How do organisations steer clear of unfair discrimination with the amended EE Act?
Employment Equity Update:
How do organisations steer clear of unfair discrimination with the amended EE Act on equal pay for equal work or work of equal value?
James has been working as Marketing Manager for a company for the last 19 years and has been a reasonable performer. Pay increases in his company were based on tenure and performance ratings. The organisation also went through an organisational restructuring a few years ago and James continued to receive his remuneration package, even though his job has been downgraded in the process. Susan joined the company 5 years ago in a similar position and grade level. She accidentally became privy to some remuneration information of the organisation and discovered that she earns 50% less than James. She now alleges that she is not being remunerated fairly in comparison with her male counterparts. Susan refers a dispute to the Commission for Conciliation, Mediation and Arbitration (“CCMA”) alleging unfair discrimination in terms of the Employment Equity Act, 1998 (“EEA”), as amended.
What does the law say?
There is a constitutional commitment to substantive equality within the South African law, which includes equal pay. Discriminatory pay practices would have fallen foul of the Employment Equity Act, 1998 in its past form. Our courts indeed have already dealt with pay equity claims in the pastii. However, recent amendments to the EEAiii - that became effective 1 August 2014 – have brought the issue home. These changes in our local laws follow the example of various international conventions, charters and other in-country laws on discrimination and equal remuneration. The amendments are supported by Regulationsiv to facilitate its implementation.
Section 6(1) of the EEA (as amended) reads that “no person may unfairly discriminate, directly or indirectly, against any employee (including a job applicant) in any employment policy or practice on one or more grounds, including race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language, and birth or on any other
Differentiation based on any of the listed grounds are fair if: it links to the ability of the person to fulfill the inherent requirements of the job; or it is in line with structured affirmative action measures taken in compliance with the EEA.
The newly introduced section 6(4) reads as follows: “A difference in terms and
conditions of employment between employees of the same employer performing
the same or substantially the same work or work of equal value, that is directly or
indirectly based on any one or more of the grounds listed in subsection (1), is
unfair discrimination”. According to the wording of the Act any difference may
form the basis for a claim. The possible discrimination is not limited to Susan’s
cash salary or her total cost of employment package, but could relate to any term
and condition of her employment. The organisation or its representatives do not
need to have an intent to discriminate, to fall foul of the law.
The provisions of the Act cover the following circumstances:
Where persons perform the same work meaning the jobs are identical or interchangeable;
Where persons perform substantially the same work meaning the work is sufficiently similar so that they can reasonably be considered to be the same;
Where persons do work of equal value meaning value in terms of the demands of the jobs, such as ‘effort, skill and decision’. (These are not the only demands that should be looked at to determine equal value.)
Why be concerned?
Failure by an organisation to comply with fair pay practices can have various
Having an aggrieved, unproductive or disengaged workforce;
Becoming embroiled in unfair discrimination litigation with its resultant
costs, inconvenience and risks (like in Susan’s case);
Becoming involved in possible class actions, for example, where a union acts on behalf of a group of its members;
Having the organisation’s social reputation tarnished;
What are employers to do?
What is clear is that organisations – big and small – going forward will seriously have to consider their job evaluation practices, job grading and how these link to pay scales as well as the pay philosophy that underpins pay decisions and differentiation, if any. Critical will be the focus on duties actually performed by employees in comparison with others, and not on a job title or an inaccurate job description that has not been updated for years. Interesting questions arise specifically in the sphere of equal pay for work of equal value: First, is the work of
equal value? Organisations will have to show how work is defined and evaluated internally to ensure work of equal value is graded and linked to pay structures in an equitable way. Second, if there are differences in pay, organisations will have to show on what basis they differentiate which should be clearly defined in their Reward Philosophy and be backed by sound supporting practices. Some justifications could include performance, skills, scarcity factors, and competencies to mention a few or a combination of factors.
It is foreseen that mere tenure can no longer be the basis for differences in pay.
When organisational restructuring occurs, pay equity principles will also need to be considered. One cannot have a situation where a person continues receiving the same remuneration if downgraded to another job as part of a restructuring. Transitional arrangements can be provided for, but the employer cannot afford that long-standing inequalities are created through a restructuring exercise. The scenario above may indeed pose a potential problem to the company if they do not have a properly defined philosophy and strategy in place to deal with the inequities.
