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D731/05-NB/CD
IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT DURBAN
CASE NO D731/05 Reportable
In the matter between
DIRECTOR-GENERAL, DEPARTMENT OF LABOUR Applicant
and
WIN-COOL INDUSTRIAL ENTERPRISE (PTY) LTD Respondent
JUDGMENT
_______________________________________________________
PILLAY D, J
Introduction
Is a fine imposed for contraventions of affirmative action provisions of the Employment Equity Act No 55 of 1998 (EEA) a sanction for administrative contraventions or criminal offences? Does the purpose and scheme of the EEA justify the sanction? What elements have to be proved for the Court to impose a fine? What criteria should be considered when assessing the amount of the fine? These are some of the questions that arise in this application by the Director-General of the Department of Labour (DOL) to have a compliance order in terms of section 37 of the EEA made an order of the Court and to have a fine of R500 000 imposed on the respondent for contravening sections 16, 19, 20, 21, 22 and 23 of the EEA. 1
The Facts
The respondent is a company operating as a cut, make and trim factory, employing about 132 people in Newcastle. It manufactures for local and export markets, and plans to expand. Its managing director, Mr Alex Liu, is Taiwanese. As a designated employer2 it must comply with the affirmative action chapter of the EEA.3
In 2003 the bargaining council, the South African Clothing and Textile Workers Union (SACTWU) and representatives of the DOL visited the factory and advised the respondent of the legislation it had to comply with.
Being a foreigner, Mr Liu opted to engage an employer’s organization, the Federated Employers Organization of South Africa (FEOSA) to ensure that the respondent was a “legitimate and authentic” employer.
On 4 November 2003 Hlonipile Gladys Nkomo, a labour inspector from DOL, inspected the factory to check that there was compliance with labour laws. She reported that the respondent did not comply with any of the obligations in terms of the EEA. She got an undertaking in terms of section 36 on behalf of the respondent that it would comply with sections 20, 21(1), 25(1) and 25(2)(a) and 25(3) of the EEA.
Subsequent visits on 24 November 2003 and 2 February 2004 showed that the respondent was still not complying with his undertaking.
On 31 March 2004 Nkomo issued a compliance order in terms of section 37(1)(b), directing the respondent to comply with section 36(a)-(j) of the EEA within 30 days. The respondent did not object to the compliance order, which it could have done in terms of section 39(1). It nevertheless continued not to comply with it.
On 24 October 2004 an application similar to this one was launched under case No D781/04 (the first application). For some reason it was withdrawn.
This application was launched a year later on 25 October 2005. When he received this application, the respondent alleged that he tried to telephone the State Attorney for clarity as he was under the impression that the application had been withdrawn the previous year. He claimed that he left several messages for the State Attorney but they went unanswered. He contacted FEOSA but learnt that the person dealing with his case, Mr De Necker, had passed away. When he got notice of the set-down in January 2006 for the hearing of the matter on the opposed roll for 19 April 2006, he tried again to contact the State Attorney. He eventually made contact with the DOL in Newcastle, who informed him that this application was proceeding. Attempts to retrieve his file from FEOSA also proved difficult. He eventually got it from De Necker’s family before Easter 2006.
On 18 April 2006, a day before the hearing, he instructed his attorneys of record to remove the matter from the unopposed roll as he intended to oppose the application.
This explanation was tendered, firstly, to inform the Court of the reason for his delay in opposing the application and, secondly, to show that it was not deliberate.
With regard to his defence to the application he proceeded to explain that he forwarded the compliance notices to FEOSA on 24 November 2003. After getting advice from De Necker, he instructed him to comply with the EEA. More than two months later, on 2 January 2004, FEOSA requested assistance and training in completing the employment equity report from the DOL. The respondent alleged that the DOL did not respond. Instead, it launched the first application. On 29 October 2004 FEOSA delivered by hand the employment equity report and plan to the DOL.
Three months later, on 31 January 2005 the respondent consulted with its employees to advise them of the EEA and its consequences. As a copy of the plan that was delivered to the DOL could not be found, the respondent instructed its attorneys to draft a new plan.
