Employers will face consequences if the Employment Equity Amendment Bill is implemented, specifically that hard-coded sector targets will be enforced, together with fines for non-compliance. This is particularly relevant against the backdrop of the moratorium on hiring or promoting white persons allegedly imposed by Dischem.
The admirable purpose of the Employment Equity Amendment Bill (Bill) is transformation. However, the contents of the Bill, and its fast-approaching anticipated implementation date (September 2023), create practical considerations that have caused panic among employers and will require careful consideration.
In a nutshell, the Bill provides:
- that the Minister may set numerical targets for identified national economic sectors, for "ensuring the equitable representation of suitably qualified people from designated groups at all occupational levels in the workforce". Examples of national economic sectors for which the Minister will set targets are mining, financial services, agriculture and manufacturing;
- that employment equity targets, usually set in employers' employment equity plans, must comply with the sector targets set by the Minister; and
- consequences of non-compliance include that employers cannot do business with the State and may be liable for hefty fines.
The fines and penalties set out in Schedule 1 of the Employment Equity Act were negotiated at Nedlac within an existing framework of aspirational employment equity targets. These fines are unchanged in the proposed amendments to the Bill, even though the targets are now hard-coded and no longer aspirational. Because of this, employers who comply 99% with sector targets will be treated the same as employers who are 5% compliant.
Apart from the fines, non-compliance with sector targets will incur a declaration of non-compliance and an inability to do business with the State. This has severe financial and reputational consequences. The Bill does provide that employers may, after having been declared non-compliant, present justifiable reasons. This is cold comfort, because by then they will already have been declared non-compliant. There is no clear guidance yet on what will be accepted as justifiable reasons for non-compliance. The Draft Employment Equity Regulations (which we anticipate will be published together with the Bill) provides factors that may contribute to, and possibly justify, non-compliance with sector targets. These include whether the employer had insufficient recruitment and promotion opportunities, a lack of skills, or whether a transfer of business or transactions amounting to mergers and acquisitions impact the employer's transformation figures and goals.
Employers may, in a panic, react by implementing policies that may give rise to discrimination claims. A measured and considered approach is therefore required. Employers that operate in sectors where sector targets have been set are encouraged to consider whether or not such targets are achievable and if not, what their reasons for non-compliance will be. Employers may then, through their industry bodies, or on their own, engage with the office of the President and explain the practical difficulties they may encounter if the Bill is implemented in its current form. The President has the power to refer the Bill back to the National Assembly or to the Constitutional Court if he has reservations about its constitutionality. The current public debate, with representations from employers and industry bodies, may cause the Bill to be reconsidered by the President.
Webber Wentzel has participated in the public consultations on the Bill on behalf of various employers and is well placed to assist employers to take steps to address any difficulties in anticipation of the implementation of the Bill.
