High earners to lose legal protections?

Another major change to our employment law is on the way via a new section 188B to be added to the Labour Relations Act.

At present, all employees have recourse to the CCMA (or a bargaining council or private arbitration) and the Labour Court if they are dismissed and feel that the reason behind it or the procedure followed was not fair.

New section 188B will effectively strip employees earning above a certain amount – still to be determined by the Minister of Labour – of the right to challenge the fairness of their dismissals in the vast majority of cases. Provided the employer gives the employee three months’ written notice of his or her dismissal (or longer if required by their employment contract) or pays out the equivalent salary instead of notice, and the dismissal is not for an automatically unfair reason, the dismissal will be regarded by the law as fair (regardless of what the actual circumstances might be).

A dismissal is automatically unfair if it is motivated by reasons such as:

  • Retaliation for exercising a legal right from the LRA, including participation in a lawful strike, or for whistle-blowing;
  • Arbitrary grounds such as the employee’s race, gender, religion, age, ethnicity, sexual orientation or identity, pregnancy and so on;

unless it can be justified due to an essential requirement of the employee’s job or a normal or agreed retirement age.

Once the amendment has been signed into law, the exclusion will apply to all new employment contracts entered into (where the earnings exceed the threshold). Two years later it will also apply to all pre-existing employment contracts.

Employees who lose their rights of recourse due to this amendment will still have the option of enforcing any contractual obligations of the employer through the civil courts. They will have to show that the employer has acted unlawfully with reference to their agreement, rather than unfairly. Affected employees will be well-advised to participate actively in the negotiation and drafting of their employment contracts, in order to retain their rights to the greatest extent possible.

It remains to be seen where the threshold will be set. Until there is clarity in this regard, it is a matter of grave concern that many employees may be stripped of protections which they have come to regard as their basic right. When setting the threshold, the Minister will be required to consult NEDLAC and to consider the extent to which those employees “by reason of their earnings level, level of skill or position” have the bargaining power to ensure that their contracts of employment protect them adequately against unfair dismissal.

Fixed term employment contracts – new law!

The Labour Relations Act will soon be amended to change the law on fixed term employment (meaning for example employment “for one month”, “until X returns from maternity leave”, or “until we complete project Y”).

 1. The amended Act will impose new requirements when an employer employs a person on a fixed term contract, and will restrict their right to do so for
 longer than six months in total.
2. An employer must make an offer of fixed term work in writing, and must state in writing the reason for the offer being for a fixed term only.
3. Fixed term employment may only exceed six months in total if the work itself is of a limited or definite duration, or if the employer can show any other good reason (the amended Act gives a number of examples which will be accepted as good reasons). Failing this, the employment will be deemed to be indefinite, regardless of what the contract might say, and the employer will have to retain the employee in employment or follow fair procedures to dismiss the employee for a fair reason.
4. Where fixed term employment beyond a total of 24 months is justified (instead of indefinite employment), the employee will be entitled to severance pay from the employer, similar to a retrenched employee, when the work comes to an end – unless the employer offers the employee another job, or secures one for him or her.5. The amended provisions will not apply where the employee’s annual salary is over R172 000,00, or where the employer is a small one with fewer than 10 employees, or where the employer is a new, sole business of less than two years’ standing with fewer than 50 employees. (The last provision is intended to prevent employers from circumventing the law by artificially slicing up businesses or reintroducing old businesses in new forms.)

The new provisions will hopefully put an end to abusive practices whereby employers have denied staff job security for no good reason, and avoided meeting their legal obligations to dismiss employees fairly. The legislature has sought to strike a balance, however, by allowing short-term flexibility and by making exceptions for small and new businesses and high-earning employees.

This is not the only major development on the cards in employment law – more updates still to come with deal with other changes in the pipeline affecting both employees and employers.