In the first application the respondent conceded that it had not complied with the compliance order. It appealed to the Court to condone its non-compliance and not impose a fine. It informed the Court that the business was not performing well due to the currency fluctuations. It also filed memoranda signed by the employees, who expressed the following sentiment:
“Dear Madam/Sir,
We are the employees of Win-Co Ind. Ent. (Pty) Ltd. We would like to express our anger and unhappiness about the case of Equity Act plan. Our factory was used by your department. Our factory has submitted the plan and complied with the Equity Act. We surely do not wish to see that our factory wasting unnecessary money for this case first, furthermore if our factory loses the case the factory will be forced to close down and all of us will be unemployed. We appreciate it if you can kindly drop off the case against our factory. Thank you,
Wincool employees.”
The Submissions
For DOL
Advocate V. Soni SC (with Advocate T. Sishi SC) appeared for the DOL. Although the DOL sought a declaration in its Notice of Motion that the respondent had contravened sections 16, 19, 20, 21, 22 and 23,4 it submitted that the respondent should be found guilty of contravening sections 16, 17, 19, 20 and 21. Section 17 lists the matters for consultation and is not a provision that can be contravened.5 However, in motivating for the maximum penalty, it was submitted erroneously that the respondent was guilty of contravening all the sections mentioned in Schedule 1 to the EEA.6 As counsel advanced no submissions in respect of sections 22 and 23 it is assumed that a declaration in terms of them is no longer sought.7
The respondent was defiant or indifferent to its statutory obligations. In its response to the first application it alleged that it had complied with section 20. As proof of that compliance it attached not a plan but a report. The respondent was therefore not bona fide in attempting to comply with the EEA.8
The respondent either admitted in the first application that it did not to comply with its remaining obligations or the evidence it proffered did not establish compliance.9 The purported consultation was not in compliance with section 16, read with sections 17 and 19.10
The report that should have been lodged with the DOL should have been for 2003; the report that was lodged was dated 28 October 2004. No report was therefore lodged for 2003.11 Section 21 was not complied with. As the DOL received no plan and none was displayed at the respondent’s premises, section 20 had not been complied with. The plan that was attached to the Opposing Affidavit was clearly prepared recently.12
For the amount of the fine, the DOL relied on the unreported decision of Sangoni AJ in Director-General of the DOL v Ginghua Garments.13 The penalty was high because the legislature intended it to serve as deterrence and retribution14 and also be preventive.15 The contraventions have been continuous from at least November 2003.16 It is an aggravating factor that the respondent claims to have complied when evidence to the contrary is overwhelming.17 The respondent was obstructive by denying the contraventions and accusing the DOL for not assisting it,18 when it did not attend workshops aimed at providing assistance. There was a limit to which it could rely on the fault of its consultant.19
The amount of the fine must affirm the principle of the rule of law.20 In a case such as this the financial position of the respondent is not relevant. The maximum fine should be imposed with a portion suspended.21
For Respondent
The respondent’s defence to this application is that it complied with the compliance order by implementing sections 16, 19, 20 and 21 of the EEA,22 albeit belatedly.
The importance of the EEA was borne out by the criminal sanction imposed in terms of section 50 which the DOL now sought to enforce.23
The respondent employed 9 African and 2 coloured male technicians, 1 coloured male senior official or manager and 120 African females in elementary occupation, 2 of who were with disabilities. It was therefore unclear as to how the respondent could better achieve equity. As his entire staff fell within the designated groups, the respondent should be singled out for praise.24
It was always the intention of the respondent to comply with its obligations. The DOL failed to allege or prove mens rea which was crucial to such an enquiry.25 As it was alleged to have committed an offence, the DOL had to prove all the elements of the crime, which it had failed to do.
The maximum fine could only be imposed in cases of intentional and serious non-compliance leading to inequity. It should not be imposed in this case because the respondent is a small employer operating in the industrial area of Newcastle. It tried to comply by using consultants as it was owned by a Taiwanese who knew little English and labour law. It was now compliant.26 The test applied in criminal cases such as S v Richards should be applied in formulating a penalty.27 There is therefore no basis for a penalty.
The DOL is not entitled to costs as it is not a litigant but an informer whose duty is to recommend the imposition of a fine to the Court. Costs should be awarded to the respondent with the dismissal of the application.28 So submitted counsel Mr. I. Pillay for the respondent.
In his reply, Mr Soni dismissed the submission as an attempt to get the Court to apply the higher standard of proof beyond a reasonable doubt. The fine imposed by the EEA was an administrative penalty and not a sanction for a crime.
