BD Business Law & Tax (Oct 2022)

AW&TAX

A REVIEW OF DEVELOPMENTS

A risk-based view of crypto

• Avoid one-size-fits all approach to crypto asset service providers

Angela Itzikowitz & Aslam Moosajee ENSafrica

Recently, the Pru dential Authority, actingin termsof the BanksAct, 1990, issueda guidance note(G10/2022) to inform banks and bank con trolling companiesof prac tices related tothe effective implementation of adequate anti-money laundering and counterfinancingofterrorism controls relatingto crypto assets and crypto asset ser vice providers.

The Prudential Authority isawarethat certainbanksin SA havepreviously decided toterminatetheirrelationship with cryptoasset service providers and/orhave dis continued theprovision of banking servicesto crypto asset serviceproviders by closing their accounts.

In animplicit criticismof such actionsby certain banks, theguidance note emphasises thatrisk assess ment doesnot necessarily mean that banksshould seek toavoidany riskentirelyby, for example,closing the accounts of cryptoasset ser vice providers or by refusing to open an account for them.

Theguidance notehigh

lightsthat thedecisionto closeaccountsor nottooffer banking servicesshould be made onlyafter carefuldue diligence and consideration.

Ifabank givesnoticeofits intention to closean account of acustomer simplyon the basis that thecustomer is a crypto asset service provider, theenforcementofthebank’s right toterminate maybe challenged on the basis that it is contrary to public policy

Inasmuchas theFinancial Intelligence CentreAct, 2001 adoptsarisk-basedapproach to regulation,banks are required tohave inplace comprehensive policies and risk-management processes as well asprocedures to combat money laundering, terrorist financing and proliferation financing.

Thesepolicies andpro cesses mustbe documented and updated on a regular basis and training on money laundering andterrorist financing mustbe provided on an ongoing basis.

Riskassessment interms of such policies would enable banks tounderstand the direct and/orindirect expo sure to risksthat a crypto asset serviceprovider may present.Banksneedtoassess what elements are driving or reducing moneylaundering,

terrorist andproliferation financing. Inthis regard, bankshave toconsiderthe type of clients, their trans actional activity, crossborder flowof fundsand a client’s associationwith crypto-related activities.

Therisk managementand compliance programmes of banks need to be tailored and cater tovarying levelsof risk

that acrypto assetservice provider poses.Appropriate risk assessmentinvolves a consideration ofvarious factors, including:

● The typeof services,prod ucts, transactions involved;

● Customer risk;

● Geographical factors; and

● The type of crypto assets involved or exchanged.

Whena cryptoassetser

vice provider seeksto estab lish andmaintain arelation shipwith abank, thebank should,as partofits duedili gence, ascertainif thecrypto asset serviceprovider has documented andimple mented appropriate money laundering, terroristand pro liferation financingrisk man agement policies, proce dures, systemsand controls that the bank follows in respect of its own activities and productofferings. Where higher riskspresent them selves, an enhanceddue dili gence should be undertaken.

A “one-size-fits-all” approach indealing with crypto assetservice providers mayresult in inadequate riskunderstand ing and risk measures. The Prudential Authorityhas noted that this approach goes against thespirit andpractice of a risk-based approach.

Risks associatedwith crypto assetservice providers constantly change and this requires banks to conduct regularrisk assess ments andamend theirrisk profiles andrisk manage ment programmesto deal with new risksthat might arise. Banksneed relevant and requisite technical expertise toadequately assess therisks stemming from cryptoassets and ser vice providers.

Ifthe transactionalactivity ofa cryptoassetservice providerisnotinlinewiththe

initialprofile thebank hasof its customer,it shouldcon sider filing asuspicious or unusual activityreport with the FinancialIntelligence Centre (FIC).Banks must ensure thatthey employ appropriate detection and monitoring mechanismsto mitigateagainst anyrisksof moneylaunderingorterrorist financingthat maybeintro duced throughcrypto assets

BANKS MUST ENSURE THAT THEY EMPLOY APPROPRIATE DETECTION AND MONITORING MECHANISMS

orcrypto assetservice providers.

Banks must ensure they maintainadequate recordsin respect of all customer trans actionsforaminimumperiod ofsevenyears orforaperiod ofseven yearsfrom thedate of submission ofa suspicious orunusual transactionreport to the FIC.

In due course, crypto assetservice providerswill become accountable institu tionsand willhave tocomply withall theobligations imposed on accountable institutions and that may give

CORPORATE AND TAX LAW

A LITTLE BIT OF CURRENCY

BUSINESS LAW & TAX

Dealing with insurance claims

FILL IN THE PAPERWORK

Mthokozisi Maphumulo Adams & Adams

SA’s energy crisis seems tobe getting worse bythe day, and thereis noend in sight.

Eskom,the onlypublic energy supplier whichhas in thepast receivedhugefinan cial injections from the gov ernment, seems tobe help less at this point.

Electricitycuts areobvi ously boundto createserious problemsforallconsumers businesses andindividuals alike. Persistentand long powercutscancauseserious damage toconsumers’ prop erties and belongings.As a result, various kinds of insur ance policies are triggered.

Asmost insuredsknow, not allinsurance claimsare approved andpaid out.In fact,thestatisticsreleasednot solongagoshowedaspikein insurance claims’ rejections, particularly inrelation to short-term insurance claims.

Fortunatelyfor mostbusi nesses, theyhave thefinan cial muscleto challenge insurers wherethe rejection is unlawfuland/or unwar ranted. Unfortunately,most individuals are notable to challenge theseunlawful rejections.

Thequestion thenarises astowhatbenefitdoesithave totakeout policiessuchas home andhouse contents policies if youhave a high chanceof havingyourclaim

rejectedand youarenot ina financial position to challenge such rejections.

This article seeks to assist withthis questionandto explain howone can enhance one’schances of claiming successfullywhen such claims arise.

Homeand housecontents insurance policiesfall under short-term insurance.They provide cover forthe policy holder’s propertyand house contents suchas appliances fridge,stove, television, kettle, geyser, furniture, paintings, musical instru

ditionsare adheredto atall material times.

● Any material changes to the home/houseconditions arecommunicated toabro ker or insurer.

● Any uninsured defects that may impact onthe insured items are repaired soonest.

● Ensurethatalltherequired mitigating equipmentis installedandis inaworking condition. These may include having fire insulators, fire alarms, fire extinguishers, prescribed door locks and so on.

The abovementioned stepsdonot guaranteethata claim will beapproved and paid out. Theyonly enhance one’s chances of claiming successfully.

Whereonehas aclaim,it is important to report and lodge the claim timeously (soon after the incident) and provide all the required documents and information to enable an insurer to pro cess the claim.

ments and so on. Persistent load-shedding can have many undesirableramifica tionssuch asbreak-ins,theft, robberies,fires anddamage to appliances.

Given the importance of theinsureditems, itiscrucial thatpolicyholders takesteps to enhance theirchances of claimingsuccessfully inthe event of any loss or damage to the insureditems. These steps include, among others: ● Updating policy.

● Ensuringthat policycon

Where one’sclaim has been rejected, itis important that due consideration is giventotherejection,therea son(s) thereof and possible ways of challenging same. This is importantbecause a policyholderwouldhavepaid premiums for such cover withthe hopethat s/hewill becoveredincaseaninsured risk eventuates.

Although theinsured can do an internal appeal and fur ther make submissionsto the ombudsman’s officewithout

any legal assistance, it is advisable to source legal assistance duringsuch processes for the following reasons:

● Internal appeals and sub missions to the ombuds man’s officeare legalin nature and insurance policies are ordinarily highly techni cal.Thus, thebestpositioned people toassist withsuch rejections would be an insur ance law specialist.

● The legal costsof such appeals and submissions are

considerably lower than the costs which would ordinarily be applicable ifthe matter goes to court or arbitration.

● In some cases, the insur

er’s rejection maybe justified and lawful,but theinsured mayhavea claimagainstan intermediary forexample,a broker. An intermediary is unlikely to advise the insured thats/he mayhave aclaim against him/her or his/her firm.Thisis wherealawyer can advise accordingly.

Itis importanttohave such policies in place. Policy holders should, however, not simplyconcedethevalidityof rejections without seeking legal advice.

Avoid one-size-fits all approach to crypto asset service providers

CONTINUED FROM

banks someadded comfort, atleast asto theunderlying clients of thecrypto asset service providers.

Until then,given thatthe legislation isrisk-based and not rule-based,the banks should revisittheir risk appetite forcrypto asset clients and effect the neces sarychanges totheirpolicies and compliance manual.

The Protectionof Constitu tional DemocracyAgainst Terrorist and Related Activi ties Bill

Parliament’s police commit tee recentlyheard public submissions on thebill. The draft law isdesigned to align SA withinternational instru mentsthat wereadoptedto provide for:

● Offences relatedto terror isttrainingand thejoiningor establishment ofterrorist

organisations;

● Offences relatedto foreign travel for thepurposes of committing anoffence out side SA for thebenefit of or at thedirectionof orinassocia tion with a terrorist group;

● Offences relatedto the possessionanddistributionof material containingunlawful terrorism-related content;

● The authorisationof the director ofpublic prosecu tionstobeobtainedinrespect ofthe investigationandpros ecution of certain offences;

● The issuing of warrants for thesearch andcordoningoff of vehicles,persons and premises;

● A directionrequiring the disclosure ofa decryption key and the effectof a direc tion todisclose adecryption key; and

● The removalof ormaking inaccessible materialcon taining unlawfulterrorismrelated content.

This billhas beenintro duced toaddress shortcom ingsidentified bytheglobal antiterrorism andantimoney laundering standards body, theFinancial Action Task Force

Thetask forcehasgiven SA until February2023 to remedy shortcomingsthat were identifiedby itin 2021 and ifnot remedied,could result in thecountry being greylisted. Greylisting could haveanimpactontheecono my as itcould increase costs and risksassociated with investments.

Concerns havebeen raised aboutthe proposed new section 3A that would be introducedintoour lawifthe billisenacted initscurrent form. This sectionwill pro hibit the publication of terror ism-related content.It has been suggested this new sec tion will result in ordinary people beingcriminalised for

publishing criticalcontent abouttheSAgovernmentand its policies.

