The amendments to the Employment Equity Act (EEA) were expected to come into effect on 1 September 2023, in which event companies with fewer than 50 employees would no longer have been obliged to comply with the affirmative action provisions of the EEA. So why the delay, and what are the consequences?

The trade union Solidarity challenged the provisions of the EEA amendments and the draft regulations on the basis that they allegedly imposed a racial categorisation and a quota-based system on designated employers. Solidarity argued that the draft regulations amounted to rigid quotas and absolute barriers based on race. Following the intervention by the International Labour Organisation (ILO), a settlement was reached between Solidarity and the South African Government on 28 June 2023, which agreement was made an order of Court on 31 October 2023.

The essence of the Settlement Agreement is as follows:

• affirmative action must be of a temporary nature
• affirmative action must be applied in a nuanced way
• no absolute barrier may be placed on employment affecting any persons from any group
• the Employment Equity plan must continue to take certain criteria into consideration (e.g., inherent requirements of the job, pool of suitably qualified persons, qualifications, skills, rate of turnover and natural attrition, recruitment and promotional trends, etc.)
• in the compliance analysis of affirmative action in any workplace, there may be justifiable/reasonable grounds for not meeting set targets (e.g., insufficient recruitment or promotion opportunities; insufficient qualifications, skills and experience; impact on Business Economic circumstances, etc.)
• no penalties or any form of disadvantage may be imposed if there are justifiable/reasonable grounds for not meeting set targets
• employment may not be terminated because of affirmative action

The terms of the Agreement must be published in the Government Gazette as part of the 2023 Employment Equity regulations.

While the terms of the Settlement Agreement (now backed up by an order of Court) may come as a relief to employers, an important consequence of the delay is that employers who employ less than 50 employees – but who earn more than the relevant annual turnover – are not off the hook. They, along with all other designated employers, will still be required to report for 2023 by submitting their annual EEA2 and EEA4 reports to the DEL by no later than the closing date of 15 January 2024. Designated employers also need to have an up-to-date EE Plan which includes an EE Analysis, as well as an EE Committee. Non-compliance may result in fines of R1,5 million or 2% of their annual turnover, increasing to R2,7 million or 10% of annual turnover for repeat offenders.

For any assistance with ensuring that your company complies to the Employment Equity Act, please contact hr@labourwise.co.za or kscholtz@labourwise.co.za .