After the hearing, the Court found that the question that was not addressed fully by the parties was whether it was required to adjudicate the commission of a crime for which a fine was payable or an administrative contravention for which an administrative or civil penalty was payable. The rule of law applied not only to the determination of the amount of the penalty but also liability, the one being inextricably linked to the other. The Court therefore invited the parties to supplement their Heads of Arguments to address the issue of the application of the constitutional principle of the presumption of innocence to the law and facts of this case. Both parties obliged.
For DOL
Counsel for the DOL stressed at the outset that the affidavits filed by the parties did not involve the application of principles of criminal law. Nor did the respondent complain that the DOL was imposing criminal penalties against it.29 The Court was being asked to exercise its powers under section 50(1)(a) and (g) of the EEA which do not confer criminal jurisdiction on it. As there was no suggestion in the respondent’s answering papers that any aspect of criminal law was involved, initial Heads of the DOL did not deal with the possible application of criminal law and the presumption of innocence.30 The first and only place where the respondent suggested that criminal law applied was in para 18 and 19 of its initial Heads where it was submitted that as the DOL sought a criminal sanction he must prove his case for a fine beyond a reasonable doubt.
This was not a criminal matter because section 50(1)(g) of the EEA empowered the Court to impose a fine for any contravention of section 16, 19, 20, 21, 22 and 23 of the EEA without declaring those sections to constitute an offence. In contrast, sections 59 and 61 of the EEA create offences and prescribe the maximum sentence that may be imposed on those convicted.31
Neither section 50 nor any other section confers criminal jurisdiction on the Court. The most likely, if not the only, inference to be drawn is that the fines referred to in section 50(1)(g) of the EEA constitute administrative penalties as distinct from imposing sentences for criminal offences.32 As these are not criminal proceedings, the criminal standard of proof falls to be rejected.33
Once the DOL adopted the stance that these are not criminal proceedings it did not have to deal with other criminal constitutional law principles such as the presumption of innocence.34
The impression created by the words “fine” and “contravention” in section 50(1)(g) must be rejected, firstly because the Court as a creature of statute does not have criminal jurisdiction. Some statutes which create offences confer jurisdiction on the Magistrates’ Courts.35
Secondly, section 179 of the Constitution provides that only the national prosecuting authority has the power to institute criminal proceedings on behalf of the state. Section 35(3)(c) of the Constitution entitles accused persons to a public trial before an ordinary court. This case is not brought by the prosecuting authority before an ordinary court but before a specialist court which is presided over by a person who has “knowledge, experience and expertise in labour law” 36 but not necessarily in criminal law.37
Thirdly, if Parliament intended that a contravention of Schedule 1 to the EEA should constitute a criminal offence it would have indicated such intention explicitly as it did in respect of sections 59 and 61 of the EEA. 38
Fourthly, the Basic Conditions of Employment Act 75 of 1977 (BCEA) also distinguishes between fines for non-compliance with certain provisions39 and penalties for specified offences.40
Lastly, section 93(1) of the BCEA provides for prosecutions to take place in the Magistrates’ Courts. Magistrates are empowered to impose penalties provided for under the BCEA.41 Prosecutions under the EEA did not follow the same route.
Turning to the scope of the application of the principle of the presumption of innocence, counsel cited the following cases :
S v Zuma42 which referred to Woolmington v Director of Public Prosecutions43 for the source of the principle of the presumption of innocence;
R v Oakes44 for the rational for making the presumption a fundamental tenet of criminal law;
S v Coetzee & Others45 for the Constitutional Court’s decision that placing the onus on an accused in statutory offences in certain circumstances infringed the presumption;46 and
Prinsloo v Van Der Linde 47 for Constitutional Court authority that the presumption has no application in civil proceedings.48
If the presumption is to apply, it must be found that Parliament intended Schedule 1 to the EEA to constitute criminal offences. Parliament could not have had that intention for the following further reasons:
Firstly, section 35 of the EEA and section 65, 66 and 67 of the BCEA give labour inspectors wide powers to question persons who are required to answer truthfully and capably all relevant questions; but the answers may not be used in criminal proceedings, other than for perjury or making a false statement.
Secondly, section 67 of the BCEA limits the employer’s right to silence by placing an obligation on it to furnish answers. While the answers may not be used in criminal proceedings, they may be used in proceedings contemplated in Schedules 2 and 3 of the BCEA.
