South African businesses to pay crippling affirmative-action fines

Businesses could pay an enormous price – up to 10% of their turnover – if they do not strictly observe provisions regarding affirmative action, says a report on the Sake24.com site.

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 are said 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, notes the report. 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. The report says 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 those who lie about their company’s empowerment status.
Full Sake24 report

Meanwhile, the controversy over proposed changes to the Act, which it was feared would cause coloured and Indian workers to lose their jobs in some provinces, turned out to be a storm in a teacup, says a Business Day report. The contentious issue of whether employers should use national or regional demographic statistics to calculate the employment equity target for their workforce has not been significantly changed, says the report. Under the present law, employers have a choice to use national or regional demographics to determine their racial targets. There was an uproar last year when an initial draft of the amendments proposed that employers be forced to use national demographics as a measure, which would have meant that the workforce had a disproportionate number of coloureds in the Western Cape and of Indians in KZN. However, the amendment Bill is believed to leave the present regulatory regime much the same, with the exception that the Labour Minister will have the power to produce regulations on the matter. The regulations will allow a company – that is designated as a national company – to use national demographics as its employment equity measure. Companies that are not national will not use national demographics, notes the report.
Full Business Day report

– LegalBrief