Thebill proposesthat someone who isfound guilty of the publicationof terror ism-related content could facea fineofupto R100mor imprisonment ofup to30 years. It also allows the national directorof public prosecutions toapply with out notice tothe affected party, toa judgein chambers for variousorders, including thefreezing ofanaccused person’s property.

Thebill alsointendsto prohibita personfromrely ing on a dutyof secrecy or confidentiality toescape reporting the presence of a person suspectedof com mitting or intendingto com mit a terrorist-related offence, but thisdoes not apply tolegal professional privilege betweenan attorney and client for com munications madefor the purposes of legaladvice or pending litigation.

Academics and journalists whoare arrestedfor beingin possession of terroristrelatedcontentmayraiseasa defence thatthe possession was for carrying out work as ajournalist orforresearch purposes. Thiswas intro duced followingan earlier round ofpublic consultations in regard to the bill. Some argue thatthis provision should be extendedto allow for organisationsand individ

ualsinvolved inwork topre vent radicalthinking or extreme behavioursuch as religious organisationsand religious leadersthat ingood faith engagein researchand education oftheir congrega tionstocounterradicalthink ing or extreme behaviour.

Ina recentlypublished statementby the Treasury, it appearsitisworkingtowards the billbeing by November 2022 and, if so, hopefully this willgo somewayto avoida greylisting for SA.

In this environment, understanding crypto asset use cases,preparing policies and comprehensiverisk management processes to combat money laundering and terroristfinancing are critical. Documentedpolicies, procedures andinternal con trols must betailored to deal with anyadditional risksthat arepresented bynewprod ucts and/or technologies.

THE TASK FORCE HAS GIVEN SA UNTIL FEBRUARY 2023 TO REMEDY SHORTCOMINGS THAT WERE IDENTIFIED BY IT IN 2021

• What you can do to enhance your chances of your claim being successful

LOAD-SHEDDING CAN HAVE MANY UNDESIRABLE RAMIFICATIONS SUCH AS BREAKINS, THEFT, FIRES AND ROBBERIES

/123RF TASHATUVANGO

IT IS IMPORTANT TO REPORT AND LODGE THE CLAIM TIMEOUSLY AND PROVIDE ALL THE REQUIRED DOCUMENTS

BUSINESS LAW & TAX

Was pay determined by race?

WORTH THE WAGES

formedby theminemanager of theoperational mineand defunct mine.

Jonathan Goldberg Global Business Solutions

InMkhatshwa vShandu kaCoal (Pty)Ltd (JS28/2016) [2022] ZAL

CJHB 177(July 62022), theemployee was a mine managerwho was retrenched onJuly 312015. Heinstitutedthisaction,chal lenging the allegedunfair pay discrimination based on race.

The reliefsought bythe employee waspayment of the amount calculated on the differencebetweenthesalary packages ofemployees on the PattersonBand D3level andthose onaD5 level,for theperiodbetweenMay2012 andJuly31 2015.Healso sought compensation that wasequivalent to24months’ remuneration.

Thecrux oftheemploy ee’s case was that he was discriminated againstas a mine manageras histwo whitecounterpartswerepaid at a higher ratethan he was and were placed on the Patterson Band D5 level.

Soonafter theemployee signed acontract ofemploy ment withthe employer, accepting theposition of mine manager(decommis sioned collieries),he realised other minemanagers were paid at the D5 level. When the employee confrontedthe employer, hissalary was changed to the D4 level.

The employer explained the differencebetween decommissioned and opera tional mines:

● A decommissioned mine embarksoncareandmainte nance andrehabilitation to ensure it is not flooded if it is re-opened.

● An operational mine involves drillingand blasting, vehicle maintenance,soilstripping, attending to ongoing rehabilitationand pumping.

The minemanager ofan operational minehas the daily pressureof ensuring production isdelivered; reg ulatory prescripts,including the MineHealth andSafety Act (MHSA)and Explosives Act are complied with; man aging employeesand con tractorsas wellasrunning

person may unfairly discrim inate, directly or indirectly, against an employee, in any employment policy or prac tice, on oneor more grounds, including race, gender, sex, pregnancy, marital status, family responsibility, ethnic orsocialorigin,colour,sexual orientation, age,disability, religion, HIVstatus, conscience, belief,political opinion, culture,language, birthoronanyotherarbitrary ground.”

While section 6(4)of the act provides: “A differencein terms and conditions of employment between employees of the same employer performing the same or substantially the samework orwork ofequal valuethat isdirectly orindi rectlybased onany oneor more of the grounds listed in subsection (1), isunfair dis crimination.”

formed bythe employeesis sufficiently similar that they can reasonably be consid ered to beperforming the samejob,eveniftheirworkis not identical or interchange able; and

budgets, and communityrelated issues.

The employer’s witness conceded, under cross examination, thatthere wasa huge wagegap betweenthe employee and his compara tors.Hencein 2013and2014 the employee received a salary increase of 22% and 7%, respectively, which was higher than the employee’s comparators.

The employer’s witness was adamant the salary gap was informed by the different scope ofwork andthe func tionsperformedbymanagers of operational mines and decommissioned mines.

The legallandscape was setoutinsection 6(1)oftheof the Employment Equity Act (act), which provides: “No

In this case the employee questions the alleged racial pay discrimination, in terms of section11(1) ofthe act,the employer bears the onus to prove, ona balanceof proba bilities, that such discrimina tion did nottake place as alleged,was rationalandnot unfair or was otherwise justifiable.

Inregulation 4ofthe Employment EquityRegula tions, work ofequalvalue means that thework per formed by an employee:

● Is thesame asthe workof another employee of the same employer, iftheir work is identical or inter changeable;

● Issubstantiallythesameas the work of another employee employed by that employer, if thework per

● Is ofthe samevalue asthe work ofanother employeeof the sameemployer ina dif ferent job, iftheir respective occupations are accorded the same value in accordance with regulations 5 to 7.

Regulation 6(1) provides that the assessment of whether work is of equal valueis anobjectiveprocess thattakes intoaccount the following criteria:

● Responsibility demanded of the work, including responsibility forpeople, finances and material;

● The skills and qualifica tions, including prior learning and experience required to perform the work, whether formal or informal;

● Physical, mental and emotional effort required to perform the work; and

● Tothe extentthat itis

relevant, the conditions under which work is per formed, including physical environment, psychological conditions, and the time when, and geographic loca tionwhere, thework isper formed.

The employer’s main defencewas thatthework performedby themineman ager of anoperational mine hasmore demandsinterms of responsibilityand accountability for people, budget and compliance with legislation. The employee, on the other hand, contends that, without conducting a job evaluation, the employer could not objectively distin guish between thework per

The labourcourt found thatin instancessuch asthe presentone, thedistinctionin the value of the work is easily discernable from the scope of thework performedbythe mine manager ofan opera tionalmineasopposedtothat of a defunct mine. The employer’s evidence in this regard was not disputed.

Itwasaccepted thatabald claimthat adistinctionin remuneration constitutes an unfair discrimination was inadequate forthe onusto shift to the employer to prove that the discrimination was fair.

The employeein thepre sent casefailed todemon strate his racewas an essen tialcondition forbeingpaid less thanhis whitecompara tors. The employee seemed to suggest that,since he used to be a mine manager of an operational mine prior to 2012,heought tohavebeen paid atD5 levelas his comparators.

The court found there was no merit in the employee’s attack on the employer’s endeavour to address the wage gap betweenhim and his comparators by improv ing his remuneration as it was aimed at addressing historical challenges that it had inherited.

It wasthe employer’s undisputed evidence that race played no role in the pay distinction between the employee and his compara tors asit wasthe actualfunc tions and responsibilities of the positions they occupied.

The employeefailed to makeacase tosustaina claim of unfair pay discrimi nation in terms of section 6(4). Therefore, the employ ee’s claim was dismissed.

Online dispute resolution can lower costs

Thabile Fuhrmann Cliffe Dekker Hofmeyr

The onset of Covid resulted in businesses adapting respon sivemeasures tomitigateits impacton businesscontinu ity,whether accessingdocu mentsonline toconducting business remotely.

Allindustries adaptedto thisaccelerated digitalevolu tion whilethe legalsector lagged.By chance,dispute resolution is becoming a focal point for the sector.

Traditional disputeresolu tion is lengthyand expensive andwasdoneinpersoninthe eyes of the court. Today, blockchaintechnologyallows onlinemediation andarbi

tration asalternative dispute resolution is known as online dispute resolution (ODR), lowering dispute costs.

ODRisno longeranalter native, butan indispensable norm. Withvirtual hearings during thepandemic becom ing a way oflife, virtual hear ings arelikely toremain a postpandemic reality.

Catapulting dispute resolu tion into the digital age ODR isa technology-based extension ofdispute resolu tion whichseeks toresolve disputes betweenparties.

ODR alsoexpands traditional means ofdispute resolution using technologiesinto the procedure.

ODR couldbe theefficient process businessesuse for online consumer disputes concerning theremote pur chaseof goods,or ajustice system for smallclaims in business-to-consumer deal ings. ODRfacilitates resolu tions of disputes, with or without theparticipation of third parties.

While ODR is not an entirelynew concept,ituses sophisticated technology to enhance andreplicate exist ing alternativedispute reso lution processes.Disputes from smartcontracts should be resolvedthrough online dispute resolution systems.

Asynchronous online mediationhas alsoprovento

be the most prevalent form of online mediation, granting the involved parties flexibility and aquicker resolutionofthe matter as opposed to inpersonmediation,whichmay seeamediation movedtoa far-off date because of the parties’ conflicting schedules.

Technical brilliance of ODR Thisdigital evolutionwas derivedfrom thesynergy betweenADRandtechnology designedto mimichuman thought processesand intelligence.The techbehind theprocess istermedthe “fourth party” asit isconsid eredan independentcontri butionto themanagementof the dispute.

With thenormalising of virtual hearingsbefore and during thepandemic, virtual hearings will likely remain an option post-pandemic.