Although sections 65 and 66 have not been expressly incorporated into the EEA, the scheme of the BCEA and the EEA suggests that the distinction between criminal and other proceedings is central to both Acts. 49 If the presumption were to apply, all the protections listed in section 35(3) must also be extended to the employer.50 Statutes such as those dealing with taxation, customs and excise, gambling and competition impose fines for non-criminal transgressions.
For respondent
Mr Pillay submitted that as the DOL sought to impose a fine, the respondent is accused of a statutory contravention for which the penalty of a criminal sanction is imposed.51 The purpose of the presumption is to minimise the risk of innocent persons being convicted.52
Given the grave social, psychological and economic harm that accompanies a criminal charge, the guilt of the accused beyond a reasonable doubt had to be proved.53 The DOL therefore has to prove every element of the offence beyond a reasonable doubt.54
Fault (mens rea) is an element of any statutory offence. It is a principle of the interpretation of statutes that the legislation intended fault to be an element of statutory liability.55
The DOL must prove that the respondent intended to contravene the sections relied on. However, the respondent always intended to comply, was at pains to comply in that it instructed a labour consultant to comply by submitting an employment equity plan and report, and did comply.56 The DOL failed to overcome the criminal burden of proof.57
Terminology
One of the reasons for the blurring of the distinction between civil and criminal regulation is the terminology. Terminology such as “quasi-criminal”, “guilt”, “fine” and “retribution” are used interchangeably in civil and criminal proceedings.58 “Contraventions” of a statute can be either civil or criminal breaches of the law. “Fines” can be imposed as a sentence following a conviction or as an administrative penalty.59 “Offences” can be either criminal, that is, crimes such as murder and fraud (mala in se) or non-criminal,60 that is, regulatory offences (mala in prohibita).61 Mostly, its use in statutes is the only clue that the breach is to be regarded as criminal.62 A penalty denotes punishment, corporeal or pecuniary, civil or criminal63 and includes a fine. The EEA refers to payments levied in its Schedule 1 as fines. As the terminology is used interchangeably, the ambiguous words are defined for the purposes of this judgment.
“Contravention” means a civil or administrative breach of the law.64 “Offence” means a crime, including common law and regulatory offences. “Regulatory offence” means a crime that is mala in prohibita. “Penalty” means a punitive sanction for a contravention.65 “Fine” means a punitive sanction for an offence. “Sanction” includes both fine and penalty.
The issues
Is the sanction imposed by the Court in terms of section 50(1)(g) read with Schedule 1 to the EEA a penalty or a fine? The question arises because the parties are in dispute as to whether the regulation of compliance with the affirmative action provisions is criminal or administrative. The resolution of this issue, it was implied, would automatically determine what the elements of the contravention or offence are; who bears the onus of proving each element; and what standard of proof is required to discharge the onus.
Whether the punishment is administrative or criminal is a matter of statutory construction.66 In the opinion of the Court categorising the breach as criminal or administrative is not the complete answer.
Historically, penalties and fines are indispensable regulatory enforcement tools, especially against corporations that break the law. Inherently, they are neither criminal nor civil or administrative. They are categorised on the basis of the procedures that precede them, whether a court issues them, and if so, whether it is a criminal or civil court or administrative tribunal.67 Proceedings may be civil in form but criminal in effect. Asset forfeiture under Prevention of Organised Crime Act 121 of 1998 (POCA), despite its remedial objectives, also has palpably punitive and penal crime prevention effects.68
Procedure cannot be a sufficient basis to distinguish an accused from a person who contravenes a statute if the effect is to grant to the former and deny the latter all the fundamental protections and privileges allowed under the Constitution : The presumption of innocence, the right to silence and the protection against self-incrimination are safeguards that the Constitutional Court insists on when it places the onus on the prosecution to prove the guilt of the accused beyond a reasonable doubt.69 These presumptions and protections have no place in civil proceedings where the elements of a contravention have to be proved on a balance of probabilities70.
The elimination of reasonable doubt should be the goal of any punitive procedure if the principles of the rule of law are to be met.71 What a sanction seeks to do substantively rather than the form in which it is presented, should be at the heart of the enquiry. Whatever is sought to be done must be reasonable, justifiable and necessary under the Constitution.72 That applies as much to the determination of unlawfulness (if applicable) and liability as it does to the amount of the penalty.
