Cheadle was the principal architect of the 1995 LRA and Le Roux and Thompson are lawyers who have been engaged in the practice and reform of labour law since the 1970s. This important article was first published in Business Day today. Labour law reform Pragmatic reform of labour legislation needed urgently.
Dismal outcomes
The performance of SA’s labour market and one of its key props, labour law, are the subject of criticism and for the same reason: dismal outcomes. The attacks come from left and right, so the prescriptions for reform run in opposite directions.
Reconsideration
Law is a distinctly secondary force in the making of social outcomes but it still has an important effect. Given the mixed and even disappointing results of the 1995 Labour Relations Act (LRA), we have to keep reconsidering. We have some thoughts, some of which are lofty and others pragmatic.
LRA 1995 – stabilising influence
The 1995 LRA was designed to promote fairness, rationality and a higher level of co-operation across the labour market, from industry forums down to individual workplaces. It gives expression to the relevant sections of the bill of rights and it meets international labour standards. There can be no doubt that back in the 1990s, the new legislation helped to stabilise workplace relations: industrial conflict in the second half of that decade was dramatically down on the first. The National Economic Development and Labour Council played the role of patrician, providing policy leadership, all-party cohesion and not a few guides. The Commission for Conciliation, Mediation and Arbitration (CCMA) and the Labour Court did then and continue today to do sterling work in guaranteeing fairness and rationality, and damping down what would otherwise be still higher levels of discord.
Lack of social receptiveness
Our sense is that it is not the structure of the law that is wanting (accepting that no law can do everything anyway). Rather, the stumbling block takes the shape of a lack of social receptiveness to a key part of the LRA’s scheme, made worse by the inability of national macroeconomic policies to deliver sustainable, employment- boosting growth.
Second channel – workplace forums
While the institution of collective bargaining was robustly asserted in the 1995 LRA, provision was also made for a second channel of industrial relations. Parties were invited to form workplace forums, platforms to foster trust and workplace productivity. Collective bargaining and the dispute resolution structures of the LRA cannot carry the weight of labour dynamics in this unequal society in the absence of the embrace at least of the philosophy underlying the second channel.
New social compact
A new social compact is needed for this to be achieved. This cannot be limited to the top-tier actors; it must reach down to the workplace leadership as well. It should not be so much a compact in relation to wages but on workplace culture, productivity and reform.
Rethink required in following areas
#1 SA cannot afford the level of conflict associated with failed collective bargaining in the public sector. The consequences for society are not only expensive, they are fatal. Nor do workers enjoy any net financial gain; they end up worse off. An end to volatility in this sector is not in sight. There is, however, a voluntary remedy available until saner perspectives prevail. The parties should consider agreeing to submit all economic disputes to arbitration for a respectable period, say three years. … And a case can be made for the right to industrial action to be open to suspension by the Labour Court if that action is accompanied by egregious conduct.
#2 Given a history of arbitrary management decision-making, it was appropriate for the then Industrial Court to introduce stringent rules in relation to pre-dismissal hearings in the 1980s. That time has now passed and the cottage industry associated with pre-dismissal inquiries needs to be closed down.
#3 Collective bargaining processes and outcomes need to reflect that diversity. The recent agreement on a tiered wage structure in the clothing sector represents pioneering and necessary flexibility in the approach to bargaining.
#4 The abuse of contract labour does not justify outright prohibition. The abuses of contract labour can be prevented by appropriate regulation.
Even disgruntled players need to recognise that contract labour is now ubiquitous and is sometimes a useful feature of labour markets across the world.
However, all of these prescriptions — and other amendments to legislation that might soon be in the offing — will count for very little if a broad consensus on the need to transform the workplace culture is not actively pursued and achieved.
This letter appeared in Business Day today, written by Steuart Pennington,Nottingham Road – Simplify labour law
“I read with interest the article by Halton Cheadle, Peter le Roux and Clive Thompson on the reforms needed to our labour relations dispensation (Pragmatic reform of labour legislation needed urgently, November 15). To understand their proposals you need to be a lawyer. Since Mr Cheadle’s reforms of 1995, our labour relations legislation, written by lawyers for lawyers, has become an unbelievable burden to business — and a lawyers’ paradise.
Most entrepreneurs and business owners who are inspired to start a new venture that requires the employment of labour are not lawyers, they are people with an idea they hope will succeed in a competitive marketplace. Their perception of the complicated one-sidedness of our labour dispensation is probably the biggest single disincentive to their ambitions. I wonder how many would-be entrepreneurs have abandoned their ideas, or closed down their fledgling businesses, because of the overwhelmingly onerous task of labour legislation compliance?
The authors don’t deal with this adequately. Nor do they deal with the fact that in the Global Competitiveness Report, which compares the world’s 142 most competitive nations, SA ranks
138th on “co-operation in labour-employer relations”;
138/142 on “flexibility of wage determinations”;
90/100 on “rigidity of employment index”, where 100 = worst;
139/142 on “hiring and firing practices”; and
130/142 on “pay and productivity”.
Together with education, health, the business cost of crime, and government cronyism, our labour market efficiency ranks amongst the worst in the world and is the most significant disincentive to our competitiveness and investment.
