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Huge fines for firms flouting transformation

Jul 15 2012 18:00
Dewald van Rensburg

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Johannesburg – Business people could pay an enormous price if they do not strictly observe provisions regarding affirmative action.

Businesses could be fined up to 10% of their turnover, which in the case of major companies could run into millions.

Attempts at Nedlac to reach a compromise about proposed radical amendments to the Employment Equity Act came to naught and the next step is to take them through the parliamentary process.

The proposed amendments appear to be so radical that the business sector will have them tested in court if they remain unchanged by the parliamentary process.

Should the proposals be accepted, not only could considerably larger fines be levied but they would also make it much easier for government to impose them.

The 1998 Employment Equity Act prescribes relatively small fines of between R500 000 and a maximum of R900 000.

The new fines being proposed follow the model of competition legislation and are linked to companies' turnover.

They range from 2% of a company's annual turnover to 10% for repeated violations and could cost a large employer millions.

Current penalty provisions, which have been in place for 14 years, have in practice almost never been imposed on transgressors. Since 1998 at most “five or six” fines have been levied, said a person close to the Nedlac negotiations.

With the new proposed changes the department of labour is trying to remove obstacles that have made it difficult to fine transgressors.

It is proposed that the system of review and appeals be dispensed with and that the director general of labour be able to drag offenders straight to the labour court.

This will prevent review mechanisms being employed to hold up the fine-paying process, the department said in a memorandum.

The proposed fines are largely in line with those outlined at the end of 2011 in the black empowerment bill for companies using fronts to claim that they are empowered.

Not only are fines of up to 10% envisioned, but also imprisonment of up to 10 years for people who lie about their company’s empowerment status.

Fines are not the only worrisome proposed amendments.

Sake24 understands the suggestion that demographic representation (and thus affirmative targets) should no longer reflect the profile of the region’s economically active population but that of the country as a whole has also survived the Nedlac process.

This provision harks back to government spokesperson Jimmy Manyi’s infamous remark that the Western Cape has an over-concentration of coloured people, and the implication that people should migrate so that every region in the country should reflect its overall racial divisions.

A provision such as this could have serious consequences, especially for the Western Cape, the province most at out of step with the national demographic pattern.

The Employment Equity Act covers only “designated employers” - those employing more than 50 people.

Fines can be levied firstly if such companies neglect to draw up the required affirmative action plans. A labour inspector could request a copy of this plan at any time.

Employers could also be fined if they fail to submit the required annual report on their progress in terms of affirmative action. Currently businesses with fewer than 150 workers need to submit this report only every two years.

It is proposed that this provision should be scrapped because the department’s online system facilitates the process.

The department’s director general can also review employers’ compliance with the act.

The employer must cooperate and provide any document requested. Should he fail to do so, or disregard the director general’s recommendations after the review, he could also be fined.

 - Sake24

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