The Controversy
If the breach is an offence it would be a regulatory offence. The Constitutional Court left open the question as to whether all the protections and privileges available to common law accused are also available to regulatory offenders.73 Judicial discomfort with the concept of strict liability predates the Constitution.74 Langa J (as he then was), was not persuaded that the mere categorisation of an offence as regulatory would necessarily have the effect of a lower standard of scrutiny.75 O’Reagan J76 and Kentridge AJ77 opined that the protections may not be available. O’Reagan J explained that justification under section 33(1) of the Constitution will determine whether a regulatory offender should bear an evidential or legal burden. For Kentridge AJ it would be “illogical if not perverse” to say that the fairness of a trial for an absolute liability offence would be destroyed if the accused is required to prove a special defence.78
Thus if the Court were to declare that section 50(1)(g) creates a regulatory offence, it is still an open question whether the DOL will have to prove all the elements of the offence beyond a reasonable doubt.
The application of the presumption of innocence arose in a civil case. The Constitutional Court found in Prinsloo v Van Der Linde and Another 79 that the presumption of negligence in respect of a veld fire which occurred on land outside a fire control area did not infringe the right to be presumed innocent under s 25(3)(c) of the Constitution or the right to equality before the law. The purpose of the legislation was to prevent veld fires. The state had a legitimate interest in doing so, and there was a rational relationship between the purpose sought to be achieved and the means chosen to do so.80
Despite its finding that the presumption of innocence has no application in civil proceedings, the Court nevertheless enquired into the substantive relationship between the presumption and the purpose sought to be achieved by it.
The Canadian Employment Equity Act 1995, c. 44 deals with violations as follows:
35. (1) Every private sector employer commits a violation of this Act who
a. without reasonable excuse, fails to file an employment equity report as required by section 18;
b. without reasonable excuse, fails to include in the employment equity report any information that is required, by section 18 and the regulations, to be included; or
c. provides any information in the employment equity report that the employer knows to be false or misleading.
Violations not offences
(3) A violation is not an offence and accordingly the Criminal Code does not apply in respect of a violation.”
Even though the EEA follows its Canadian counter-part closely in many ways, that is not true in respect of the violations clause. The format of the penalty provisions in the EEA is as follows : There is only one reference to a fine for a contravention in the body of the EEA and that is under the heading “Powers of the Labour Court”.81 For expatiation of what constitutes contraventions and what the penalty should be, one has to look to Schedule 1 to the EEA.
Statutory crimes are usually formulated so that they contain a description of the act or omission prohibited, a pronouncement that a person who commits or omits to perform the act commits a crime and the penalty for the crime.82 These three clauses are usually presented as a conjoined unit, so that when they are read together, the essential requirements of the crime are clear.83
Section 50(1)(g) does not adopt this strict formulation required for the creation of statutory crimes.
The closest and only connection to criminal law in relation to breaches of the affirmative action provisions is the use of the words “fine” and “contravention”.84
The EEA distinguishes contraventions of the affirmative action provisions from the offence of breach of confidentiality.85 That is an indication of the Legislature wanting to differentiate between the two regulatory regimes.
The distinction is also maintained in the Competition Act86. Administrative penalties87 for certain prohibited practices and other contraventions of the Competition Act are distinguished from offences88. The Competition Tribunal imposes penalties for contraventions89 and the Magistrates’ Court imposes fines and imprisonment for offences.90
Usually, administrative tribunals determine contraventions and impose a reasonable penalty. When a court is required to adjudicate a contravention, its seriousness escalates.
It also escalates if the penalty is substantial. The maximum sanction of R500 000 authorised in Schedule 1 to the EEA for the first contravention is substantial. In contrast, the only offences created in the EEA, namely for breach of confidentiality and obstruction, undue influence and fraud, the fine is limited to R10 000 without imprisonment.91 The Canadian Employment Equity Act limits the amount of the penalty to $10,000 for a single violation; and $50,000 for repeated or continued violations.92 The quantum of the fine imposed by the Competition Tribunal for certain prohibited practices and other contraventions of the Competition Act is limited to 10 % of the firm’s annual turnover.93 While that can exceed a billion in a monopolistic industry such as steel manufacturing, it is also limited to a few thousand rand in cost-sensitive industries such as clothing and footwear manufacture. Whereas the distinction between the criminal and civil spheres of regulation was justifiable in the past when fines were conventionally more severe than penalties,94 the rational for the differentiation may not be justified today when heavy penalties are imposed for contraventions.
