Department of Labour response to Committee Report on KZN oversight visit

Meeting report

The Chairperson said this was the second time the Committee had met to consider the Status Report. To the surprise of the Committee, the representative of KwaZulu-Natal (KZN) reporting on this matter had presented meaningless excuses for not presenting the report and seemed not to be aware of the topics or have deep knowledge, behaviours that the Department would not accept. She requested that the Director General manage more carefully those assigned to address the Committee.

Executive Summary on Oversight visit of the PC conducted in March 2017 in KZN
Mr Thobile Lamati, Director General (DG) of the Department briefed the Committee.

The oversight focused on the clothing and textile sector due to pervasive non-compliance with the labour laws in this sector. In the section under Discussion the legal framework of the mandate was covered. On top of basic conditions of employment, inspectors performed based on the following legislation in the Clothing and Textile Sector: Occupational Health and Safety Act 85 of 1993; Unemployment Insurance Act, 2001 as amended; Compensation for Occupational Injuries and Diseases Act,1993 and Employment Equity Act,1998. Complementary Immigration Officers from the Department of Home Affairs were responsible for the enforcement of Immigration Laws wherever foreign nationals are employed. The composition of those in the inspection teams was made of Specialist Inspectors in Occupational Health and Safety; UIF Payroll Auditors; Bargaining Council Agents for Clothing and Textile Industry; Bargaining Council Agent for Leather Industry; Immigration Officers from Department of Home Affairs; and agents from SAPS. A provincial management team was also present, represented by the Chief Director Provincial Operations; Provincial Chief Inspector; Provincial Communications Officer and the respective Deputy Directors from Labour Centre Operations.

During the multiple visits made to places of employment, feedback was given to employer management teams and the Department of Labour inspectorate was instructed to take necessary actions through the normal enforcement procedure where there was flouting of the law. Employers who had somehow heard about the

visits had sent away the undocumented foreign labour and unregistered employees in a bid to avoid being caught by the law enforcement agencies. A total of 13 employers were visited and all of them were found to be non-compliant with the provisions of the labour laws outlined in the presentation. Where there was foreign labour with no valid work permits, the Immigration Officers made some arrests in terms of their enforcement procedures. Most employers did not comply with the minimum wages prescribed by the collective agreement regulated by the Bargaining Council as well as the provisions of the Occupational Health and Safety Act,1993.

Regarding the procedures of selecting the businesses that were visited, the inspections were conducted in terms of labour legislation which includes two types of inspections: Proactive inspections, conducted to fulfil the commitment of the programme’s Strategic Workplan and the Annual Performance Plan for a Financial Year; and Reactive inspections conducted in response to reported complaints of non-compliance and incidents. Mr Lamati summarised the non-compliance situations from the different businesses that the Department visited, and described the actions that had been taken in all 13 cases, which are summarised in the presentation. The factories subject to inspection in KZN were:

Jarna Trading Enterprise, 4/8 Soupan Road, Omar Osman building, Clairwood, Durban. Visited on 28-03-2017. Manufacturing (clothing)

2kg Investments, 84 Seaward Road, Clairwood, Durban. Visited on 28-03-2017. Manufacturing (textile)

Tephlyn Clothing cc, 769 Sunset Avenue, Chatsworth. Visited on 28-03-2017 manufacturing (clothing).

Sop Trading, t/a Dune Site Trading, Unit 13, 12 Graveside, Havenside, Chatsworth. Visited on 28-03-2017. Manufacturing (leather)

Africa HK Manufacturing (Pty) Ltd, now t/a Colima Trade, 60 Albert Wessels Drive, Riverside Industrial, Newcastle. Visited on 29-03-2017. Manufacturing (clothing).

