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Labour-broking ban slammed

Farzana Rasool
By Farzana Rasool
Johannesburg, 17 Jan 2011

A report commissioned by the Department of Labour (DOL) and the Presidency shows some draft amendments to the labour Bills are unconstitutional.

The Democratic Alliance (DA) says it is of profound significance that the proposed legislation would place literally millions of jobs in jeopardy, would in all likelihood be unconstitutional, would have "serious de-stabilising effects in the labour market", and would result in "significant" other unintended consequences, as per the report.

Draft amendments to the Labour Relations Act (LRA), Basic Conditions of Employment Act and Employment Equity Act, and a new piece of proposed legislation - the Public Employment Services Bill - were published in the Government Gazette in December.

In September, a regulatory impact assessment (RIA) report of the amendments and new Bills was compiled by professors Paul Benjamin, Haroon Bhorat and Carlene van der Westhuizen, of the University of Cape Town.

Illegal ban

The proposed repeal of section 198 of the LRA, which regulates labour brokers, would effectively prohibit labour broking, according to the RIA report.

“A prominent risk is that this would violate the Constitution on two primary grounds.”

The report explains the first basis is that the proposal would violate the protected right to choose a trade, occupation or profession freely.

The second ground is that definitional changes would significantly narrow the scope of who qualifies to be an employee under labour law.

“This would not only violate the right to fair labour practices and place SA in breach of international obligations, but also have serious de-stabilising effects in the labour market,” concludes the report.

Unemployment spike

The report also says the repeal of section 198 will see that labour broker clients (employers) have to directly employ workers, incurring administrative and other costs.

The risk is that employers will not be willing to incur this cost and those formerly employed through labour brokers will lose their jobs.

“Thus, while permanent employment may increase in response to the repeal of section 198, it is a fair assumption that total employment will decline.

“This will not only contribute to increased levels of unemployment in the country, but also deprive the households attached to these workers of a valuable source of wage income,” says the report.

This provision of the proposed legislation would also have the unintended consequence of prohibitively increasing the number of cases referred to the CCMA, labour courts and civil courts, which the report concludes would potentially have "significant budgetary implications", that at present have not been addressed, adds DA shadow minister of labour Ian Ollis.

Small plus

The RIA report says enforcing permanent jobs for all workers will increase the cost of doing business for employers.

The increased cost is due to medical aid and pension fund contributions, and the conversion of temporary contracts to permanent ones.

The condition will also see a portion of the 2.13 million workers, who are currently classified as temporary, out of jobs since some employers will choose not to offer them permanent employment due to increased cost, according to the report.

“The report concludes that the Bills would, therefore, almost certainly exacerbate SA's unemployment crisis,” says Ollis.

However, the report also says the amendment will improve job security for those workers who do become permanently employed.

“The fact that the very report commissioned by the Department of Labour to adjudge the effect of these proposed laws has found that they will cause enormous damage to the South African economy, is of manifest significance,” says Ollis.

“The report makes it abundantly clear that the proposed laws cannot proceed in their present form, and that a number of problematic provisions must be scrapped, if we are to avoid further exacerbating SA's unemployment crisis.”

Union standpoint

Trade union United Association of SA (UASA) agrees, saying the proposed changes to the LRA may hurt thousands of workers.

“A great number of workers could end up disenfranchised if the latest proposed amendments to the LRA are accepted in their present form.”

Leon Grobler, COO of UASA and chief negotiator of the Federation of Unions of SA at Nedlac on the amendments, says drastic changes to the amendments are necessary.

UASA believes the proposed amendments have not been thought through properly and could have a very negative impact on workers in SA.

Labour broking still has a role in SA and banning the practice would deal a blow to the jobless, said the Unemployed People's Party (UPP), according to media reports.

"If [Congress of South African Trade Unions] Cosatu were to prepare for a 'mother of all battles in 2011', then the unemployed would have to prepare for the 'father of all battles' in response," said UPP general-secretary Malcolm Gema, commenting on a statement by Cosatu, which is for the ban of labour broking.

Cosatu previously said labour broking is a new form of slavery and needs to be banned completely.

Gema encouraged alternatives to a ban, like greater regulation of the industry.