In addition to the 10% penalty imposed by the Competition Tribunal, a firm could face a fine of R500 000 with or without imprisonment for 10 years for not complying with the Tribunal’s order to pay the penalty.95 Effectively, a criminal sanction is tagged to the contravention for purposes of enforcement.
In a different way the EEA also tags a criminal sanction for contraventions. If an employer fails to abide by a Court order which declares a compliance order to be an order of the Court, it can be cited for contempt of the Court and liable to a fine or imprisonment. Contempt of court is the usual way in which orders for specific performance such as reinstatement are enforced. Specialisation has not deprived the Court of this power to exercise criminal jurisdiction.
Affirmative action is politically sensitive. The adverse publicity that accompanies the mere complaint that an employer is not complying with the affirmative action provisions can tag the employer as racist, sexist, anti-democratic or counter-revolutionary. The Court imposes only monetary sanctions. Non-monetary sanctions, such as adverse publicity in the form of “name and shame” advertisements and disqualification from government contracts, may also accompany contraventions. Employers who are issued with penalties are as exposed to social stigma, ostracism from the community and social, psychological and economic harm as an accused96. They risk losing their physical liberty if they are cited for contempt of court for not complying with a compliance order and are as vulnerable to having their human dignity impaired as any accused97. A sanction under the EEA can therefore be as odious as a conviction and a fine.
Because this Court is a specialist court cannot be the reason for depriving employers of a just outcome. If it transpires that something more is required than a civil process allows, or something akin to or less than what a criminal process imposes, the Court must ensure that the procedural safeguards are proportionate to the breach and the sanction.98 Proportionality is also at issue in the substantive outcome.99 The Court can make adjustments in the procedure adopted, in placing the onus of proof and the evidentiary burden appropriately and in directing the quality and quantity of evidence required to deliver a just outcome. Precisely because of its specialisation can the Court intervene in this way.
Foreign Law100
These concerns about the substance of proceedings for contraventions and regulatory offences are not novel. Foreign jurisdictions have also recognised the potential for prejudice. The European Court of Human Rights has adopted the view in determining whether or not proceedings should be labelled as criminal or civil that they are likely to be regarded as criminal even if the proceedings are (a) brought by a civil authority and either (b) have a requirement to show some kind of culpability (willful or neglectful) or (c) have the potential for severe consequences such as imprisonment. The emphasis is on the true nature of the proceedings rather than their form.101
Michael Woods and Richard Macrory102, after helpfully summarising decisions of the European Court of Human Rights and the courts in the United Kingdom conclude thus :
Labelling a penalty as civil will not be decisive in categorising the procedure as civil or criminal, even if the intention is to decriminalise an offence. The general punitive character of the system will be key, not large fines or the threat of imprisonment.
Even if a particular civil penalty regime is deemed to be criminal under Article 6 of the European Convention on Human Rights, (the right of access to impartial and independent adjudication and the presumption of innocence clause), it can still operate as a civil procedure with, e.g. a reduced standard of proof, if suitable procedural safeguards, which are not as burdensome as those required for criminal offences, are present;
Judicial discomfort with applying stringent criminal constraints to civil procedures designed to ease the burden of regulation, discourage the courts from interfering with civil procedures which are proportionate and fair, and lack a criminal context.103
A provision of the European Community Competition Law which is similar to the administrative penalty imposed in section 59 of the Competition Act, is regarded as being either criminal or of a quasi-criminal nature. Some academics favour the granting to respondent firms in competition law cases
“all the protections accorded to an accused in a criminal trial, including the privilege against self-incrimination, the use of a standard of proof beyond a reasonable doubt and the fair trial protections” 104
That approach curries no favour in Australian penalty proceedings, where intent or negligence is irrelevant for strict liability crimes and where penalties are sometimes more onerous than fines.105
Boyd v United States106 was one of the earliest decisions in which the US Supreme Court observed that "proceedings instituted for the purpose of declaring the forfeiture of a man's property by reason of offences committed by him, though they may be civil in form, are in their nature criminal."107
The United States of America recognises the relationship between the purpose of penalties, the process of enforcement and the amount imposed.108 In “big” cases civil penalties are judicially imposed.109 The burden of proof is on the agency to prove the violation, and the determination of the violation is a jury question. A court determines the amount of the penalty.
