Director General, Department of Labour v Jinghua Garments (Pty) Ltd (D 730/05) [2006] ZAKZHC 11 (5 December 2006)

IN THE LABOUR COURT OF SOUTH AFRICA

HELD AT DURBAN

CASE NO : D 730/05

In the matter between:

THE DIRECTOR-GENERAL OF THE

DEPARTMENT OF LABOUR Applicant

and

JINGHUA GARMENTS (PTY) LTD Respondent

J U D G M E N T

___________________________________________________________

SANGONI AJ:

The applicant is the Director General of the Department of Labour who, in terms of the requirements of the Employment Equity Act 55 of 1998 (the Act), plays a key role in the enforcement of that Act. This statute is designed to ensure the promotion of equal opportunity and fair treatment in employment. It is key to the implementation of affirmative action measures by maintaining and enforcing the designated employers to comply with their respective statutory obligations intended for the implementation of employment equity.

The respondent is Jinghua Garments (Pty) Ltd, a company duly registered and incorporated, with limited liability, in accordance with the company laws of the Republic of South Africa. It is a ‘designated employer” as defined in section 1 of the Act by virtue of having employed persons in excess of 50 at all times material to these proceedings. In fact it had in its employ 280 employees.

In recognition of the disparities in employment consequent upon the application of discriminatory laws on the basis of colour, the Act seeks to eliminate unfair discrimination and to ensure the implementation of employment equity in employment so as to redress the effects of discrimination. To achieve this, the Act prescribes certain obligations to be met by the designated employers. The usual non-compliance with the provisions of the Act is in the area of the application of affirmative action measures. In these proceedings the applicant seeks an appropriate relief in consequence of the respondent having failed to comply with such statutory obligations.

The order sought by the applicant is in the following terms:

“1. That the compliance order issued by Thobekile Sisibo on 31 March 2004, in terms of s 37 of the Employment Equity Act, No 55 of 1998, in respect of Jinghua Garments (Pty) Ltd (“the Respondent) is made an order of the Labour Court.

That a fine of R500 000 is imposed on the Respondent for contravening sections 16, 19, 20, 21, 22 and 23 of the Employment Equity Act.

That the Applicant is granted further or alternative relief.”

Before dealing with the specific action referred to in the order sought, I would like to refer to section 13 of the Act that records the duties of designated employers as regards the affirmative action measures.

It reads:

“13 Duties of designated employers

Every designated employer must, in order to achieve employment equity, implement affirmative action measures for people from designated groups in terms of this Act.

A designated employer must –

consult with its employees as required by section 16;

conduct an analysis as required by section 19;

prepare an employment equity plan as required by section 20; and

report to the Director-General on progress made in implementing its employment equity plan, as required by section 21.”

Section 16 makes it obligatory for the designated employer to take reasonable steps to consult and attempt to reach an agreement with a representative trade union or if there is none with the employees on the following matters:

The collection of information the designated employer is obliged to collect and to conduct an analysis “of its employment policies, practices, procedures and the working environment, in order to identify employment barriers which adversely affect people from designated groups”. Such groups are defined as black people, women and people with disabilities. (section 19)

In terms of section 20 the designated employer bears an obligation to prepare and implement an employment equity plan.

Section 21 of the Act stipulates time lines when the designated employer must submit reports to the Director General in the case of an employer with more than 150 employees as is the case with the respondent, the first report to be submitted within 6 months after the commencement of the Act and thereafter once every year.

Section 22, also referred to in the order sought is irrelevant for purposes of these proceedings. It pertains to a public company. The respondent is not. The provisions relate to publication of a report by such designated employer.

Section 23 provides for successive employment equity plans. It reads:

“Before the end of the term of its current employment equity plan, a designated employer must prepare a subsequent employment equity plan.”

In the light of the fact that no equity plan was ever prepared by the respondent the preparation of a subsequent equity plan is not envisaged. A concession was made on behalf of the applicant that non-compliance in this regard should be overlooked.