Sky Sheng, 61 Marconi Drive, Riverside Industrial, Newcastle. Visited on 29-03-2017. Manufacturing (clothing)

Prod-U-Star 83 CC, 61 Marconi Drive, Riverside Industrial, Newcastle. Visited on 29-03-2017. Manufacturing (clothing)

Top Dress Clothing, 9 Gutenberg Street, Riverside Industrial, Newcastle. Visited on 29-03-2017. Manufacturing (clothing).

Siqalakabusha  Primary Workers Co-operative, 2 Indigo Street, Isithebe, Mandeni

30-03-2017. Manufacturing (clothing)

Zaic Clothing, now Nico Zhang Trading, 3 Indigo Street, Isithebe, Mandeni. 30-03-2017. Manufacturing (clothing).

Knitwear International, 12 White Street, Isithebe, Mandeni. Visited on 30-03-2017. Manufacturing (clothing).

Fashion River, 23 brown street, Isithebe, Mandeni. Visited on 30-03-2017. Manufacturing (clothing)

Angel Footwear Manufacturers CC, 31 Ally Road, Isipingo Rail, Isipingo. Visited on 31-03-2017. Manufacturing (leather).

All the stores failed to comply with Conditions of Employment, UIF and OHS requirements.
Under the section Miscellaneous, Mr Lamati pointed out that during the visits 33 foreign nationals were taken into custody by Home Affairs Immigration officials and R3,000 fines were issued to employers. He also mentioned that employees may enquire or lodge complaints to the Department of Labour regarding their status about registration with the UIF. When non-compliance is identified by the Inspectors the normal enforcement process is followed where the employer is compelled to register, declare and pay the contributions. KZN Province has met all the targets set for 2016/17 in terms of the Provincial APP as shown in slide 44 of the Executive Summary.

In terms of constraints found during the inspections, Mr Lamati emphasized that there is often a language barrier as some employers cannot communicate and understand English. The Inspectors normally issue enforcement notices after conducting the inspection with the expectation that the employer has an obligation to find someone to translate such notices. Other constraints were delays in provision of information by employers; when records are not kept by employers but off-site accountants; the cases when certain employers have more than one UI reference numbers and thus contributions and declarations recorded in separate UI reference numbers; and also, some audits were not carried out as they could only be conducted upon receipt of records.

Mr Lamati referred to the presentation to learn more about the feedback provided from the visits to the factory Quin Sheng which had felt to comply and allow the conduction of the inspection.

Notices are still in force and follow up inspections would be conducted to determine compliance after the expiry of such notices. The Department committed to keep track of all irregularities presented above on the larger community of small businesses.

Discussion

Mr T Rawula (EFF) commented that during the previous section he had asked about the lack of information regarding skills development and employment equity on the findings and no clarity had been given. As the visits in KZN were always accompanied by SAPS agents, he asked If this has been a special arrangement for Members of Parliament (MP). He also raised concern about the inspectorate capacity as none of the issues presented had been reported in the past. His asked how many companies are assigned per inspector. He pointed out that most of the highlighted problems of non-compliance were health-injuring related.

The Chairperson responded on the issue of police presence. Before carrying any inspection, the relevant authorities and researchers perform their own assessment considering the area where the stores are located and submit a report on whether possible violent situations might take place.

Ms F Loliwe (ANC) asked for further clarity around the role of the consultant hired for several of the registered companies. It seemed on many occasions that he had more power and information than desired for the independent nature of his task. She asked what was the strategy of the Department when utilising these consultants to talk to the business owners. She said that during the visits there were problems with some store owners and they had to be detached from their store, and the Committee requested further information in relation to this issue. She was pleased that the report covered and informed on police arresting, but some of those owners on the wrong side of the law ran away and thus unnotified searches should be carried. She asked why did Africa HK Manufacturing have 3 UIF numbers, how was this going to be corrected, and how did this affect the employees.

Mr I Ollis (DA) stated that the visits in KZN were better organised than those carried out in the Eastern Cape, except for that language barrier with some of the owners. He commented rhetorically if it is more productive to arrive with one Home Affairs and a policeman that just civil agents. However, he said in the cases where buildings were declared unsafe and inhabitable, the stores and the building should be shut down until the situation changes.

