Winds of Change: A closer look at the Amendments to the Employment Equity Act 55 of 1998

Jun 14, 2023 | News

The Employment Equity Act 55 of 1998 (“the Act“) is primarily intended to promote the right to equality in the workplace, ensuring that all employees enjoy equal opportunities and are treated equally by their employers in order to address South Africa’s history of prior racial inequalities.  The Employment Equity Amendment Act 2 of 2022 (“Amendment Act“) which is set to come into effect on 1 September 2023, amends the Act in that it advocates and promotes fresh initiatives to further advance equality and diversity in the workplace.

The most notable amendments to the Act are the revision of the definition of “designated employer”; the introduction of sectoral numerical targets and provision for the issuing of Compliance Certificates. These amendments are discussed in more detail below:

Revision of “designated employer”. 

The Act currently defines “designated employer” as an employer with fewer than 50 employees but a total annual turnover that is equal to or more than the relevant annual turnover thresholds as determined in Schedule 4 of The Act.

In relation to the above-mentioned definition, the Amendment Act restricts the application of these sections to a reduced group of employers in order to relieve some of the administrative burden on smaller employers. With effect from 1 September 2023, an employer (other than a municipality, an organ of state, or an employer designated as such under the terms of a collective agreement) will only be regarded as a designated employer for the purposes of the Amendment Act’s affirmative action provisions if it employs 50 or more employees. The overall annual turnover of an employer will no longer be considered.  Smaller employers therefore will no longer be required to adhere to the duties of a designated employer regarding affirmative action, such as creating and implementing employment equity plans, reporting to and submitting employment equity reports to the Department of Employment and Labour. The administrative burden on these employers will be greatly decreased as a result.  

Minister of Employment and Labour to set numerical targets.

The new section 15A  introduces the addition of sectoral numerical targets. By guaranteeing fair representation of members of specified groups from historically underrepresented groups of persons based on race, gender, and disability, at all occupational levels in the workforce, this provision aims to advance the objectives of the Act. The amendment gives the Minister of Employment and Labour (Minister) the authority to specify numerical goals for each national economic sector in order to administer the Amendment Act. Prior to deciding on targets, the Minister must engage with relevant stakeholders with regard to the sectors and targets. Any proposals must then be published in the Government Gazette for comments, giving interested parties at least 30 days to voice their opinions. The Minister can no longer merely decide what the numerical sectoral targets are in terms of what is considered to be equal representation in the workplace due to the amendment. There is now a pre-requisite, and that pre-requisite is that the Minister must consult with the pertinent sectors, now including education, wholesale and retail trade, financial services, insurance, gas, Steam and Air Conditioning Supply, Professional, Scientific and Technical sectors.

With the addition of the sectoral numerical targets, designated employers’ bear the onus to review their employment equity plans (“EE Plans“). Section 42 of the Amendment Act now requires designated employers to review their EE Plans to ensure that their numerical targets and goals align with any sectoral targets that are set by the Minister. Should they not, such employers must provide a reasonable justification to the Department of Labour for their non-compliance. Employers are therefore advised and encouraged to set out such justification in their employer’s equity plans failing which the Department of Labour may reject such plans or issue compliance orders against defaulting employers.

Employers should also take note that with the introduction of sectoral numerical targets, the Department of Employment and Labour will introduce a new online assessment system which will enable the Department to monitor an Employer’s progress in meeting sector targets.  This will enable the Department to react to areas of non-compliance quicker than has historically been the case.

Certificate of Compliance: State Contracts

A newly added subsection (6) of Section 53 of the Act will allow the Minister to only issue an employment equity compliance certificate if the employer has met the numerical targets established under Section 15A of the Amendment Act or has provided a reasonable justification for its non-compliance. Employers will require this certificate in order to tender for State Contracts and non-compliance will in all likelihood lead to an entity being disqualified from the bid. Although the certificate requirement (contained in the Act), was introduced many years ago, it will only come into operation on 1 September 2023 with the amendments contemplated by the Amendment Act.

In terms of the section 53(6) of the Amendment Act, a compliance certificate may only be issued if the Minister is satisfied that:

  • The employer has met any sectoral numerical targets that apply to it or has provided a plausible justification for not doing so.
  • The employer has submitted its annual employment equity report.
  • There have been no findings by the Commission for Conciliation, Mediation and Arbitration (CCMA) or a court that the employer breached the unfair discrimination provisions of the EEA in the previous 12 months.
  • In the previous 12 months, the CCMA did not issue an award against the employer for failing to pay the national minimum wage.

The affect of the amendments on Employees and Employers:

The amendments have mixed consequences. While the definition of “designated employer” has been reduced and restricted, which assists small employers by lifting an administrative burden off them, designated employers now incur the obligation to ensure they meet sectoral numerical targets; and review and amend their EE Plans (if necessary).  These amendments aforementioned will promote the transformation of those workplaces affected by the amendments and will create employment advancement opportunities for a broader section of persons from historically disadvantaged groups.

The amendments, however, may have significant implications for larger, designated employers, or non-designated employers who seek to do business with the state. However, the purpose of these amendments is to increase employment opportunities for those historically disadvantaged groups, by creating a working environment that promotes diversity, equal opportunities and safeguards against unfair discrimination.

Designated employers are encouraged to monitor their progress in meeting the sectoral numerical targets and are further advised to review their EE Plans in light of any sectoral numerical targets set by the Minister.

Article by Ali Sonday (Associate) & Celani Mchunu (Candidate Attorney)

Employment Law Department