From adispute resolution perspective, courtsare now workingin asimilarfashion, and everythingis becoming paperless.

Whenadisputeisofficially resolved, ahand-signed con tract istraditionally expected. This is notnecessary for the digital era.

Contracts are getting smart Smart contractsare digi talised contractsdeveloped through blockchaintechno logy that executes all or parts ofan agreementand

is a useful tool in ODR.

Computer programmes coded with protocols that can facilitate, verify,execute, and incorporate contractual terms are used to document the agreementbetween the parties.

Blockchain technology encourages trust, security, transparency andthe trace ability of datashared across networks while delivering cost savingswith new competencies.

This hasenabled channels like onlinedispute resolution to becomemore acceptable and mainstream,trans formingthe waywework, interact, playand resolve legal disputes.

• Labour court accepts that race played no role in the pay distinction between employee and others

THE EMPLOYER’S WITNESS CONCEDED THERE WAS A HUGE WAGE GAP BETWEEN THE EMPLOYEE AND HIS COMPARATORS

THE EMPLOYEE … FAILED TO DEMONSTRATE HIS RACE WAS AN ESSENTIAL CONDITION FOR BEING PAID LESS

BUSINESS LAW & TAX

Pitfalls of idyllic workplace

HOME OFFICE WITH A VIEW

Denny Da Silva Baker McKenzie

If Covid-19 hastaught us anything, it isthat an exclusiveoffice inwhich to performyour workis nolonger anabsolute requirement.

While nota newconcept, the popularity ofan islandhopping, “workingnear the waves”, digitalnomad life appeals to many, even pro fessionals. Butfew individu alsoremployersconsiderthe inherent tax risk with this new-age working model.

Whiletechnologyhaskept upwiththechanges,thebasic tax principlesremain the sameand shouldalwaysbe considered, because interna tional tax law has not evolved in this area asmuch as one may think. This isnot to say thereisno spacefordigital nomads; on the contrary, this is increasinglybecoming an important consideration for anyjob-seeker theabilityto work from anywhere.

Here,we aremore concerned withemployees who wishto workremotely and whatan employer should considerwhen intro

ducinga “work from any where” policy.

The riskfor theemployer, onethatneeds tobecarefully managed, isthe possibilityof creating a permanent estab lishment in another country.

Thisis essentiallyfancylingo forcreating atax presencein another country.

While theanalysis and ultimate answer to whether a tax presence iscreated is cumbersome and involves a number of considerations, an important considerationis whetherthe presenceofan employee in another country couldcreate ataxablepres ence for the employer in that country.

If thisis thecase, the employer would essentially create a “branch” in that country, and besubject to

corporate incometax onany businessprofits thatcouldbe attributed to that branch. Theremayalso beVATcon sequences,but thetwotests are not mutually exclusive.

For anindividual, thegen eral rule isthat a taxable presenceis createdafteran individual spends more than 183 days inany 12-month periodin acertaincountry, but it canvary depending on the country. The starting premise isthat beingin a country and rendering ser vices means that an individu al’sincomeis sourcedinthat

CONSUMER BILLS

country, which iswhen dou bletax treatiesapply interms of howthe taxingrights are allocated.

Where thereis nodouble tax treaty inplace, then an individualpays taxinone

countryonasourcebasisand in another countryon a residency basis, butmay be ableclaim acredit fortaxes paidintheothercountry an administrativenightmarethat canruinyour timeonthe beach.

The responsibilitiesof a “digital nomad” would need tobecarefully managedsoas nottocreate thistaxpres ence. For low-level employ ees withbasic oradministra tive functions, the risk is generally low because the employee will not be doing any work of substance in that country and wouldnot gen erally be in a position to negotiateorbinditsemployer to anycontract. Ifthis isthe case, then the employer would need to reconsider what is termed “administra tive functions”

Forsenioremployeesor,if you like, administrative-staffwith-contract-negotiatingpowers, the line becomes blurred anda significantrisk starts to develop.The ability tonegotiateorenterintocon tracts or have a material influence in any of these aspects vastly increases the risk of apermanent estab lishmentbeingcreatedforthe employer.

Employees thatfit this profileshould ratherbegiven approvaltogo onleaveand not permission to work remotely from a desk with an enviable real-life ocean view. After all, it would probably be betterfor theirmental health notto beworking while on holidayin an exotic location!

The responsibility of WhatsApp group admins

The elegance of our Roman-Dutch common law system includes being based on principle rather than on precedent.

In about530 BCE, and in a mere three years, Roman law was codified in the Digest under the guidance of the Emperor Justinian. The principles established by classical Roman law and its development after the Digest form the foundation of many branches of law including the law of sale, contract, agency, family law, and for present purposes, the law relating to wrongful, harmful conduct, including defamation.

The other important principle, especially in our constitutional democracy, is the fact that there are very few situations where faultfree strict liability applies.

A media flurry followed the introduction of a new

PATRICK BRACHER

feature by WhatsApp giving group administrators the ability to delete any message posted by a group member. It has been suggested that SA law determines that the admin of a group is legally responsible for content that they could have removed but did not. It has even been said that, if the admin does not remove a wrongful message, they become legally responsible for every actionable message that appears on that group.

That is not the law. In the case of defamatory matter, there is no strict liability. First

of all, you have to be the person who publishes the defamation. The group admin does not publish group members’ messages unless they endorse it or forward it. By the time the message comes onto the group chat, it has already been published to all members of the group.

Generally, the group admin cannot be personally responsible for the fact that someone chooses to pass the defamatory matter on and so publish it to third parties, or approves the message. The fact that the group admin could have removed the content does not create the necessary legal intent to defame the person whose reputation is injured.

Besides the publication requirement, the failure by an admin to delete the message does not mean the admin associates themselves with the message or had an

intention to defame the target of the message. It would put an impossible legal burden on a group admin to have to sort out, mostly without knowledge of the intricacies of law or the facts, what is and is not injurious or wrongful.

The so-called chain of publication does not have its links intact if the group admin neither publishes nor specifically permits nor fails within two days to take down the offensive matter.

The same applies to criminal law. You do not commit a crime unless you have a guilty mind. Guilt is not imputed by a failure to act when there is no duty to act. Group admins do not have a strict duty to take down offensive matter because the value judgments involved and the knowledge of law required would create an unacceptable burden of

guilt.

There may be reputational issues for a group admin who fails to take down, for instance, a blatantly racist statement in the knowledge that it has been put on the group message platform. Every group and group admin would be wise to make it clear to members of the group that the admin is not responsible for what is posted by other members on the group nor is the admin legally obliged to take down the messages of members.

Each group member is responsible for their own

messages. Any member publishing matters to the wider world will have to bear the consequences themselves.

The admin’s position is different if the group is established for the purpose of encouraging, making or distributing inappropriate or offensive matter. The group admin will be part of the chain of publication in that situation. But the same cannot be said for an innocent neighbourhood group or work group that needs someone to administer it.

Therefore group admins should cover their backs by setting the basic limits suggested, but don’t shut down useful groups for want of an admin.

● Patrick Bracher (@PBracher1) is a director at Norton Rose Fulbright.

THE GROUP ADMIN DOES NOT PUBLISH GROUP MEMBERS’ MESSAGES UNLESS THEY ENDORSE IT OR FORWARD IT

• Working near the waves may sound truly wonderful, but beware of the tax collector in the fynbos

THE RESPONSIBILITIES OF A ‘DIGITAL NOMAD’ WOULD NEED TO BE CAREFULLY MANAGED

/123RF KARANDAEV

THE RISK FOR THE EMPLOYER IS THE POSSIBILITY OF CREATING A PERMANENT ESTABLISHMENT IN ANOTHER COUNTRY

BUSINESS LAW & TAX

Authentication and its pains on blockchain

SIGN ON THE (VIRTUAL) DOTTED LINE

Dylan Cron, Kenan Peterson & Jamie Battersby Webber Wentzel

SA enforcesforeign arbitration awards through the Inter nationalArbitration Act 15 of 2017

Theact which adopts the UncitralModel Lawon International Commercial Arbitration (asmodified) provides forrecognition and enforcement ofawards as required by theNew York Convention onthe Enforce ment ofForeign Arbitral Awards1958, subjectto addi tional requirements.

The act requires the origi nal arbitral award and origi nal arbitrationagreement “authenticatedin amannerin which foreign documents must beauthenticated to enablethem tobeproduced in any court”, alternatively a certified copy ofthe award and agreement, tobe pro duced forenforcement pro ceedings. Acertified copy, however, means “ a copy authenticated ina mannerin which foreign documents must beauthenticated to enablethem tobeproduced in any court”

Under SA’s UniformRules governing courtprocesses, rule 63 provides for the authentication offoreign documents (excludingaffi davits), withauthentication

servingthepurposeofverify ing signatures on them.

Broadly,this requiresthe signatory to appearbefore a specified officer, identify him- orherself andsign the relevant document before the officer, who then appends a certificateor thelikecon firmingthe factofsignature by theidentified signatory. (As an aside,it is unclear howa copycould everbe authenticated.)

havesignaturesat allinthe traditional sense that are capable ofauthentication. Moreover, it would be rare for anarbitrator/arbitral panel tosign anaward before an officer nominated under rule 63, solely for purposes of external confirmation of who signed the award.

So apartfrom blockchain complications, even tradi tionally signedarbitral awards may face difficulties when it comes to authentica tion.

Several potentialsolutions could bedevised withinthe existing framework to cater for this difficulty regarding signature and authentication:

Although rule63(4) does provide fora “catch-all” pro vision where a court “ may accept as sufficiently authen ticated any document which isshown tothe satisfactionof such courtor theoffice, to havebeen actuallysignedby the person purporting to have signed such document”, this does requiresome form of signature.

