Dear Valued Client,
As the year draws to a close, and before we all head to the coast, light the braai coals, or enjoy some quiet time at home with loved ones, we’d like to take a moment to express our gratitude for your support and collaboration throughout 2024. It’s been a pleasure working together, and we’re excited about the opportunities the new year holds.
With that said, herewith some final notes from our Technical Helpdesk for 2024:
Constitutionality of the Employment Equity Amendment Act:
On 12 November 2024, The Minister of Employment and Labour, Ms. Nomakhosazana Meth, signed the Employment Equity Amendment Act, 2022 (The Act) into force with effect from 1 January 2025. Practically, this means “In the next 2025 EE reporting cycle starting on 1 September 2025, employers will have to use the published EE amended legislation to submit their EE reports”, as per the Minister.
The B-BBEE Verification Manual sets compliance to the provisions of the Act as a pre-requisite for the B-BBEE verification of the Management Control element. Understanding of and compliance with the Act is therefore crucial to maintain a Measured Entity’s B-BBEE Level. While cautiously welcomed for its relaxation of the Designated Employer definition and resulting reduction in administrative burden on SMMEs, the legality of some of its provisions were questioned as it was viewed to setting ‘inflexible quotas’. As discussed below, this is however not the case.
The Act was previously assented to by the President and gazetted on 14 April 2023.
Amendments to the Act follows a report from the Commission for Employment Equity, including the following finding:
‘The purpose of the Employment Equity Act is to align your employee profile to the Economically Active Population (EAP) demographics. According to the CEE, employers only use the EAP distribution as a long-term benchmark for the setting of self-imposed targets, there is no short to medium term benchmarks for the setting of numerical targets and goals. It became evident during the Director General’s review that most employers used the self-regulated targets as a shield to circumvent the law by setting low targets as there are no visible incentives or sanctions for not complying with the intentions of the law.’
The Act introduces several changes to the Employment Equity Act of 1998, some more contentious than others. These changes include the following:
Amendment to the definition of “Designated Employer”:
Designated Employers are now defined only by the number of employees, doing away with the annual turnover measurement. This means that Employers with less than 50 employees will no longer be required to implement affirmative action measures in terms of the Act and are thus exempt from Employment Equity Reporting requirements. Non-designated employers also may no longer voluntarily submit such reports as if they were designated.
Amendment to the definition of “People with Disabilities”:
The definition was updated to align with the definition in the United Nations Convention on the Rights of Persons with Disabilities (2007).
Sectoral targets:
One of the more contentious amendments. The new section 15A of the act allows the minister of labour to identify specific economic sectors and to set numerical employment equity targets for these sectors at all occupational levels in the workforce. Previously, an employer was free to set its own targets, provided that it makes reasonable progress to correct the effects of past and ongoing discrimination in the employment space. Designated employers in these sectors are now required to use the sectoral targets set by the minister in their employment equity plans, and their progress will in part be assessed based on these gazetted targets. Designated Employers must follow either the national targets or the targets set for their province, it thus effectively becomes a ‘minimum’ target but not a quota.
The Minister published draft regulations on 1 February 2024 to cater for the sectoral targets, we however still awaiting the final, legally binding gazette.
Numerical targets:
Section 20 was amended and the numerical targets previously left to the discretion of the Designated Employer must now comply with the sectoral targets set for their specific industry. The sectoral targets published by the Minister in practice therefore becomes minimum numerical targets.
Powers of the Director-General:
Section 42 empowers the director-general of the Department of Labour to assess whether a designated employer is implementing employment equity in compliance with the act by considering a wide range of factors which now determines “whether the employer has complied with a sectoral target as set out in terms of section 15A” of the act. It is however one of several factors to consider including the demographic profile of the reason, pool of suitably qualified candidates from designated groups, present and anticipated economic circumstances of the employer, etc. Even if the DG determines that an employer had failed to implement an employment equity plan because it had not met the sectoral targets, in terms of section 45 of the act, the DG will have to approach the Labour Court for an order directing the employer to comply with the request or recommendation; or to impose a fine. This legal principle was established in the 2009 Labour Court judgment in Director General of the Department of Labour v Comair, where the court concluded that the DG had failed to take into consideration all the factors set out in section 42 of the Act, and dismissed the application.
Certificate of Compliance:
Section 53 was amended to the following:
Section 53 of the principal Act is hereby amended by the addition of the following subsection: ‘‘(6) The Minister may only issue a certificate in terms of subsection (2) if the Minister is satisfied that— (a) the employer has complied with a numerical target set in terms of section 15A that applies to that employer; (b) in respect of any target with which the employer has not complied, the employer has raised a reasonable ground to justify its failure to comply, as contemplated by section 42(4); (c) the employer has submitted a report in terms of section 21; (d) there has been no finding by the CCMA or a court within the previous 12 months that the employer breached the prohibition on unfair discrimination in Chapter 2; and (e) the CCMA has not issued an award against the employer in the previous 12 months for failing to pay the minimum wage in terms of the National Minimum Wage Act, 2018 ).’’.
While 12(a) isolates the numerical targets in terms of 15A, it does not set a quota. This is as the wording speaks of ‘complied with’ and not ‘met’.
This is evident from 12(b) ‘in respect of any target’. A Designated Employer who does not comply with a numerical target set in terms of Section 15A could potentially still be deemed compliant if said employer raised a reasonable ground to justify its failure to comply.
Measured Entities are encouraged to familiarise themselves with the content of the Act. Should you have any questions or concerns with regards to its impact on B-BBEE Measurement, do reach out to us for assistance.
We hope you have time to relax, recharge, and make wonderful memories this festive season.
Please note that our office will close at 12 pm on Wednesday, 20 December, and we will reopen on Monday, 8 January 2025.