Mr M Bagraim (DA) said the Department Labour bathrooms and City Councils themselves were struggling to comply with many of the sanitation requirements exposed, so when applying the law, the Department should be considered. On foreign nationals, there is a problem with discovering when they are illegal, mainly because some employers could not tell whether they were illegal and there is cost in firing them. On UIF, many employers were not paying fees and it is too complicated to control this top-down; there is therefore a need for Union, staff and community help when checking compliance. He agreed with Mr Rawula on what the output says: that all 13 cases do not comply with the law for any of the targets, and that means 100% problem in 100% of cases, expecting same results in the larger community of employers. Regarding the language barriers between the inspectors and employers, he suggested inspectors strategise around asking the employees first if they received orders in English from the employer. The Department needs to combat the culture of silence around the violation of workers’ rights.

Ms S Van Schalkwyk (ANC) said electrical compliance and ventilation were also problems the Department needs to face for health and safety. Regarding the notice policies, the Department referred to, she asked if it were not possible to immediately shut down the building where owners are not complying in extreme cases. On slide 25, regarding the increasing number of foreign nationals being employed, that is undesirable in her opinion. She mentioned that in many of these businesses, foreign employers implement a culture of no-work no-pay, besides medical justification and sick leaves Her concern is that in cases of chronic diseases such as TB or HIV employers do not allow time to collect ARVs. The Bargaining Council has relations with the so called Chinese Councils or organisations overviewing small owners of Chinese origin, and though understanding that agreements are achieved to fight unemployment, in terms of payment there are certain things that cannot be accepted perhaps paying employees R40 per day and other irregularities regarding temporal contracts.

Ms T Tongwane (ANC) referring to slide 20 (SOP Trading) and slide 29 (PROUD U STAR) she asked why wasn’t the inspection conducted and when does the Bargaining Council intend to do it.

Mr Lamati agreed with Mr T Rawula and said the lack of skill development factors included in the report will be corrected and information will be provided. Though skill development belongs to the Department of Education, the Department of Labour has the mandate to overview and enforce. Employment equity inspections were not carried out because most of these employers are not target of the equity policies. He clarified that the Department asks for SAPS accompaniment when carrying out inspections because it is provided in the law.

Responding to Mr M Bagraim, the Department provides information for employers to know where they must complain. He agreed that the Department of Labour should make use of a community approach to enforce compliance given the shortages on inspectors, compared to highly regulated countries and developing countries were the ratio is 1 inspector for 20,000 economic active people; the current ratio in South Africa is 1 for 120,000. For employers that do not report incidences on injuries on duty, he agreed the Department could inspect and sanction as per annexure 2 where incidents and procedures are recorded.

Regarding the question about the consultant: they understand the responsibility of the consultant in the moment of inspection, yet the employer must be at the place of employment when the inspection is taking place.  Those companies that have been pinned in the Department’s radar of action do not require notice to be inspected.

Mr Lamati reported that many companies are making use of many registration numbers, with apparently different names to avoid certain aspects of the law or inspections. He agreed with Mr Ollis that there is a dual responsibility for the Municipalities and the Department. Referring to those employees and employers of foreign nationality that had been deported, the Department committed to follow up on the status of their cases. Answering to those comments referring to the lack of toilet paper on the offices of the Department of Labour, he said that they are hidden and provided when requested because they were usually stolen.

He stated that many employers use the excuse of not knowing that their employees are illegal, but that this is not valid as they need to check employees’ requirements before hiring. Thus, they will continue to be fined by the Department of Home Affairs. The issue of employers not paying sick leave or not being paid if there is no workload, the Department is mobilising human resources and engaging with unions.

In terms of the usage of the English language when inspections take place, before the inspection, employees are asked if the owner speaks English and they confirm they do. However, once the inspection is started the command of the language disappears.