A potentialdifficulty thus arises. Ifthe originalarbitral agreementor awardisgene ratedinavirtualenvironment onthe blockchain,it maynot

● The ElectronicCommuni cations and Transactions Act, 25of2002 provides for the use of electronic and advanced electronicsigna tures,which maysufficeto meet rule 63(4), supplement ed by additionalevidence, if necessary (althoughwhere an arbitration agreement is silent on the signature requirements, statutorily only the more securely digitally signed method of signature would be accepted.In other words,it islikely thecourt would only accept an advanced electronicsigna ture which meets the requirements of the Elec tronic Communications and Transactions Act);

● If authentication is impos

sible, given the nature of the award oragreement, thenit couldbe arguedthat rule63 (andthe IAauthentication/ certification requirement) could never be met, permit tingthecourt toadoptapur posiveapproach toensure thatthe safeguardsper formedby theserequire mentsare satisfied.It maybe a stretch, however, to argue that the maxim lex non cogit ad impossibilia truly applies, giventhat thepartieswere free to sign the agreement in the traditional manner;

● Ifthe partieshaveagreed to the awardand the agree ment being located in a vir tualenvironment, thendoc trines of waiver and estoppel may prevent the losing party objectingto recognitionand enforcementonthebasisdis cussed above.This doesnot,

however,solve thedifficulty thatthecourt wouldstillitself have to apply the act, even without any opposition.

Parties seeking to have foreign arbitralawards recognisedin SAmayfirst want to have the underlying agreements signed tradition ally, before an officer with authentication powers, before uploading itto the blockchain.That wouldren derthe storagelocation irrelevant.

Ultimately, the act has cumbersome requirements which may nothave been stress-tested practically.It remainstobeseenhowthese will beapplied bythe courts whenfacedwiththeprospect ofrecognising andenforcing aforeign arbitralaward locatedon theblockchain. Clear legislative development

/123RF MEHDIALIGOL

to dealwith thispotential issue would be welcomed.

Itis hopedthat ourcourts will adapt to ensure foreign arbitralawardsmakinguseof newtechnologies arenot defeatedby formalisticpoints raised byopportunistic defendants.

Although it was stated years ago, inthe context of jurisdictional challenges,the followingstill ringstrue today: “Welive in atime of rapidly growing commercial and financialsophistication anditbehoves thecourtsto adapt their practices to meet the currentwiles ofthose defendants who are prepared todevote asmuch energyto making themselves immune to the courts’ orders as to resistingthe makingof suchorders onthe meritsof their case.”

Terms to be met for Sars default judgment

In the judgmentof Taxpayer M v Commissioner for the SouthAfrican RevenueSer vice(VAT1826)[2022]ZATC4

(May 102022), theGauteng Tax Court hadto consider whetherit shouldgrant default judgment infavour of thetaxpayer(to setasideits penalty assessment).

This application followed Sars’ failure totimeously deliverits statementof groundsof assessmentand opposing the appeal in terms of TaxCourt rule 31(rule 31 statement).

Thefactsof thecasewere as follows: Following the tax payer’snotice ofappeal against Sars’ disallowance of its objection, Sars had 45 businessdaystofileitsrule31 statement.Shortly beforethe 45-dayperiod expired,the parties agreed to suspend the 45days pendingdiscussions betweenthe parties’ legal representatives.

Onceit becameapparent to the taxpayer the matter would not beresolved out sidetheformalcourtprocess, it notifiedSars to fileits rule 31 statement within 45 days from the date of the letter.

Thecourt confirmedthat,

beforeanapplicantmaybring an applicationfor default judgment,thefollowingjuris dictional requirementsmust be met:

● 1. The respondentmust be indefault withanobligation or failed tocomply with a period prescribedunder the Tax Court rules;

● 2. The applicantmust have delivered anotice interms of rule56(1)(a) ofthe TaxCourt rules notifyingthe respon dent toremedy thedefault within 15 days; and ● 3. Therespondent must have failed toremedy its default within 15 days.

The courtfound thatthe taxpayer’s application for default judgmentwas pre mature. Thetaxpayer was first required toserve a for mal rule 56(1)(a) notice on Sars,granting Sarsafurther 15 daysto remedyits default (ie, fileits rule31 statement), before it was ableto bring an application fordefault judg

ment interms ofTax Court rule 56(1)(b).

The practicalimplication of the judgment Wherea partyfailsto fileits rule 31,32, or33 statement timeously, TaxCourt rule 52(6) requires thatthe party first bring anapplication to condone the late filing.

It follows that if Sars is late in filingits rule31 statement (voluntarily without being prompted bythe Taxpayerin terms of a rule 56(1)(a) notice), Sarsisrequiredtofirstbringa condonation applicationin terms of rule 52(6).

However, supposeSars

delaysthe processof filingits rule 31 statement, forcing the taxpayerto firstserve arule 56(1)(a) notice on it. In that case, Sars obtains a further 15-day extension tofile its rule 31statement without having to bring a condonation application.

This interpretation does not seem fair.One would expectthatwhile Sarsispro vided withan additional15 daysto fileitsrule 31state ment beforethe taxpayer mayapply fordefaultjudg ment,Sarsis stillrequiredto apply for condonation of the latefiling ofitsrule 31state ment in terms of rule 52(6).

• Arbitral deals generated virtually on blockchain may not have signatures in the traditional sense

Riette Lombard AJM

THE COURT FOUND THAT THE TAXPAYER’S APPLICATION FOR DEFAULT JUDGMENT WAS PREMATURE

THE ACT HAS CUMBERSOME REQUIREMENTS WHICH MAY NOT HAVE BEEN STRESS-TESTED PRACTICALLY

BUSINESS LAW & TAX

Dust off that plan for the dawn raiders

Heather Irvine Bowmans

The recentCompe tition Commission raid on insurance companies, its first inyears,isawarn ing to companies operating in SAto implementacompre hensive dawn-raid plan.

Thisplan shouldidentify the coreteam responsiblefor dealing with a search, includ ing seniormanagement, inhouse legal counsel and the IT andsecurity managers responsible for each site.

Anexternal supportteam, including thecompany’s lawyers andinvestor rela tions expert, shouldalso be identified.

Staff need to be clear on procedures tobe followed and who is responsible for dealing withthe regulatorin the event of a raid.

Theplan shouldoutline key principles to be adopted to dealwith thesearch oper ation,and shouldtakeinto account travellingdistances, aswell asthesize andnum berofcompanypremisesthat may beinvolved. Ideally, competition authority staff

should be askedto wait for the company’slegal advisers to arrivebefore commencing the search, and the warrant shouldbephotocopiedandemailed to the core team as swiftly as possible.

However, the commission staff may begin the search before external counsel arrive,andso staffshouldbe appointed to “shadow” each commission official, and monitor theconduct ofthe search.

Shadow staffrecord which offices are visited, all

locaterelevant partsofthe building being searched, or the relevant records being sought, to minimise disrup tion of the business (or even a complete shutdown of the company’s operations).

Ideally,this coreteamof employeesshouldreceiveindepth training toensure they understand the crucial role theywillplayduringandafter the dawn raid.

Adequate measuresneed to be put in place to protect the company’s legally privi leged documents.

The commissiontakes the view that it is entitled to remove documents that are claimed as legally privileged, although these are generally not read on site.

Staff should insistthat any legal opinions, or communi cations to or from legal coun sel are placed in a sealed bag priortobeingremovedbythe commission.

mission to remove highly confidential information, suchas strategicplans,bud gets,pricingorcustomerlists, companies are entitledto file aconfidentialityclaiminrela tion toany hardcopies and electronic files that are removed or copied, and shoulddo soimmediately,to ensure that this information does not find its way into the handsofthird partiessuchas customers or competitors or the media.

In recentraids, thecom mission has engaged an external service provider to extract a mirror image of company’s servers,which can later besearched repeat edly using keywords.

impact on staffmorale as far as possible.

Once the searchis over, the companywill needto conducta thoroughinternal investigation to determine whether any contravention of theCompetition Acthas occurred.

questions asked byeach offi cial, and noteeach document reviewed or removedby the authorities.

It isimportant that employees co-operatefully and assistthe commissionto

If thecommission does not observe this procedure meticulously there may well begrounds forthecompany toapproach thehigh courtto set aside the seizure.

Although itis notpossible torefuseto allowthecom

IT staff needto be avail able to assistthe commission to obtain access, without crashing the systems.

It is a goodidea to formu late an external communica tion plan to deal with ques tionsfromthe media,aswell as an internal communica tionplan topreserveconfi dentiality and dealwith the

It may stillbe possible to qualifyfor immunityfrom prosecution in terms of the commission’s corporate leniency policy in relation to the complaint identified in the searchwarrant, orother potential contraventionsof the act of which the commis sion isnot yetaware (for example,involvingothertime periods,service orproduct lines,or differentprohibited practices).

Accordingly, considera tion needs to be given to applying for a marker to join theleniencyqueueassoonas possible. Companies that offer substantialco-operation at anearly stage aftera dawn raid may indue course be ableto negotiatereduced administrative penalties.

Whilethecommissionhas not been as active in con ductingsearches sincethe Covid-19 lockdown began (and weare still along way from2015/2016, whenthe commission conducted five raids in18 months),this recentseizure operationmay signal a returnto more nor malenforcement bythe commission, including more active cartel prosecutions. Although thecommission has said itwill prioritise investigationsin sectorsof the SA economy which affect poorconsumers, thecom missioncan anddoescon duct dawnraids inindustries that arenot now inthe com mission’spriority sectorsfor investigation.

This means thatall com panies with operationsin SA not only those in sectors suchas foodandagro-pro cessing, infrastructureand construction, insurance, banking andintermediate industrial products need to planfor thepossibilityof dawn raids.

Accepted offer of employment is binding

Jacques van Wyk & Michiel Heyns Werksmans

Inthe caseofNtsunguzi vM2 Bio Foodand Beverage(Pty) Ltd[2022] 6BALR629 (CCMA), following aseries of interviews, the interviewee receivedan emailfromthe prospective employer which read “wewould liketo offer you a positionat our com pany, for a probation period of threemonths starting October12021 Forthisinte rimperiodwe canofferyou R20,000 permonth ascom pensation. Welook forward to hearing from you”

The intervieweereplied to this correspondenceseeking further detailsconcerning the remuneration offered and expressed excitement by stating “lookingforward to hearing fromyou and

definitely lookingforward to October 1”. Thefollowingday the interviewee sent a further email whichstated: “Just fol lowing up on the conver sationbelow, I’m expected at the Woodstockoffice on October1and notHoutbay,is that correct?”

