Author Topic: Concourt ruling could have huge impact on BBBEE  (Read 1284 times)

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Concourt ruling could have huge impact on BBBEE
« on: July 24, 2016, 01:37:56 PM »

The ConCourt judgment relating to a dispute between Solidarity and Correctional Services could set new targets, write Jonathan Goldberg and Grant Wilkinson.

Cape Town - Last Friday, the Constitutional Court handed down judgment in an application for leave to appeal against a decision of the Labour Appeal Court affecting how employment equity is applied across the country.

The decision of the Labour Appeal Court related to a dispute between Solidarity and the Department of Correctional Services about the validity of the department’s 2010-2014 Employment Equity Plan (2010 Employment Plan), as well as the department’s refusal to promote or employ certain employees.

The Employment Equity Plan contained targets based on the demographic profile of the national population issued by Statistics South Africa in 2005.

The department advertised certain vacant posts. Among those who applied were the 10 individual applicants in this case, who are members of Solidarity.

When most of them were recommended for appointment, the department refused to appoint them. This refusal was based on what they deemed to be an over-representation due to their utilisation of the national demographics.

The issue of utilising only national demographics has been a contentious issue for some time. Many view this as akin to seeking absolute quotas and is therefore in contravention of the constitution and the Employment Equity Act.

Solidarity referred an unfair labour practice and discrimination case due to, among other reasons, the targets contained in the 2010 Employment Plan being quotas rather than numerical targets.

The court rejected Solidarity’s contention that the targets contained in the 2010 Employment Plan were quotas. It found them to be numerical targets which were applied with flexibility.

The court concluded candidates from designated groups were also subject to the principle that an employer may refuse to appoint a candidate who falls within a category of persons who are already adequately represented at a particular occupational level.

Section 42 of the Employment Equity Act is of particular significance in this outcome.

This section holds that when assessing compliance the following factors, in addition to other sections, may be taken into account:

  • The extent to which the suitably qualified people from designated groups are equitably represented within each occupational level in relation to the demographic profile of the national and regional economically active population.
    Reasonable steps by a designated employer to train suitably qualified people from designated groups.
    Reasonable steps taken by a designated employer to implement an employment equity plan.
    The extent to which the designated employer has made progress in eliminating employment equity barriers that adversely affect people from designated groups.
    Reasonable steps taken by designated employers to appoint and improve suitably qualified people from designated groups.
    Any other prescribed factor.

Of significance, the court held the department had acted in breach of its obligations under section 42 of the Employment Equity Act in not taking into account the demographic profile of the regional and national economically active population, but simply using the demographic profile of the national population in assessing the level of representation of the various groups and in setting the numerical targets for its 2010 Employment Plan.

It held that the department used the incorrect benchmark, contrary to the Employment Equity Act.

This meant the department had no justification for using race and gender to refuse to appoint the individual applicants and that, therefore, the decisions not to appoint most of the individual applicants constituted acts of unfair discrimination.

The court made an order that the individual applicants who were denied appointment even though they had been recommended must be appointed to the relevant posts if those posts have not been filled or were filled but are presently vacant, and the appointment should be with retrospective effect to the dates when the individual applicants should have been appointed.

With regard to those individual applicants who had applied for the posts that remain filled to date, the court ordered that their remuneration should be placed at the level at which it would have been if they had been appointed to the posts and this should be with retrospective effect to the date when they would have been appointed had they not been denied appointment. Three of the individual applicants were unsuccessful in their appeal.

This outcome is a clear indication of the balancing act required to be performed by organisations when setting affirmative action targets. In national organisations, these targets must take into account not only the national demographics, but also the regional ones, which may prove challenging, particularly where there is a significant difference between the two.

The decision could also have a huge impact on Broad Based Black Economic Empowerment.

The new codes of good practice were issued in October 2013, and amended in May last year.

They require the application of demographics when determining BEE scores for senior, middle and junior management under the management control element and when determining points scored for a number of sub-elements under skills development.

There has been much discussion on which demographics to use. Must the national or provincial demographics be applied when determining black representation in the management categories, or in skills development?

The draft Verification Manual states at paragraph to Appendix 4 that a company can use provincial demographics if the “biggest portion of its employees are based in that province”. Otherwise we default to national demographics.

The elements where demographics impact scoring make up 24 points out of the 109 points available on a company’s BEE scorecard or 22 percent of the points. This is a significant portion of the scorecard.

Does this judgment by the Constitutional Court mean that national demographics cannot be applied for BEE purposes and that the Department of Trade and Industry must revisit the formulas used for management control and skills development?

Many companies have already had verifications performed under the amended codes of good practice and their BEE levels have all dropped substantially. What impact will this judgment have on such certificates as the basis for a significant portion of the scoring has been questioned?

Jonathan Goldberg is chief executive officer and Grant Wilkinson is an executive at Global Business Solutions.

The views expressed here are not necessarily those of Independent Media.
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