The exercise to promote, monitor and enforce compliance with an employment law in general takes place through the engagement of labour inspectors. They are appointed for that purpose by the Minister of Labour in terms of section 63(1) of the Basic Conditions of Employment Act 75 of 1997 (BCEA). In terms of section 34 of the Act any alleged contravention of the Act may be reported to the applicant. It may also be reported to other persons and other bodies.

The labour inspectors have the authority, without warrant or notice, to enter and inspect any place where an employer carries on business in order to carry out the monitoring duties as contemplated in section 65 of BCEA. They also have powers to require a person to disclose information and to call for records.

If the inspector has reasonable grounds to believe that the employer has failed to comply with certain provisions, he/she may request and obtain a written undertaking from the designated employer to comply with the provisions violated. On 3 November 2003 labour inspector Ms Nkomo requested and obtained such undertaking from the respondent as a consequence of non-compliance with sections 20 and 21 of the Act. On the same day a similar undertaking was obtained in respect of the provisions of section 25. Section 25 provides that an employer must display at the workplace a notice in the prescribed form informing the employees, inter alia, about the provisions of the Act and the most recent report submitted by the employer to the applicant.

On 25 November 2003 inspector Ms Sosibo carried out another inspection at the respondent’s place of business. That revealed that notwithstanding the written undertakings made previously the respondent had still not complied with the provisions of the sections referred to, and, to crown it sections 22, 24 and 27 had also been violated. The respondent signed further undertakings on the said date to comply with the provisions of the sections complained of.

In a situation where the employer has failed to comply with a written undertaking the inspector may issue a compliance order in terms of section 37 of the Act. In terms of that order the inspector directs the employer to implement what has not been complied with within a certain period or face a fine, which may be imposed by the Labour Court on the recommendations of the applicant. That compliance order was issued and served on the respondent on 31 March 2004. It was issued in respect of the violations of sections 16, 19, 20, 21, 22, 24 and 25.

The section dealing with the compliance order is section 37. The relevant paragraphs are recorded as follows:

“37 Compliance order

(1) A labour inspector may issue a compliance order to a designated employer if that employer has-

(a) refused to give a written undertaking in terms of section 36, when requested to do so; or

(b) failed to comply with a written undertaking given in terms of section 36.

(2) A compliance order issued in terms of subsection (1) must set out -

(a) …

(b) …

(c) any written undertaking given by the employer in terms of section 36 and any failure by the employer to comply with the written undertaking;

(d) …

(e) the maximum fine, if any, that may be imposed on the employer in terms of Schedule 1 for failing to comply with the order; and

(f) …

(3) …

(4) …

(5) A designated employer must comply with the compliance order within the time period stated in it, unless the employer objects to that order in terms of section 39.

(6) If a designated employer does not comply with an order within the period stated in it, or does not object to that order in terms of section 39, the Director-General may apply to the Labour Court to make the compliance order an order of the Labour Court.”

This application has been brought in terms of section 37(6). The facts of the case are common cause. The violations of sections 16, 19, 20, 21 and 23 of the Act are admitted. What has been said above relating to inspections conducted, written undertakings made and the issue of the compliance order is also not disputed.

The issue to be determined relates to the payment of a fine for the violations of the Act. There is an apparent conflict between section 37(2)(e) on the one hand and section 50(2)(g) and schedule 1 on the other. I have already referred to section 37(2)(e) above wherein it is stipulated that the maximum fine may be imposed in terms of the schedule 1 for failing to comply with the order. The reading of the entire section 37 confirms that the ‘order’ referred to therein is the compliance order.