BREACHED

The intervieweewas then advised thatthe employer was stillreviewing candi datesandabout aweeklater he was informed that another candidate was chosen.

The commissionerstated that,in orderto concludea binding contract, acceptance mustbe clearandunequi vocal orunambiguous. A counteroffer is not sufficient.

In this instance the inter viewee unequivocallyaccep ted the offer. Thefact that he didso viaemailcorrespon

dence did not matter and nei therdid thefact thathe requested someclarity about his salary. Whenhe accepted theoffer, hebecamean employee. Bynot appointing him, theemployer breached the contractof employment that wasestablished. His dismissal wastherefore procedurally andsubstan tively unfair.

Conversely, inthe matter of Tshikiv NelsonMandela University [2022]8 BALR 860 (CCMA),following a recruitment process the interviewee claimedthat he was informed telephonically byan HRconsultant ofthe employer (who thereafter passedaway) thathehad been successful in his appli cation fora positionhe applied for.

While beinginformed of this, he wasadvised to send

hispayslip toher tofinalise the offer. On his own version the HRconsultant later informedhim thattheshort listing processfor theposi tion had beenchallenged and the offer had been delayed.

NO CONTRACT

The intervieweeconfirmed, in a “follow-up” correspon dence, that he was still await ing the offer. Thereafter, the interviewee hadbeen told that anothercandidate had been placed in the position.

In this case the commis sionerfound thatnocontract of employmentwas con cluded as there was on his own version no offer and no acceptance.

In both the Ntsunguzi and the Tshiki matters,the CCMA referred to the Labour Appeal Court’s (LAC)decision of Wyeth SouthAfrica (Pty)Ltd

v Manqele and others [2005]

6 BLLR 523 (LAC).

In the Wyeth matter, the LAC held that a person who hasconcluded acontractof employment but has not yet commenced workingfor the employer is anemployee, for purposes of the Labour Rela tions Act 66 of 1995 (LRA).

Ultimately, afactual enquiry hadbeen conducted in both theNtsunguzi and Tshiki mattersto determine whether theprinciple con firmed in the Wyeth matter

PULLQUOTE IN CAPS FOR DEPTH OF BOX BUT NOT LESS THAN FOUR LINES OF COPY/ OR MORE THAN 8, LINE SPACE ON TOP

had been established,that is whether acontract ofemp loyment had been concluded.

The factualenquiry involves a “backward-look ing” process.As summarised in Youngv BarnesGroup (2019)40 ILJ479 (CCMA),for anemploymentagreementto be valid, there must be:

● An intention to create a legal relationship;

● Offer and acceptance;

● Agreement as tothe ess entials of the contract; and

● Consensus asto therights and duties of the parties.

Employers arereminded to avoidproviding offersof employment ifthe relevant recruitment processes or details ofa vacantpost have notbeen finalisedas avalid employment agreement maystill becreatedand enforced throughoffer and acceptance.

• Companies must have internal and external teams responsible for dealing with searches by regulators

ADEQUATE MEASURES NEED TO BE PUT IN PLACE TO PROTECT THE COMPANY’S LEGALLY PRIVILEGED DOCUMENTS

/

BUSINESS LAW & TAX

Common purpose in the workplace

Francis Mayebe & Tracy van der Colff Baker McKenzie

The doctrineof common purpose is a well-known principle incrimi nallaw.Inessence, iftwo ormore people,having a common purpose to com mit a crime, act together in ordertoachievethatpurpose, then the conductof each of them in theexecution of that purposeis imputedtothe others.

Fromalabourlawcontext, thedoctrine isrelevantin instancesof violentstrike action. The vexedquestion is whether an employer may apply the doctrineof com mon purposeto dismiss employees formisconduct wherethe employeeswere spectators to a violent assault during an unprotected strike.

The ConstitutionalCourt (CC) provided someguidance

in this respectin August 2022,in NumsaoboAubrey Dhludhlu and147 Othersv MarleyPipe Systems(SA) (Pty) Ltd [2022] ZACC 30.

One hundredand fortyeight employees participated in an unprotected strike, dur ing whicha roguegroup of12

The chairfound allthe employeesguilty oftwo counts ofmisconduct both theassault andparticipating in an unprotected strike.

Forty-oneof theemploy ees challenged this decision andboth theLabourCourt (LC) and Labour Appeal Court (LAC)found infavour ofthe employer. The LACheld that toavoid liabilityunderthe doctrine of common purpose, the employeesin thevicinity ofthe assaulthad anobliga tionto takepositive stepsto disassociate themselvesfrom the conduct of the perpetra tors and interveneto stop the violence from taking place.

violentaction, theCCfound that the LAC misconstrued the doctrine ofcommon pur pose by requiring bystanders totakepositivestepsindisas sociating themselvesfrom the actual perpetrators, and intervening instopping the violent action.

Common purpose requires activeassociation with the violencebefore its commencement. Themere presenceat thescene ofthe violentactiondoesnotinvoke the doctrine of common

MASS ACTION

violently assaulted the employer’s head ofHR. The employer instituted disci plinary proceedingsand dis missed all148 employees whohad participatedinthe strike and hadbeen present during the assault.

Initsfinding,theCCunan imously overturnedthe deci sionoftheLAC.TheCCfound that 12of the148 employees were actively engagedin the assault,and 41of theemploy ees wereunidentified. Despite the probability of the unidentified employeesbeing at thepremises duringthe

LEGAL SCOOP

purposeandimputethatcon duct to all bystanders.

In thisinstance, therewas no clear evidencethat the employees intendedto asso ciate themselveswith violent actions. The mere fact the employees were singing dur ing the violentaction was not enough to establishan active associationwith theviolent actionand thusestablisha common purpose.

RETALIATION

Active disassociationby intervention in the context of aviolentstrike mayputan employee inharm’s way. Therefore,an employeeis entitledto choosesilencefor fear of retaliation

TheCCset asideboththe LCand LACfindingsand referred thematter backto the LC toconsider an appro priatesanction onthecharge

/123RF DIGITALGENETICS

of participationin anunpro tected strike only.

The CCclarified the application of the doctrine of common purpose,and its application in the context of employmentlaw. Itisunde niable that singing and jeering while your colleagueis being violentlyassaulted isabhor rent,butinthiscaseitwasnot enough to invoke the doc trine.

Common purpose requires positivesteps in associatingoneself withvio lent action.Our lawdoes not require that an employee actively disassociatesthem selves from the violent action or intervenes. Therefore, a carefulanalysisisrequiredon the basisof thefacts andevi dence todetermine whether the employee is guilty of misconduct by wayof com mon purpose.

Watch what you do with your industrial waste

The mass production of goods worldwide is at a record high with fast fashion, fast food and fast learning leading the way.

What’s the catch, you may ask? Easy: waste. As a result of the increasing demand for the supply of goods, and the aftermath that comes with disposing of those goods, commercial law transactions and legislative changes are requiring large entities to reassess how they can reduce their environmental footprint.

EXTENDED PRODUCER RESPONSIBILITY

The National Environmental Management Waste Act 59 of 2008 (act) regulates how waste is managed in SA, providing for various practices to be implemented by individuals and companies alike, to prevent pollution and promote social and ecological sustainability.

Section 18 of the act deals with what has been coined as “extended producer

LEGAL SCOOP

responsibility”

Essentially, this term means that a producer is now responsible for what happens to the packaging of its products after the consumer has bought and used those products, otherwise known as the “post-consumer stage”

On the back of section 18, as well as section 69 of the act, the department of forestry, fisheries & the environment (the department) introduced a new set of regulations, which were subsequently amended in 2021, detailing the extended responsibilities that have been imposed on producers regarding the packaging of their products.

The regulations apply to a variety of product packaging. These classes of products include paper and packaging material, single use compostable plastic packaging, single use plastic products, single use biodegradable products, glass packaging, and metal packaging.

In a nutshell, pretty much every kind of packaging material is included, except for shipping containers, timber or textiles, and plastic pallets or bulk containers exceeding 1,000l

AIM OF THE GAME

The purpose of introducing additional producer responsibilities is to encourage a circular economy. A circular economy aims to create a system that will significantly reduce waste by focusing on maintaining, repairing, recycling, re-using, or refurbishing product packaging. Therefore, the materials that package the

products we buy will not always be discarded, but rather repurposed or regenerated.

So, who needs to pay attention?

The regulations define a “producer” as any person or category of persons, including a brand owner who is engaged in the commercial manufacture, conversion, refurbishment (where applicable) or import of new or used identified products as identified by the minster by notice in the Government Gazette in terms of section 18(1) of the act.

What do you need to do?

By definition in the act, a producer is financially or physically responsible for implementing schemes and strategies that will effectively implement the obligations placed upon them by the act and the regulations. These schemes and strategies must be implemented in conjunction with waste collection organisations or

waste pickers. The following main steps must be taken by a producer in order to comply with the regulations:

● 1. Register as an identified producer with the department;

● 2. Curate and submit an extended producer responsibility scheme to the department within six months from the date on which the producer commenced business.

Alternatively, a producer can join an organisation running an existing scheme within three months from the date on which they commenced business.

Producers who join an organisation will have to

make payment of a fee, prescribed by the organisation. The organisation itself will have to submit both interim and annual performance reports to the department, which will be measured against the waste reduction targets set out in the regulations.

A producer who establishes its own scheme must similarly submit both interim and annual performance reports to the department.

These submitted reports must show the quantity of waste that has been either exported, collected, diverted from landfill, or replaced on the market.

In the era of climate consciousness, companies are ethically responsible for reducing their carbon footprint, the aforementioned legislation is certainly a step in the right direction.