Given the current state of the industry, and the increasing financial pressure, many stakeholders have agreed on not increasing the minimum wages with the purpose of saving jobs. However, what the law states is that both parties: employers and employees must agree on these terms, and the same must happen before employees get paid below minimum wage. Paying below the minimum wage can happen, but only under the circumstances described above.

Answering to the question of whether the Department could close an entire building which electrical system is endangering the employees within, the DG stated that it is a decision that could have serious financial consequences for the Department, and though inspectors sometimes decide to do so, it is a decision that must be carefully analysed.

The Department discovered that even for low skilled jobs employers decide to employ foreign nationals instead of South Africans, a pattern that worries the Department, given that the desire is to only import critical skills. However, many of these cases correspond to illegal employees. The Department suspects the reasoning behind it is the intention of paying them below minimum wage.

The DG also committed to follow up on cases where sick leave or permission for health purposes has not been given.

A Member of the Bargaining Council, addressed the concerns around the right of taking leave, stating that if the employer does not respect this aspect of the collective agreement, the Council applies a compliance order followed by the right procedure. Regarding the possibility of paying employees under minimum wage rate, the only exception that can be admitted is through an exception application that requires the understanding and agreement of the employee in a context of financial struggling. This process is very unlikely to happen without consent of employees and the provision of the required documentation and financial evidences upfront to the Council.

According to the Clothing Industry Bargaining Collective Agreement, minimum wages are established and no employee is allowed to work more than 7 days, but many employers underdeclared the number of workers they have and thus can underpay workers. This is only picked up on during the inspection process, and then employers receive a compliance order to register their employees, and different venues are provided for the employee to reclaim the amounts that had not been paid in the past.

In the case of PROD U STAR, which refused to register under the Bargaining Council, the Council issued two orders of execution against the company.

Regarding the designated agent of the Bargaining Council that was accused on mismanagement, the Department has not found evidences against him ye, he is being monitored. The Council rotates agents so they do not always visit and have contact with the same factories.

The Chairperson asked about the companies with 3 UIF numbers and what is happening to workers when these companies change names illegally. When employers pretend they do not understand English it is mainly because they are on the wrong side of the law. She asked how the law allowed employers that don’t speak English to employ large amounts of people.
 

The DG mentioned that many companies are registered with their initial name, and when they convert into cooperative it becomes very difficult to carry out inspections, which is something the Department is working on. Most companies hire a South African consultant to do paper work for them.

The Chairperson asked where these consultants are when the inspection takes place.

A member of the Bargaining Council replied that the Department is convinced employees can understand English, but there is an unwritten law to remain silent when inspections take place.

The Chairperson asked if inspectors had different findings and interaction in English with workers during follow up visits.

Mr Lamati said it is the responsibility of the employer at their expense; the law states that they must hire someone that can provide the translations service

The Chairperson suggested they are subpoena on the spot, in situations of non-compliance.

Mr Rawula asked whether the Department or the Council could bring some clarity on whether those officials responsible for prosecuting employers request payments from employees.

The Chairperson asked Mr Rawula to provide an example.

Mr Rawula argued that there was a debate in the Eastern Cape as to who should cover the expenses related to employers’ prosecutions.

The DG said the Commission for Conciliation, Mediation and Arbitration (CCMA) had met with the Board of Sheriffs to conclude the costs would be covered by the CCMA and no sheriff should demand payments before services rendered as per the agreement between the CCMA and the Board.

Mr Bagraim suggested the Department utilises shaming techniques, perhaps publishing the names of those that fail to comply, in the newspaper. He also brought up that many foreign employees are being hired using fake certificates that look authentic because they are printed at the Department of Home Affairs by official employees.

The Department of Labour was released.

Adoption of minutes
Minutes of Committee meeting held on 17 May 2017 were adopted.

The Meeting was adjourned.