Since before 1986, administrative penalties are tiered into about three subsets. At one end, they are imposed through formal adjudication under the the Administrative Procedure Act (APA)110. The process is similar to trials for judicially imposed civil penalties. The agency or authority has the burden of proving the violation. An Administrative Law Judge (ALJ) generally makes a recommendation or initial decision as to the violation and the amount of the penalty. The agency makes the final decision, which is open to review by a court.
In the middle, statutes such as the Clean Water Act 111 allow the use of less formal procedures than APA proceedings for penalties that do not exceed $25 000. The judicial review is not de novo and the defendant does not receive a full trial anywhere.
At the other end, an agency assesses the penalty after informal or no procedures at all. The Department of Justice or the courts need not be involved when making the assessment or when compromising the penalty amount. Absent agreement, the agency cannot collect the penalty without a judicial proceeding in which the agency assessment would be subject to de novo review.
Post 1986, this model was modified by statutes which distinguished between Class I and Class II penalties. Informal procedures apply lesser Class I penalties and formal APA procedures apply to larger Class II penalties.112
Categorising monetary penalties as criminal and civil remains controversial. The Supreme Court of the United States of America declared a violation of a water pollution statute to be civil. Rehnquist J held that the proceeding in which the penalty was imposed was not "quasi-criminal" to trigger the Fifth Amendment's protection, i.e. the protection against self incrimination.113 The Court noted that Congress had labelled the sanction as a "civil penalty," and juxtaposed it with criminal penalties in a subparagraph immediately preceding it. Penalties were therefore allowed without regard to the procedural protections and restrictions available in criminal prosecutions.114 In coming to its decision the Court nevertheless also considered whether Congress, despite its manifest intention to establish a civil, remedial mechanism, provided for a
“statutory scheme (that) was so punitive either in purpose or effect as to negate that intention.”115
The sanction for breaches of the affirmative action provisions under the EEA is coloured by elements that suggest that it could be an offence disguised as a contravention in order to avoid the inconveniences of observing all the protections and privileges available to a common law accused. This Court imposes the sanction, the quantum of which is substantial, and is accompanied by the odium and the risk of a conviction for contempt for non-compliance. So serious is the sanction that it does not readily lend itself to being purely administrative. Greater procedural flexibility and the lower burden of proof make contraventions a more attractive option for regulators.116 Concomitantly, the potential for abuse of individual rights grows. The Court must enquire whether the statutory scheme is so punitive that it justifies invoking the protections available to an accused117 or make any other accommodation in order to meet the requirements of the rule of law.
An offence or contravention ?
Are the sanctions imposed for non-compliance with the affirmative action provisions of the EEA substantively criminal?
Labour law reform which began with the drafting of the Labour Relations Act No 66 of 1995 (LRA) continued into the second and third phases with the BCEA and the EEA respectively. The brief of the LRA Ministerial Task Team118 was to decriminalise labour legislation. Imprisonment of the employer is not an option prescribed by the EEA for offences119 because it can be of no good to anyone, least of all the employees who might find themselves employer-less and jobless.
The pre-litigation processes echo this policy of decriminalisation. Although the DOL has no legal duty to provide assistance to anyone to comply with the EEA it nevertheless helps to disseminate information and provide advice and training.
Inspectors of the DOL have wide powers to monitor and enforce employment laws120 and employers and employees have an obligation to co-operate with them.121 Answers to questions put by them may not be used in criminal proceedings except on a charge of perjury or making a false statement.122 If these proceedings were criminal, the DOL would be severely compromised in prosecuting its case as it would not be able to use the information collected by its inspectors.
When an employer fails to comply with its affirmative action obligations in chapter 3,123 the DOL must require the employer to give a written undertaking to comply within a specified period. If the employer refuses to give that undertaking or fails to comply after giving it, the DOL may issue a compliance order. The order must identify the provisions in chapter 3 that have not been complied with, the period within which they must be complied with and the maximum fine that may be imposed. The employer must comply with the order within the stated period unless it objects to it within 21 days after receiving it, or such further period as the Director-General may allow.124
If the employer’s non-compliance persists, the Director-General may apply to the Court to make the compliance order an order of the Court.125 An application to impose a penalty is the last resort, unless it is preceded by contempt of court proceedings.