● This month’s column was written by Jessica Strydom, Fluxmans attorneys

A PRODUCER WHO ESTABLISHES ITS OWN SCHEME MUST SUBMIT INTERIM AND ANNUAL PERFORMANCE REPORTS

• Constitutional Court clarifies grounds on which employees can be dismissed when violence occurs

TWELVE OF THE 148 EMPLOYEES WERE ACTIVELY ENGAGED IN THE ASSAULT, AND 41 OF THE EMPLOYEES WERE UNIDENTIFIED

THERE WAS NO CLEAR EVIDENCE THE EMPLOYEES INTENDED TO ASSOCIATE THEMSELVES WITH VIOLENT ACTIONS

BUSINESS LAW & TAX

Best defence is good ESG

DO THE RIGHT THING

Sarah McKenzie, Maria Philippides & Anél De Meyer Webber Wentzel

Increasing public and regulatory scrutiny of claims bycompanies abouttheir ESG(envi ronment,social andg overnance) achievements makes it essential these are accurate, well-founded and backed up with data.

Inmany jurisdictions,soft law recommendations about companies’ ESG-related acti vities arematuring intohard law obligations.As thepres sureon companiesandinsti tutional investorsto tackle ESG issuesintensifies, regu lators aredeveloping disclo sure standardsto meet investors’ information needs.

For financial institutions in SA, crackdownsby global regulators should beseen as awarning tomake sureany ESG-related statements are substantiated and true.

InMay 2022,theUS Securities andExchange Commission (SEC)proposed two amendmentsseeking to enhance and standardise dis closuresof ESGfactorscon sidered by funds and advis ers, and toexpand regulation on the namingof funds with an ESG focus.

InNovember 2021,the UK’s FinancialSector Con duct Authority(FCA) pub lished its ESGStrategy, stat ing thatmarket participants and consumersmust beable totrustgreen andotherESG labelled financial instruments and products.

InEurope andChina,reg ulators arealso imposing new obligationson compa nies to conductdue diligence to identifyadverse environ mental effects, and to make

greater disclosureof envir onmental information.

SA’s current disclosure and reporting requirements do notexplicitly requiredis closureson ESGmatters,but thismay change.Thereare, however, guiding principles on disclosuresrequired by companies:

● The KingCode, which deals withcorporate gover nance, emphasisessustain abledevelopment asa “pri mary ethicaland economic imperative”. Thisreflects an approach that incorporates

tial Authority underthe Fin ancialSector RegulationAct, 9 of2017, requireslife insur ers,nonlifeinsurersandrein surers tomeet thefollowing requirementsin theirinvest mentpolicies: (i)settingout theirstrategy forinvesting, including assetallocation strategies andhow thesewill bemanaged; and(ii)taking into accountany factorthat maymateriallyaffectthesus tainable long-termperfor manceof assets,including ESG factors;

● A reviseddraft Codefor ResponsibleInvesting inSA (Crisa) 2.0sets outprinciples and practicerecommenda tions with a clear emphasis onESG and sustainable development issues; and

ESGfactors intoinvestment decision-making. TheJSE requireslisted companiesto report annually,on an “apply and explain” basis, the extent to which they have complied with the King Code;

● JSE-listed companies have general continuingdisclosure obligations under the JSE list ings requirements, which applyto financiallymaterial ESG issues;

● On June 14 2022, the JSE releasedits Sustainabilityand Climate Disclosure Guidance note,which aimstopromote transparencyand goodgov ernance,and guidelisted companiesonbestpracticein environmental, social and governance disclosure;

● PrudentialStandard GOI3, promulgatedby thePruden

● TheFinancial MarketsAct 2012makesit anoffenceto publish, in respectof past or future company perfor mance, any false or mislead ingstatement, promiseor forecast. The risk of breach ingthisact willriseascom paniesmore regularlyreport toshareholders andstake holders ontheir ESGconduct andasESGconcernsbecome moreimportant ininvestor choices.

One of the principal ESGrelatedlitigation risksfaced by the financial sector is the potentialfor inaccurateor misleading ESG disclosures, includingon climatechange, or “greenwashing”

Greenwashing is gener allydefined asunsubstantiat edor misleadingclaims aboutan entity’s environ mentalperformance, orsel ectivedisclosure ornondis closureof theenvironmental or social impacts of a compa ny’s business practices.

In other jurisdictions there hasbeen asurge oflitigation

inthese categories,and sometimes theregulators themselves have taken action.Recent casesinclude Abrahams vCommonwealth Bankof Australia,where shareholdersof theCom monwealthBank ofAustralia filed acomplaint in2017 against the bank for investing incoalmines; SECvValeSA, inwhichtheSEChascharged Vale, a publicly traded Brazil ianmining company,for committing securitiesfraud by intentionally concealing thatits Brumadinhodam might collapse, andthat the flowfrom thedamwould

cause significantenviron mentaldamage; andSECv BNY Mellon, where the SEC hascharged BNYMellon,an investmentadviser, foromit tingor makingmisleading statementsabout theESG investment considerationsof its managed mutual funds.

There hasbeen nodirect orexplicit greenwashingliti gation in SAor ESG-related enforcementaction bySA regulators, butSA legaland regulatorylaws createthe platform andcater forthe possibility of greenwashing claims and litigation.

ROBUST Officers,directors andfund managersshould focuson ensuring that ESG-related disclosuresare accurateand developing robust policies andprocedures toevaluate ESG-related issues.

Thefollowingrecommen dations couldhelp tomitigate these risks:

● Ensuring thatgovernance

and oversight committees focusedon ESG-relatedtop icswork closelywithdirec tors andofficers sothat man agement andoperational personnel remain wellinformedabout howthese topicsimpact corporatedeci sion-making; and ● Financial institutions should: (i)makeevery attemptnotto overclaimclimate actionsthe companyis takingtowards net-zero(or other)commit ments; and (ii) review ESG disclo sureswith marketing,scien tific and legalteams to avoid publishing potentiallymis leading information.

Like allclaims basedon misrepresentation, the truth isthebest defence.Ifacom panycan supportconcrete statements with concrete sustainabilityefforts andfirm data, itis more likelyto be able toneutralise anddefend potential greenwashing claims.

SA stalling on blockchain arbitration agreements

Dylan Cron, Kenan Peterson & Jamie Battersby Webber Wentzel

Withtheadventofblockchain technology,thequestionaris es whether SA’s legal envi ronmentallows forthe recognition andenforceabili tyof foreignarbitration agreementsthat usethis technology. And, inthe best traditionof lawyers,the answer is perhaps.

At the outset, the intersec tionof blockchaintechnology with arbitrations covers expansive terrain.Blockchain technology,also referredto asdistributed ledgertechnol

ogy, is(broadly) an immutable, digital database which uses coding to gener ate whatis essentiallya ledger. Thedigital ledger records andtracks transac tions, generally inreal time, andcan beaccessedaccord ing to relevant permissions.

Each transactionis recorded as a “block” of data in the ledger, linked to the preceding andsuccessive blocks, creatinga digital chain ofinterconnected, con temporaneously successive data blocks.

This digitalledger can intersect with arbitration agreements inseveral ways.

At one endof the spectrum areself-executingsmartcon tracts, whichwould theoreti cally never(practically) require recognitionor indeed even human intervention. These smartcontracts would automatically trigger enforcement eventswhen an arbitral award is uploaded.

By way ofexample, if monies (formingthe subject matterofthedispute)areheld bya facilityora bankwhich isparty totherelevant blockchain, these funds could automatically be released onceadigitalinstructiontodo sois generatedbya favourable arbitral award.

Thisalso appliestothe transfer ofownership where ownership is evidenced elec tronically. If proof of owner ship existed in a digital space, this proof could automatically be updatedonce afinal arbitralaward tothis endis uploaded (share certificates, deeds, registration ofIP etc, if thesewere recorded electronically).

Of course,this would require the relevant registries or facilitators to be party to theblockchainandacceptthe automated “smart” rules whichwouldapply.Intheory, the act of external enforce ment couldfall awayas this

becomes anautomatic inci dence of an arbitral award. This enforcementcould span jurisdictions andlegal regimes, providedthat the relevant actors areparty to the blockchain (and the elec tronic recordingof owner ship is recognised in the rele vant jurisdiction).

We may besome way from ahomogenous digital and legal environment which would cater for this, however.

At the otherend of the spectrum arearbitration agreements whichstill require human recognition and enforcementbut have

(with therelevant arbitral award) been recorded as data blocks in a digital ledger.

Given thebenefits of blockchain technology, including real-time uploads, transparency ofthe chainof transactions, thepermanent recordingofeachtransaction, the chronological sequencing of datablocks whichmakes tampering difficultand readi lyidentifiable andso on,the immediate reactionmay be that there isno discernable reason whyawards recorded only onblockchain technolo gy should not be recognised.

Alas,thelaw isnotwith out complications.

• As scrutiny of claims about ESG targets reached grows, make sure you actually achieve them

JSE-LISTED COMPANIES HAVE GENERAL CONTINUING DISCLOSURE OBLIGATIONS UNDER JSE LISTINGS REQUIREMENTS

OFFICERS, DIRECTORS AND FUND MANAGERS SHOULD FOCUS ON ENSURING ESG-RELATED DISCLOSURES ARE ACCURATE

/123RF PRESIDENTKUMA

BUSINESS LAW & TAX

World dispute cases to grow

STATE YOUR CASE

Kylie Slambert & Ethan Chetty Baker McKenzie

The International Centre forthe Set tlement forInvest ment Disputes (ICSID) has,since 1966,beenrecognisedwidely as theleading institutionfor alternative dispute resolution in disputesbetween states and individual investors.

Thetheoretical utilityof such conventionsis relatively straightforward: inthe same manner that international commercial arbitration,in combination withthe New York Conventionon the Recognition and Enforce ment ofForeign Arbitral Awards, fuelledthe rapid expansion ofglobal com merce by offering parties to international commercial contracts amechanism to expeditiously resolvedis putes, theICSID Convention was designedto encourage foreign investmentinto states withthe promisethat,should anything gowrong, there would berecourse inthe form of enforceable awards.

The latest issue of the

“ICSID Caseload Statistics” reveals that 2021 was a record-setting yearfor cases registeredbytheICSIDunder the ICSIDConvention, with promising signsof growthin 2022sofar.Thevastmajority of claims pertainto interna tional oil, gas,mining and energy investments. This was,no doubt,aresult ofthe after-effects ofthe Covid-19

recent proceedings. Accord ing tothe “ICSIDCaseload Statistics”, thegeographic distributionofnewcasesreg istered infinancial year2022 under theICSID Convention, shows that,for sub-Saharan Africa, two caseswere regis tered in the Republic of Congo,twoin Mali,onein Senegal and onein the Republic of Sudan.

