The South African labour law landscape may be on the cusp of a significant shift with the proposed amendments to the Labour Relations Act 66 of 1995 (LRA), as detailed in the final National Economic Development Labour Council (Nedlac) report on the Labour Law Reform Process.
These amendments, found in sections 39, 43 and 46 of the Labour Relations Amendment Bill, 2024, seek to reshape the remedies available to high-income employees in the context of unfair dismissals.
This article examines the implications of the proposed changes for both employers and high-income employees, assessing the fairness, alignment with South African labour values, and whether they represent a positive development for the country’s industrial relations framework.
Reframing the legal landscape
The proposed amendments introduce a new section to the LRA — provisionally section 208B — as well as corresponding amendments to sections 193, 194 and Schedule 7.
Under the proposed framework, employees earning above the high-income threshold — initially set at R1.8m per annum (the cap), will no longer be entitled to reinstatement or re-employment remedies for unfair dismissal, unless the dismissal is automatically unfair. In cases of automatically unfair dismissals, reinstatement, re-employment, and uncapped compensation will remain available.
In all other cases of unfair dismissals, the remedy to affected high-income employees will be limited to compensation capped at the threshold. The cap will also apply to compensation awarded for unfair labour practices.
These changes may directly impact both employers, particularly at the executive level, and high-income employees, with broader implications for litigation risk, employment policy design, and dispute resolution strategy.
Reinstatement risk removed
For management and human resources teams, the amendments present a new frontier in managing executive exits.
With reinstatement largely removed from the remedial equation, the risk calculus shifts. Employers may make decisions with greater certainty and reduced concern over long-term reinstatement orders that could disrupt leadership continuity or organisational strategy.
For senior employees, the changes require a mindset shift. Gone are the days when litigation might lead to reinstatement in the C-suite.
The focus will likely pivot to maximising compensation claims, albeit under a capped regime, and, where applicable, pursuing whistleblower-based claims to circumvent the cap.
Realistic approach to remedies
On one hand, the proposed amendments may align with broader economic and legal principles.
High-income earners typically possess stronger bargaining power, better legal access, and greater mobility in the labour market. Limiting their remedies to capped compensation — where the amount may still be substantial — might not amount to a denial of justice.
Furthermore, reinstatement in senior roles is often impractical due to irreparably damaged trust relationships. The Labour Court and the Commission for Conciliation, Mediation and Arbitration (CCMA) have long struggled with the feasibility of reinstatement in executive-level disputes.
The amendments acknowledge this reality by replacing a frequently impractical remedy with a more realistic approach.
Keshni Naicker and Amandla Makhongwana 30 Jan 2025 Equal application
However, constitutional guarantees of equal treatment and fair labour practices, enshrined in sections 9 and 23 of the Constitution, must apply equally to all employees.
Differentiating remedies based on income could amount to socio-economic discrimination, undermining the universality of labour rights. There is also a risk that employers may abuse the regime, knowing their exposure is capped unless the dismissal is automatically unfair.
Thus, while the amendments may be pragmatic, they also represent a philosophical shift: labour rights are no longer universal protections, but potentially tiered entitlements. The constitutional validity of this approach may well be tested.
Implications of the proposed amendments
For employees earning above the threshold, the loss of the reinstatement remedy could be viewed as a reduction in labour protections.
Reinstatement offers not only economic redress but also reputational vindication. The absence of this remedy could result in unfair dismissals becoming more routine, as employers will only face capped compensation even where the dismissal lacks merit.
Conversely, employers may benefit from the increased certainty brought about by the removal of reinstatement. Fewer reinstatement hearings mean reduced procedural complexity and cost.
In addition, the amendments may enable adjudicative bodies to focus on more precarious employment disputes. Ultimately, the amendments may help build a more predictable and commercially aligned labour law framework.
Potential for faster resolutions
For affected employees, some consolation may lie in the finality that capped compensation brings. In executive-level dismissals, a return to the organisation is often undesirable for both parties. The cap may enable faster resolutions, reduced reputational harm, and more constructive settlement negotiations.
Given the high volume of labour disputes that clog our courts and tribunals, a capped compensation system could help reduce the burden on dispute-resolution institutions.
In balancing the pros and cons, the proposed amendments may foster a more predictable and less adversarial system. However, the risk of diminished equality and protection remains.
Careful implementation required
The proposed changes reflect a maturing of South Africa’s labour law regime, recognising that high-level employees may not require identical remedial protections as lower-income workers. By shifting the focus from reinstatement to fair compensation, the amendments may introduce both clarity and efficiency.
That said, their success depends on careful implementation. Procedural fairness must remain paramount, and meaningful remedies must still be available to employers who are unfairly dismissed.
The exclusion of automatically unfair dismissals from the capped regime is a critical safeguard.
If implemented with due care, these changes may usher in a more streamlined and commercially aligned dispute-resolution framework that reflects the realities of modern executive employment, without compromising fundamental fairness.
