifying the 80% ratio. Whilst length of service is a recognised ground for justifying difference in remuneration, the facts in this matter require further scrutiny. The Commissioner ruled that the employer s argument ignored the fact that the employees worked via the temporary employment service for several years and that although this was not a dispute in terms of section 198A of the LRA, it was necessary to consider the intention of this provision. The employees were entitled to the difference in remuneration received, and the amount they should have received had the unfair discrimination not taken place. Calculated the amount for the period 1 November to 1 August 2015 in respect of each employee to be R16 509.60 (sixteen thousand five hundred and nine rand sixty cents.) 41 Comment: It is our opinion that both these cases are incorrect, and we are thus satisfied with the outcome of the Appeal (discussed on the next slide) that followed in the Labour Court:
Equal Pay The Review Pioneer Foods (Pty) Ltd v Workers Against Regression (WAR) and Others (C687/15) [2016] ZALCCT 14 (19 April 2016) The Court found that the award would have the startling implication of it being impermissible for employers to pay employees as agreed to in collective agreements, differentiating based on length of service. The award was thus set aside. It found that differences in pay based on length of service is a classic example of where the ground for differentiation on is rational and legitimate; and definitely not arbitrary It went on to find that the Commissioner was incorrect in referring to section 198 of the Labour Relations Act, as this case was brought in terms of the Employment Equity Act. The purpose of Section 198 should not have influenced his ruling in this matter. The Court did not agree that the employer s failure to take into account their years of service served under the TES, was unfair. It was not irrational or unfair to not make exceptions to the 80% / 20% policy when it came to former TES employees. There is nothing arbitrary about the uniform application of a rule which sets different pay levels for employees with varying lengths of service as employees of the employer concerned. 42
43 MODELS What are employers doing? FIXED TERM CONTRACT OR TES LRA DEEMED AFTER X MONTHS LIABILITY TRANSFER OF DEEMED TO TES EQUAL TREATMENT PROTECTION COVERED 1 Business risk Yes Yes Yes Yes 2 Training pool Yes Yes Yes Yes 3 Combo 1 + 2 above 4 Freeze category 5 Outsource category 6 Functional category Yes Yes Yes Yes Yes could be element Yes could be element Not necessary Yes Yes Yes Yes Yes Yes Not necessary Not necessary Not necessary
44 Employment Equity Amendment Act Labour Relations Amendment Act Effective 1 August 2014 Effective 1 January 2015 Prequalification: None Wording: Race, sex, gender or any arbitrary ground in terms and conditions of same employer performing the same work or work of equal value based directly or indirectly on race, sex, gender or any arbitrary ground is unfair discrimination Prequalification: Less than R205 433 Three months Wording: Equal treatment on the whole to performing the same or similar work unless there is a justifiable reason Justifications: Fair and rational application: Seniority or length of service Qualifications, ability and competence Performance, quality or quantity Demotion Temporary position experience Shortage of skill Market value Any other factor that is not race, sex, gender or any arbitrary ground Justifications: Systems application: Seniority Experience Length of service Merit Quality and quantity of work Any other criteria of similar nature
45 Retrenching to Equalise SACCAWU obo Moeng & Others / Woolworths (Pty) Ltd (LC) April 2016 The issue for determination in this matter is whether the dismissal of the employees for operational reasons by the employer was automatically or substantively and procedurally unfair. In 2012, the Woolworths workforce was comprised of about 16 400 flexi-timers and 590 fulltimers, about 3.5% of the workforce, throughout its 200 stores. Woolworths sought to convert the remaining 590 full-timers to flexi-timers to standardised terms and conditions of employment. At the conclusion on the voluntary phase on 4 September 2012, out of 590 full-timers, 413 accepted one of the voluntary options and 177 rejected the offers. Woolworths, proceeded with the section 189A phase. During the section 189A phase, 85 of 177 full-timers accepted one of the voluntary options.
46 Retrenching to Equalise The issue that arises in this matter is whether Woolworths decision to dismiss employees for operational requirements in order to eliminate discrimination based on pay inequity was operationally justifiable. The Judge concluded that the employers could still maintain a different reward system for fulltimers and part-timers if they had a justifiable reason for different treatment. As to what constitutes justifiable reasons, the answer is found in the EEA Regulations. It is also patent that the pay inequity that arose as result of implementing flexi-time contracts could have been easily justified in terms of Regulation 7(1)(a) since the full-timers had longer service period than the flexi-timers. In essence, this Regulation gives credence to SACCAWU s submissions that it was unfair to dismiss long serving employees when there were realistic alternatives in a form of natural attrition and/or a wage freeze for full-timers.
47 Retrenching to Equalise Even if there are instances where differentiation is found not to be justifiable, employers would have to develop plans to address inequalities identified and, pertinently, without reducing the pay or remuneration of affected employees in order to bring about pay equity. The dismissal of the employees was substantively and procedurally unfair. Woolworths was ordered to reinstate the employees retrospectively from date of their dismissal without loss of pay.
QUESTIONS 52
49 THANK YOU! Regards, Johnny 083 281 9571 johnny@iafrica.com
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