Further, only 2% of arbi trators, conciliatorsand ad hoc committee members appointedin 2022,incases registered underthe ICSID Convention and additional facility rules, werefrom subSaharan Africa.

pandemic, whichexacer bated underlyinginvestment disputes,as wellasinterrup tions to theglobal supply chain causedby geopolitical conflict.

AFRICAN CASES

Despite theglobal trend towards ICSID arbitration, African countriesform the minority ofcited statesin

SAis ajurisdiction opposed toICSID proceed ings, since the matter of Piero Foresti, Laura de Carli versus Republic of SA ICSID, which challenged transformative constitutional and statutory provisions in SAlaw, and resultedin theterminationof its Europeanbilateral invest ment treaties andthe pro mulgation of the Protection of Investment Act 22 of 2015.

Section 13 ofthis act requiresthat theSAgovern ment may only consent to international arbitralpro

ceedings onceall domestic remedies havebeen ex hausted. Accordingly, inter national investmentdisputes with SA needto be mediated andlitigatedinSAbywayofa court, independent tribunal orstatutorybody, asafirst port of call.

OtherAfricanjurisdictions are not similarly opposed to these proceedings. Mauritius has becomea gatewayjuris diction forinvestment into Africa. Tanzania,Nigeria, Ghana, Zambiaand Kenya have provided avariety of growth opportunities for infrastructure investments, structured tradeand com

VIEWPOINT AFRICA

modityfinancing,amongoth er investment opportunities.

Parties seeking to initiate proceedings and enforce awardsin Africancountries, however,often faceamulti tude of mainly practical chal lenges. These include that:

● ICSID proceedings gener ally require the application of novel,intricate andcomplex lawsfrom multiplejurisdic tions;

● ICSID proceedings gener ally require multijurisdiction alco-ordination effortsto investigate, collect evidence and sustain proceedings; and ● Enforcement proceedings generally requirea greatdeal

of legal,as wellas political and social sensitivity to the award debtor state.

CHALLENGES

Disputes arebecoming increasingly frequentand complexfor businesseswith operations across Africa.

As businesses continue to enternew marketsagainsta backdropof tighterregulato ryscrutiny, increaseddigital isationand higheraccount ability, legal advice that offers an interconnected,multi jurisdictional, cross-border approachto arbitrationand dispute resolution, has become essential.

Competition watchdogs improve co-operation

Brought to you by ENS

Now more than ever before transacting parties should remain cognisant of the competition law regimes applicable across Africa.

In addition to the everincreasing regulation of competition law in general, there has been notable growth in the monitoring and enforcement capabilities of African regulators.

A critical tool in this regard is information sharing (co-operation) among regulators, which can take various forms, including informal commitments and formalised memoranda of understanding

In May this year, the fair competition commissions of Tanzania and Zanzibar undertook to co-operate in a strong working partnership going forward.

In July, the Egyptian Competition Authority agreed with the Tunisian Competition Council to enhance co-operation in the competition law domain. In August, the Egyptian authority further concluded a

memorandum of understanding with the Competition Commission of SA, in terms of which the agencies have committed to co-operate in various areas of competition law.

A further example of the collaboration trend is the recent memorandum of understanding entered into between the Comesa Competition Commission and the eSwatini Competition Commission in August, the objective of which is to foster cooperation and harmonisation across the agencies.

TANZANIA

In July 2022, the Fair Competition Commission of Tanzania published its whistle-blower policy, the objective of which is to enable and encourage stakeholders to report corruption, malpractice and other forms of unethical behaviour by employees of the commission.

The policy makes provision for, inter alia, reporting procedures, confidentiality measures and compensatory rewards for

whistle-blowers, with the aim of enhancing and protecting the integrity and reputation of the commission.

BOTSWANA

On August 4, the Botswana Competition and Consumer Authority approved, subject to conditions, a transaction involving the indirect acquisition by Heineken of the flavoured alcoholic beverages, wine and spirits businesses of Distell Group Holdings.

In addition to the horizontal overlap, the transaction encompassed the acquisition of a dominant market share held by the target business before the merger. Thus, Heineken undertook to dispose of its own flavoured alcoholic beverage brand (Strongbow), which the authority acknowledged as a divestiture undertaking and imposed additional measures as conditions. These include a complete disassociation between Heineken and the Strongbow brand in Botswana, and monitoring mechanisms to enable the

authority to assess the notifiability requirements of any subsequent transaction with the new brand owner.

Furthermore, to address the public interest concern arising from the absence of Botswana-owned local distributors, the authority imposed conditions aimed at empowering a citizenowned distribution company. The conditions oblige the parties to identify and equip (through a supplier/ distributor development programme) a locally owned distributorship business for eventual inclusion in the supply chain.

MOROCCO

The Competition Council of Morocco imposed a fine of 3-million Moroccan dirhams (about R4.8m at the time of writing) on the Accounting Association for agreeing to fix the minimum hourly audit rate in violation of article 6 of the Law No. 104-12, which prohibits conduct that impedes, limits or distorts competition in a market.

It was found that the conduct deprived small and medium companies of audits

conducted at competitive prices and was not in accordance with the functions of the association.

MOZAMBIQUE

Less than two years since becoming operational, the Competition Regulatory Authority of Mozambique issued its first penalty for a contravention of the competition law (Law no 10/2013 of April 11 2013). The authority imposed a fine of 41-million meticais (about R11m at the time of writing) against merging parties for failing to notify a transaction subject to mandatory filing prior to implementation. In Mozambique, gun-jumping constitutes an offence punishable by a fine up to 5% of each or all of the infringing

parties’ turnover in the preceding year.

NAMIBIA

In 2018, the Namibian Competition Commission issued preliminary findings after its investigation into alleged collusion between short-term insurance companies. After inviting oral representations on its findings, the commission instituted proceedings in the high court. It was alleged that the defendant insurance companies engaged in a concerted practice to set maximum mark-ups and labour rates charged by panel beaters for the repair of insured vehicles.

In June 2022, the commission and Phoenix Assurance Namibia Limited (one of the defendants), concluded a settlement agreement based on an admission by Phoenix that the conduct constituted an unintended contravention of the legislation, for which penalties were imposed and commitments required to be made regarding future compliance with competition law in Namibia.

IT WAS FOUND THAT THE CONDUCT DEPRIVED SMALL AND MEDIUM COMPANIES OF AUDITS CONDUCTED AT COMPETITIVE PRICES

• Only 2% of mediating personnel appointed in 2022 so far have come from sub-Saharan Africa

TANZANIA, NIGERIA, GHANA, ZAMBIA AND KENYA HAVE PROVIDED A VARIETY OF GROWTH OPPORTUNITIES

BUSINESS LAW & TAX

What normal retirement age is today

Paul Williams & Kirsty Gibson Baker McKenzie

Benjamin Franklin famously noted thatthere aretwo certainties inlife: death andtaxes. Until not that longago, a third could havebeen added: retirement.

Youworked untilyou reacheda definedagewhen youduly receivedyourcar riage clock before heading off intothesunset toenjoythe fruitsof yourlabour.These days,the notionof adefined retirementage seemsasout datedasa carriageclock.The pandemic(ofcourse)hasonly served to accelerate this.

Some employees have had to rethinktheir retire ment plans inthe light of financial hardship,and the dramatic shift towards remote workinghas made flexi-retirement thatmuch easier.

Itis hardlysurprising, therefore, thatemployers are struggling with the notion of whenthey canand can’t dis miss anemployee onthe groundsof age.A coupleof

recent casesbefore the Labour Court inSA highlight someof thepitfallsfor employers in this area, but equally helpus understand how those pitfalls can be avoided.

Dismissalon thegrounds of ageis automaticallyunfair unless theemployee “has reachedthenormaloragreed retirement agefor persons employed inthat capacity” (section 187(2)(b)of the LabourRelations Act,1995) a deceptively simple test.

Employersoften runinto issues whenthey seekto amend theretirement age unilaterally. Bydefinition, a unilateral changecannot be “agreed” and so an employer wouldneedto arguethatthe revised retirementage was the “normal” retirement age all along. Thisis essentially

what the respondent munici palityarguedin ImatuoboSP Hlabisa and7 othersv Umkhanyakude District municipality when it sought to dismiss employees aged between 60 and 63.

The municipalityargued thatas the “normal retire ment date”,as definedinthe pension funds of which the employees weremembers, was60, thiswas their “ nor mal retirement age” and so it was lawful for it to dismiss employees aged 60 and above.

Despite this,the court found that the “normal” retirement age was65 for two main reasons. First, the employer’s policy (in prac tice; thiswas notdocument ed),which wastoallow employees to retire from age 60 butto requirethem to retireatage65,supportedthe positionthat65wasthe“nor mal” retirement age.

Second, thecourt was persuaded by the applicants’ argument that the “normal retirement date” as referred to in the context of the pen sion funds was the date after which, ifan employeewas to take a pension from the fund,

the pensionwould notbe reduced for early payment.

More helpfullyfrom an employer’s perspective,in anotherrecentcase,thecourt confirmed in Solidarity obo Gerhardus Viljoen Strydom v SITA that anemployer can enforce an agreed retirement age even when the employee works past this age.

This decisionfollows a consistent line of authorities whichstem fromthe factthat section 187(2)(b)says thata dismissalis fairifemployees “have reached” retirement age, not “when they reach”— inother words,thesection refers to acontinuing right ratherthan arightwhich arises at asingle point in time.

In this matter, SITA served notices of retirement on a number of employees aged over 60.

It was common cause that age60wastheagreedretire ment age, but the applicants claimed that their dismissals were automatically unfair on grounds of age,because the

parties hadtacitly agreedto extend the retirementage to 67.

The employees’ position derived from a contractual term that an employee who has reached normal retire ment ageof 60may, subject to SITA’s consent,remainin service until age 67.

Theemployeescontended that SITA hadgiven its con sentas ithad previouslypro vided them with salary adjustment letters.