How will the dispute be resolved?
The CCMA will first attempt to settle the matter through conciliation. If this fails different options present itself: Either the matter will proceed for adjudication to the Labour Court. Alternatively, Susan (if she earns less than a prescribed threshold) can decide to continue with arbitration at the CCMA. The parties can also agree that the matter rather be arbitrated at the CCMA. These changes in dispute forum mechanisms were also introduced with the recent amendments to the EEA. The burden of proof in disputes relating to unfair discrimination has also now changed. If Susan alleges that the difference in pay is based on one of the listed grounds (in this case gender), she merely needs to make out a prima facie case. The organisation will then have to prove either that the discrimination did not take place as alleged, or that it was fair, rational or otherwise justifiable. If she were to allege some “other arbitrary ground”, the onus would be on her to proof that the conduct amounts to discrimination and is unfair. The organisation may require the services of an expert witness in job evaluation and pay practices to assist in refuting her claim. If either party is unhappy with the outcome, the matter could be taken on appeal to a higher authority.
So where to from here?
If the organisation does not have a proper remuneration philosophy, policy and practices in place this need to be addressed urgently to minimise risks. A remuneration review or audit to identify possible anomalies should be conducted.
The organisation then should interrogate the possibility that differences that may exist are based on a listed ground (for example, race, gender or disability) or that no other objective justification exists. The EEA 4 form should be scrutinised to ensure that the submission to the Department of Labour clearly indicates that the organisation has pro-actively identified problem areas so that remedial actions can be instituted. The current dispute with Susan will have to be managed to limit risks and a possible negative outcome.
All organisations, irrespective of size, will have to take cognizance of Section 6(4) of the EEA as introduced and its supporting Regulations. They will have to scrutinize (or introduce) their organisational structure, their job evaluation procedures, job grading procedures, their human capital policies, practices and procedures relating to remuneration and other conditions of employment in an effort to detect unfair discrimination pro-actively or risk falling foul of the law. It is advisable to address any inconsistencies upfront in a holistic manner, rather than having to face the music at the CCMA/Labour Court.
Submitted by Dr. Laurentia Truter (Truter & Ass) & Mr. Peet Kruger
(Synntech People Solutions).
i The Constitution of South Africa, 1996 - Bill of Rights, Chapter 2.
ii See for example cases like Louw v Golden Arrow Bus Services (2001) 22 ILJ 2628 (LAC); TGWU and another v Bayete Security Holdings (1999) 20 ILJ 1117 (LC) as well as Association of Professional Teachers & Another v Minister of Education & Others (1995) 16 ILJ 1048 (IC).
iii Employment Equity Amendment Act, 2013 published 16 January 2014, Government Gazette 37238.
iv EE Regulations published 1 August 2014 Government Notice 37873.
v Section 6(2) of the EEA.
About Dr Laurentia Truter
Dr Laurentia Truter has her own employment law and employee relations consulting practice, Truter & Associates. She advises local and international entities in both the private and public sector on workplace matters, including employment contracts, HR policies and procedures, employee relations procedures and dispute resolution. She has a special interest in nondiscrimination law. The topic of her doctoral dissertation was Disability, discrimination and equal opportunities – A comparative legal study. She regularly conducts in-house training and seminars. She assists clients to draft and implement employment equity and diversity initiatives in the workplace. Mobile:083 274 7402, e-mail: email@example.com
About Peet Kruger
Peet currently heads up Synntech People Solutions and fulfil the role as Senior Consultant on client projects. He was a Director at Remchannel and was appointed as an Associate Director at PricewaterhouseCoopers (PwC) after the merger between Remchannel and the PwC Reward Practice. He has extensive experience in human resources management and more specifically in the development of performance and total reward management strategies and solutions. He has worked with several large corporations, as Human Resources Manager before he started his consulting career in 1998. He consulted to and managed large projects
across all industries in the private and public sectors.
Peet played a key role in the establishment of the South African Reward Association (SARA) and also served as the President of SARA for two years in succession. Peet holds a Master’s Degree in Industrial Psychology. He is also a certified Global Remuneration Professional (GRP) and a Faculty Member of the World@Work. As a tutor on the Global Remuneration Professional programme he has taught more than 200 GRP students over the last 6 years in different parts of the world.