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Sectoral targets under the Employment Equity Act draft regulations need more clarity – legal experts

Sectoral targets under the Employment Equity Act draft regulations need more clarity – legal experts

The recent publication of the draft regulations under the amended Employment Equity Act has stirred up some controversy in business circles. There is, however, still time for businesses to have their say.

Companies have until 12 June to submit their comments on the proposed national economic sectors and employment equity numerical targets under the Employment Equity Act (EEA). Companies that employ less than 50 employees are exempt from the targets, irrespective of turnover.

Economic sectors including agriculture, forestry and fishing; mining; manufacturing; construction; financial and insurance activities; transportation and storage; information and communication; water supply, sewerage, waste management and remediation activities; electricity, gas steam and air conditioning supply have been identified.

However, much is left to be desired in the published draft regulations. For example, what exactly falls under the “remediation activities” sector?

Melissa Cogger, a senior associate at law firm Bowmans, says one of the controversial amendments to the act concerns the minister’s power to determine sectoral numerical targets for designated employers.

“Currently, a designated employer’s employment equity plan must include numerical goals to achieve equitable representation of suitably qualified people from designated groups.  

“These numerical goals are a designated employer’s projection of what it will achieve in relation to its entire workforce at the end of its current employment equity plan. 

“Going forward, ‘goals’ and ‘targets’ rather than ‘quotas’ are applicable when a designated employer is considering the implementation of its employment equity plan,” she says.

The minister has proposed five-year sector targets in terms of population groups and gender for the four upper occupational levels (top management, senior management, professionally qualified and skilled) and for employees with disabilities. 

The proposed numerical targets for the various population groups (African, coloured, Indian and white) and genders must, where applicable, be proportional to the demographics of the economically active populations, whether national or provincial.  This has previously given rise to contention, which was ventilated before the Constitutional Court.

Imraan Mahomed, director of employment law practice at Cliffe Dekker Hofmeyr, says designated employers must choose one demographic – either national or provincial – and utilise the chosen demographics for the duration of the business’ employment equity plan, in line with the five-year sector targets.

However, much needs to be clarified. For example, what if a national company chooses to use provincial demographics, but its head office is in Johannesburg and senior management has chosen to live in KwaZulu-Natal and work remotely?

Employers must also implement the five-year numerical goals and annual targets set out for semi-skilled and unskilled levels in their EE plans, which are not covered by the sector targets, by utilising the same demographics of the Economically Active Population (EAP) that they have chosen, whether national or provincial. 

Mahomed warns that the implementation of the amendments to the EEA sharply raises the distinction between numerical targets and quotas. 

“Employers need to be alive to these distinctions because the former is lawful while the latter is unlawful. Our law provides that an EE plan may provide for preferential treatment and numerical goals, but not quotas. 

“The Constitutional Court has already made it clear that an EE plan must be properly formulated (and not simply a tick-box exercise) and it must be applied in a lawful manner by an employer,” he says.

The primary distinction between numerical goals/targets and quotas lies in the flexibility of the standard. 

Quotas amount to prohibited job reservation and this was jettisoned with apartheid. Numerical targets,  however, are intended to serve as flexible employment guidelines. 

The Constitutional Court has already stated that the Constitution does not take issue with EE plans that rigidly allocate positions along the lines of race and gender, provided that the EE plan provides for certain specific deviations or exclusions. 

So, an EE plan may be deviated from, based on the operational requirements of the employer or where a candidate has scarce skills. A designated employer need only provide for limited flexibility; that is, a deviation from its general application.

If the EE plan is “rigidly” implemented, this could render a validly formulated numerical target a prohibited quota. This means that an employer can be challenged on the basis that the target became a quota – which is unlawful. The minimum standard that must be applied when determining whether the implementation of numerical targets is valid is based on whether it is rational.

 “The EE plan can only be implemented for its lawful purpose and nothing else. Once it is rigidly applied, it can hardly be said to be a measure that is being used as one designed to achieve or promote the achievement of equality, which is the ultimate objective of affirmative action measures,” Mahomed says, adding that employers cannot blindly follow numerical targets without due regard for the purpose of the achievement of equality. 

“This is done by inflexibly appointing applicants in ‘dogmatic compliance’ with the numerical targets of the EE plan. This would render the targets quotas. We anticipate that this will become very contested terrain in affirmative action law in years to come,” he notes.

Cogger says companies wanting to do any business with the state will be required to submit a certificate from the Department of Employment and Labour confirming that they comply with the act and its objectives. 

“This necessarily entails compliance with the relevant sectoral targets unless there are reasonable grounds to justify a failure to meet the sectoral targets. It is likely that the implementation of sectoral targets and the inability to meet them will end up in the courts,” she says. DM

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  • Miles Japhet says:

    Creating Employment should be our sole focus. Accordingly we should appoint on merit which includes soft issues such as attitude. Creating successful teams is not about some fanciful attempt to mirror the country’s demographics, as if this is the path to being able to run a successful business.
    Politicians have no place in interfering in private businesses thereby increasing the difficulty of running a business. They are simply part of the problem of the flight of skills, loss of investment and loss of competitiveness in world markets – job losses have and will continue.

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