The pre-litigation process aims to cajole and persuade, to wave a stick at the employer on the promise of a certificate that it complies with chapter II and III of the EEA, without which its offers to conclude contracts with the state may be rejected.126 The priority for the DOL is administrative efficiency by encouraging compliance. It has to make employment laws work with minimum recourse to costly monitoring and enforcement procedures.
Prevention is the DOL’s aim when it provides training, assistance and information to the public about the EEA.
Deterrence must be the principal aim of the sanction. That imprisonment is not a competent order for either a contravention or an offence fortifies the view that punishment aimed at retribution is not the primary objective of the EEA. If deterrence is the aim of the sanction, penalties and a civil process are the preferred method of regulation.
Deterrence must also be the explanation for the high sanctions that can be imposed. High sanctions correspond with the high value placed on rendering workplaces equitable.
Rehabilitation serves the governmental purpose more constructively than retribution. If retribution is the aim of a sanction, a criminal process is the preferred route for imposing a fine or imprisonment. Retribution cannot be the aim of this process without invoking all the protections available to an accused.
In the circumstances the Court finds that section 50(1)(g) does not create an offence but a contravention for which a penalty is payable.
Elements of the contravention and proof
Before turning to consider whether a civil process justifies the ensuing penalty, the elements of the sections that the respondent is alleged to have contravened and who bears the onus to prove them must be determined.
The allegations against the respondent are that he contravened section 16, 19, 20 and 21.
Section 16 requires an employer to consult with representatives of the employees or the employees themselves about matters identified in section 17.
Section 17 requires an employer to consult about the three processes prescribed in sections 19, 20 and 21;
Section 19 requires an employer to conduct an analysis of the employer’s policies, practices, procedures and working environment to identify barriers to employment of designated groups and develop a profile of the workforce to determine the degree of under-representation of people from designated groups in various occupational categories and levels of the workforce 127.
Section 20 requires an employer to prepare and implement an employment equity plan stating, amongst other things, the affirmative action measures to be implemented and numerical goals to achieve a credible representation of suitably qualified people, taking account of their experience and capacity to acquire the ability to do the job.128
Section 21 requires an employer to prepare a report for submission to the DOL annually on 1 October129. The report must have information about the profile of the workforce, their occupational categories and levels, recruitment, promotion, termination, disciplinary actions, skills development, a qualitative assessment of awareness of employment equity at the workplace, the consultations, the analysis, the plan, numerical goals, resources and implementation130.
Unlike its Canadian counterpart and, for instance, the Competition Act, the EEA does not state expressly what acts or omissions constitute a contravention. It must be inferred from Schedule 1 that non-compliance with any of the requirements in sections 16, 19, 20, 21, 22 and 23 constitute contraventions.
The prohibited conduct consists exclusively of omissions. The omissions may be formal or substantive. An example of a formal omission is the failure to file a report with the DOL or publish a summary of it in terms of section 22. Compliance is substantive if the employer’s interventions pass the assessment in section 42 of the EEA.131 An omission is substantive if it violates the fundamental purpose and scheme of the EEA. An employer’s interventions must be serious, genuine and capable of achieving transformation.
Consultation with the workforce is the fulcrum which turns the wheel of transformation. Without consultation, the analysis of the workplace, the ensuing equity plans and reports are suspect as they have not been tested against the countervailing views of the workers for viability.
To be genuine, consultation must be about the fundamentals of change.132 Thus the consultation must be about the three processes that the employer must undertake to achieve equity through affirmative action133.
Consultation involves the ongoing, active, informed and fearless participation of the workforce. For instance, barriers to advancement could be as obvious as setting unnecessary formal qualifications for promotion. Or, they may be as subtle and subjective as the perception of the workforce about the practices, culture, environment, policies and procedures. Some barriers may therefore not be apparent or detected by employers unless they are identified by employees. Furthermore, what affirmative action measures can realistically be implemented cannot be determined unless employees commit to making them work. Thus if shop stewards decline to train for managerial positions, or women do not want to be technicians, or male workers do not want women taking over their jobs, the employer’s plans to transform the workplace through such training will fail.
Employment equity reports should record truthfully the progress towards transformation. The plan should be the instrument that guides the enterprise to that end.
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