The schedule refers to maximum fines that may be imposed for the contravention of any provisions of sections 16, 19, 20, 21, 22 and 23 of the Act. It provides for a maximum fine of R500 000 for the first contravention R600 000 where there is a previous contravention for the said provision. In the case of a previous contravention within twelve months or two previous contraventions in respect of the same provision within a period of three years the maximum fine is R200 000. The list is not exhaustive. The conflict centres around whether the fine of R500 000 is for the contravention of a compliance order or of each individual contravention of a provision of the Act.

Section 50(1)(g) deals with powers of the Labour Court. It records that the Labour Court may make any appropriate order including imposing a fine in accordance with schedule 1 for a contravention of certain provisions of the Act.

In light of what I have stated above the issue for determination is whether the fine should be on the basis of non-compliance with the compliance order or contravention of the individual sections of the Act. I am alive to the fact the number of sections whose provisions have been contravened should in any event have an influence in assessing the appropriateness of the fine to be imposed, but to impose a fine on individual contraventions of the sections would yield completely different results as opposed to the position of a fine for contravening a compliance order. As the conflicting provisions relate to penalty, the more lenient construction to the person liable to be fined should be preferred. I will thus consider an appropriate fine in this matter on the basis of the violation of the compliance order, with the contraventions of other provisions of the sections referred to being relevant factors to be considered.

As regards the appropriateness of the fine Mr Soni SC appearing for the applicant together with Mr Sishi SC submitted that the court should consider, inter alia, the following:

20.1 the purpose of the Act;

20.2 the extent of the contravention;

20.3 the period the contravention has endured;

20.4 the reason for not complying;

20.5 the attempts made to comply, if any;

20.6 the maximum fine prescribed;

20.7 any relevant considerations relating to the respondent.

I agree that these are relevant factors.

Mr Chetty, for the respondent, brought to my attention that the respondent is a citizen of the People’s Republic of China who commenced business operations in South Africa in September 2002. It is the lack of expertise as regards the legal requirements that landed it in this mess. It engaged Federated Employers dispensation of South Africa (Fedsa) not knowing that Fedsa also lacked the necessary skills to assist it to comply with the requirements of the Act. I was also advised that the respondent is no longer trading. To prepare itself for future trading it has engaged the services of Perfect Partners to assist it achieve compliance with all the aspects of the Act.

I have considered all these factors mentioned, together with the fact that, as mentioned by Counsel, the respondent was not obstructive in its approach to these proceedings. It acknowledged the contraventions without ado. In Christian v Colliers Properties (2005) 26 ILJ 234 (LC), where the court was required to determine damages under section 50(1)(d) and (e) of the Act, it acknowledged its responsibilities to make an award that should deter the respondent and would-be offenders. To ensure compliance with the Act the fine should have a punitive and preventative element. The same line of reasoning needs to be followed in this case. One has to be guided, of course, by the stipulated fines which are on the upper limit of what the legislature intended. It is also agreed by Counsel that the fine should not be characterised by an element of retribution. They agreed that a fine in the region of R200 000 (two hundred thousand) would be reasonable. They differed only as to the portion thereof to be suspended.

I am of the view that it is appropriate in this case that costs should follow the result.

In the result I make the following order:

The compliance order issued by the labour inspector Thobekile Sisibo on 31 March 2004, in terms of the Employment Equity Act 55 of 1998, in respect of the respondent herein, is made an order of this Court.

The respondent is ordered to pay a fine of R200 000 (two hundred thousand), half of which is suspended for a period of three years on condition the respondent is not found to have contravened any of the provisions of sections 16, 19, 20, 21 of the Employment Equity Act, within the period of suspension.

The respondent is ordered to pay the costs of the application.

C T SANGONI

ACTING JUDGE OF THE LABOUR COURT

For the applicant : Advocate V Soni SC and

Advocate Sishi SC

(Instructed by the State Attorney)

For the respondent : Mr K M Chetty

(Instructed by Singh & Chetty Attorneys, Durban)

Date judgment delivered : 5 December 2006

The DG, Dept of Labour and Jinghua Garments (Pty) Ltd Case No : D730/05