The courtfound thatthe scope ofapplication ofthese letters was limitedto an amendment of the employ ees ’ salaries andso didnot constitute consent on SITA’s part to the employees remaining inservice. Itfound that on theevidence, the agreed retirement age of 60 remained “uninterrupted and binding”

Although theemployer was successful, this case demonstrates that even though the principle is clear that employers have an ongoingright todismissan

employee once they have reached anagreed ornormal retirement age, the evidence, and inparticular thewording of employmentcontracts, policies and retirement fund rules,iscrucialinestablishing whether an employer has compromised this right.

What these cases have in commonis thatthey demon stratehowimportant itisthat either normal retirement age is specified in the employ ment contract orthat the contractrefersto apolicyor the retirement fund rules, where normal retirement age is clearly stated.

Similarly, anyretirement policy must be unambiguous. And if an employer is seeking to make a change to the nor mal retirementage, itcannot do so unilaterally.

In thepresent working environment, many employ ers willwant togive their employees the option to continue workingbeyond normal retirement date, but insodoing, theyshouldnot open themselves up to risk.

Unprotected strikes put employers to test

Sibusiso Dube Bowmans

SAhasa richhistoryof protestaction.Whenitcomes tothe workplace,eachyear thereis aperiodthat canbe dubbed as “strike season”

Ordinarily, this happens when mostindustries engage in wage negotiations.

The right of each employ eetostrike isenshrined.Sec tion 64 of the Labour Rela tions Act sets outthe rules of engagement foremployers and employeeswhen it comes toindustrial action.

However, rulesthat areset are not always followed. This often happenswhere strikes are concerned.In instances where theprescripts section 23 of the constitution of sec tion 64 of theact have not been followed,such strikeis deemed to be unprotected.

Unprotected strikes are frequently riddledwith vio lence, intimidationand dam age to property.

For employersthis isa difficult periodwhere they experience, among other things, financialloss, reputa tional harm, loss of business and/or damage to property.

On theother hand, employees losetheir wages for the days theyare not at work andrisk facingdisci plinary action,which may include dismissal,for their conductof participatinginan unprotected strikeand their conduct duringthe unpro tected strike.Those employ eeswhochoosenottopartic ipateintheunprotectedstrike may, unfortunately,find themselves fallingvictim to threats, intimidationand, in some cases,damage totheir homes.

Foran employerthelaw has developed ina manner which,inmyview,createsan onerous burdenin dealing with employeesengaged in an unprotectedstrike. Ordi narily,whenfacinganunpro tected strike,employers will approach theLabour Court on anurgent basisfor an order declaring,among oth ers, thestrike unprotected and interdictingall employ ees from participatingin the unlawful conduct.

Employers arerequired tosatisfythe courtthatthe matter isurgent andthat the unions and/or striking employees havebeen made awareof thecourtprocess. Thiscanbechallengingasnot all employeeshave email addresses andunions may notalways takeacall tocon firm that theyhave received urgent application papers

as required by the court.

Further, foremployers to impute blame on particular individuals forviolent con duct orotherwise during an unprotectedstrike, employers now havea duty to identify the specific indi viduals who areengaging in the unlawfulconduct. This may bedifficult toachieve where groupsof employees are protesting and where the protest action is violent, or employees are behaving aggressively.

Once acourt orderis obtained interdicting the unprotected strike, employ ers are then required to com municatethe contentofthe court order tothe striking employees. Again, thiscan be tough toaccomplish when facing an angry crowd of striking employees, especiallywhere thepoliceare

reluctant to assist,which is often the case.

Inarecentjudgmentofthe Constitutional Courtin the case of Numsa obo Aubrey Dhludhlu and147 Othersv Marley PipeSystems (SA) (Pty) Ltd, a group of 148 employees hadbeen dis missed for participating in an unprotected strikeand for assaulting a manager.

The courtfound, among other things, that there must

be proof ofthe employees’ complicityinthe actsofvio lencefordismissal tobesub stantively fair.The employer had failed toshow that 41 employees, thoughthey may havebeenin thevicinityof the strike,were complicitin theassault ofthemanager and so the court found that their dismissal on the charge of assaultwas substantively unfair.

Employees shouldbe encouraged toexercise their right to strikein a lawful manner. Employers should usewhatevertechnologyisat theirdisposal tocollateas much evidenceas possibleto assist inidentifying culpable employees for thepurpose of taking disciplinaryaction, and lodgingpotential claims for damagesarising fromthe losses sufferedas aresult of the unprotected strike.

• The idea of a defined time to hang up your gloves seems as outdated these days as a carriage clock

AN EMPLOYER CAN ENFORCE AN AGREED RETIREMENT AGE EVEN WHEN THE EMPLOYEE WORKS PAST THIS AGE

UNPROTECTED STRIKES ARE FREQUENTLY RIDDLED WITH VIOLENCE, INTIMIDATION AND DAMAGE TO PROPERTY

BUSINESS LAW & TAX

New law aims to speed up transformation

Lauren Salt & Amy Pawson ENSafrica

In a mediarelease on August31, thedepart mentof employment& labour confirmed that thesigningintolawofthe Employment EquityAmend ment Bill, 2020 is imminent.

President CyrilRama phosa is expected to assent to thebill beforetheend ofthe year. Theamendments are dueto comeinto effecton September 1 2023.

Thebillwillintroducevar iousamendmentstotheaffir mative actionprovisions of the EmploymentEquity Act, 1998; thesenew provisions aim toachieve morerapid transformation inthe work places ofdesignated employ ers.The isagainst theback ground of the slow progress of transformationsince the introduction of the act in 1998.

The mostsignificant ofthe amendmentsin thebillrelate to the employment & labour minister’s powerto setsec tor-specific employment equitytargetstowhichdesig nated employers willheld to account.

SECTORAL TARGETS

The bill empowersthe labour minister toidentify national economic sectorsfor the purposes ofthe administra

tionof theactand todeter mine numericaltargets for such sectors.

These sectoral targets may differentiatebetween occupational levels, subsec tors, regions orany other relevant factor.

Before determining the targets,the ministerwillbe required toconsult relevant stakeholders andthe Employment EquityCom missionontheproposedsec torsand sectoraltargetsand publish anyproposals for public comment.

● Accommodation andfood services;

● Human health and social work;

● Agriculture, forestry and fishing;

● Wholesale and retail trade;

● Repair of motor vehicles and motorcycles;

● Administrative andsup port;

● Professional, scientificand technical;

● Electricity, gas steam and air conditioning supply; and

● Financial andinsurance activities.

The remainingsectors that are tobe consulted between nowand endof September 2022 include:

● Mining and quarrying;

● Public administrationand defence;

● Manufacturing, informa tion and communication;

● Construction: and

● Real estate.

In its mediarelease, the department statedthat engagementsonthesettingof sector-specific equitytargets startedin June2019 andwill be completed bythe end of September 2022.

Some of the sectors con sulted include:

● Education;

● Water supply, sewerage management andreme diation;

Thismeans itis likelythat, fairly quicklyafter thebill becomes law, the sectorspecific targets will be circu latedforpubliccommentand, thereafter, amended if deemed necessary, and implemented.

Employers concerned aboutthe targetsshouldkeep an eyeout forthe circulation of theproposed targetsand make any submissions they deem necessaryprior tothe finalisation thereof.

ISSUANCE OF COMPLIANCE CERTIFICATES

To “incentivise” employers to meet targets,the billstates that certificates willbe issued by the minister if:

● The employer has com pliedwithanyapplicablesec toral targets or has raised a reasonable ground for non compliance;

● The employer has submit ted its most recent employ ment equity report; and

● Within the previous 12 months,theemployerhasnot been found tohave breached theprohibition onunfairdis crimination, or paid wages below the level of the mini mum wage.

The importanceof obtain ingthiscertificate isthatstate contractsmayonlybeoffered and issued to employers who have beencertified asbeing compliant with their obliga tions underthe act.A failure to comply with these requirements is a sufficient groundforcancellationofany state contract (shouldno rea sonablegroundexisttojustify such noncompliance).

In the recent media state ment,thedepartmentstateda new online assessment sys tem willbe createdto moni tor the implementation of

sector targets. The first year inwhich thesector-specific targets will applyis 2024. At the endof thatreporting year, thesystemwill beabletotell whether employers have achievedtheir target,and whereemployers arenot meeting theirtarget, theywill need tohave justifiablerea sons fornot achievingtheir set targets.

The systemwill accept,in good faith, allthe information suppliedbut thedepartmen talinspectorate mayvisit workplaces to verifyif infor mationsubmitted isgenuine. In its statement, the depart ment seems to suggest the system will automatically generatea compliancecer tificate for thosewho comply with the above.

However,itgoesfurtherto expressly state that if the informationsupplied isnot genuine,then thecertificate will be withdrawn.

DEFINITION OF DESIGNED EMPLOYER

In additionto theabove, the bills seeks to amend the defi nitionof a “designated employer” by deletingthe paragraph which classifies employerswith fewerthan 50employees,andwhomeet therequired turnoverthres

hold,as “designated employ ers. ” Consequently, employ ers who employfewer than 50employees, regardlessof their turnover, will no longer fall within the definition of a “designated employer” and willtherefore notberequired to comply with Chapter III of theact (whichdealswith affirmative action).

These employers will no longer be requiredto take certainmeasures, suchas preparing and implementing anemployment equityplan, consulting with employees and/or representativetrade unions on matters and sub mitting an employment equityreport onanannual basis. According tothe mem orandumontheobjectsofthe bill, this isintended to reduce theregulatory burdenon small employers.

With the possibility that the president couldassent to this bill as early as September 2022, employersshould analysetheir existingtrans formation measures and implement the necessary preparations. Compliance withthe amendments,as soon asthey areenforced, will be vitalfor businesses, sincefines ofbetweenR1.5m andR2.7m maybeimposed for a contravention of the act.

• Employment Equity Act amendents are expected to take effect in September 2023

A NEW ONLINE ASSESSMENT SYSTEM WILL BE CREATED TO MONITOR THE IMPLEMENTATION OF SECTOR TARGETS