I notice the National Planning Commission is paying attention to this. I hope its intention is to radically reform, and simplify, our labour relations legislation, particularly for new start-ups. The commission should give scant attention to Mr Cheadle et al’s recommended reforms, which, in my view, essentially amount to lawyers promoting and paying themselves to rearrange the chairs on the Titanic”.
This letter appeared in Business Day on 16 November, written by Ken Owen, Claremont – Class warriors warned
“How amusing that Halton Cheadle and his fellow class warriors of the 1990s are starting ( Pragmatic reform of labour legislation urgently needed, November 15) to acknowledge the “dismal” and “disappointing” effects of the 1995 Labour Relations Act, and indeed of most of their arrogant social engineering of the time.
It would be gracious of them to acknowledge that they were warned”.
This letter appeared in Business Day on 18 November, written by Clive Thompson – Forums will work
“I am not sure whether the inveterate pen-to-paperers Steuart Pennington and Ken Owen (Simplify labour law; and Class warriors warned, Letters, November 16) agree with the major point of our piece (Pragmatic reform of labour legislation urgently needed, November 15), but certainly they missed it: the key innovation of the 1995 Labour Relations Act was the statutory invitation to employers and unions to engage with one another in the entirely lawyer- and strike-free orbit of workplace forums.
Sustainable economic success depends on employers, employees and unions working together continuously in the workplace to improve the quality of goods and services. Constant, incremental process improvement is every bit as powerful as compound interest.
Employers have generally declined the invitation, preferring the biffo associated with collective bargaining and the managerial prerogative; so, too, unions, who also prefer to slug it out on the factory and office floor. And when the power option does not deliver for them, they become ardent litigators.
Employers and employees have more shared interests (in the prosperity of the business) than conflicting interests (in the wage-profit contest), but the insights and patience required for building co-operative and productive relationships have eluded them. Modifications to the Labour Relations Act in respect of unfair dismissal, collective bargaining and a few other things may well be indicated, but unless the parties open up the second, collaborative channel of the statute, the really big labour market breakthrough will not happen”.
This letter appeared in Business Day on 21 November, written by Ken Owen, Claremont – Blame law, not victims
“Clive Thompson (Forums will work, Letters, November 18) blames “biffo” employers and pugnacious unions for the failure of the Labour Relations Act of 1995 — for its dismal and disappointing outcome. While it is not unusual for lawyers to blame their clients, this attempt to blame the victims of bad law for its lamentable consequences is unusually brazen.
The act was not an innocent “invitation”; it was compulsive, and it became the main plank of SA’s dysfunctional labour regime in which a unionised labour elite excludes the non- unionised poor from the benefits of democracy. Its saddest consequence has been the trashing of the lives of a generation of young people because unionised teachers can obstruct every effort to reform the education system.
This has nothing to do with “biffo” employers. Indeed, employers no longer “biff”. They routinely endure strikes and then pay above-inflation wage increases while they manoeuvre for the exit.
The demon Anglo American has gone; De Beers has gone; the Oppenheimers are on their way, scattering promises as they go; SA Breweries, now SABMiller , runs its wonderful business from London, pays dividends in dollars, and invests its profits (which still come mainly from SA) in Uganda; Billiton, once a vehicle for South African mining interests, has collapsed into the arms of the Aussies. Investment in mining withers as major companies take their money elsewhere, to where the law is less insane.
Mr Thompson accuses me of missing the point. On the contrary, I grasp it very well. The trio who drove the passage of the 1995 act are making a second attempt to corral employers and workers in a bureaucratic system based on manipulative law. Whether they succeed or fail hardly matters since SA is now probably beyond rescue. Hardship will be their teacher”.
This letter appeared in Business Day on 21 November, written by Steuart Pennington,Nottingham Road – Work forums failed
“Clive Thompson’s letter (Forums will work, Letters, November 18) is a prime example of just how detached the architects of the 1995 labour reforms were from the then shop floor reality and how they persist in defending a labour dispensation that has failed this country. I didn’t miss his point about workplace forums, I just didn’t think his proposal was worthy of comment.
From experience, I know that in 1995 most employers were enthusiastic about the concept, including myself — I even produced a management Guide to Implementing Workplace Forums, which did not sell very well.
Mr Thompson knows that the main opposition to these forums came from shop stewards and their union advisers, and that this won’t change. They saw them as an attempt to subvert the authority of the union movement and their collective bargaining clout, and a cheap mimic of the German system.
The reality is that workplace forums did not work. They were ill-conceived.
The reality is also that the 1995 labour reforms were a disaster for this country. He, Halton Cheadle and Peter le Roux (Pragmatic reform of labour legislation needed urgently, November 15) should not be focusing their energies on “Band-Aiding” a labour dispensation that has failed, as if to justify their noble intentions.
They should be proposing radical reform that: restores the balance of power between labour and private enterprise; removes bureaucracy; promotes job creation; encourages small, medium and macro enterprise growth; and improves our labour market efficiency from the lowly position of 138th out of 142 countries to 50th.
I’ll admit it is a big ask, but trying to fix what is broken is unhelpful”.