Employers: Is it pay discrimination to differentiate on length of service?

A4In the Employment Equity Act (EAA) there is a wide definition of unfair discrimination which lists gender, race, religion and so on. Recently a phrase was tagged onto this discrimination clause which says “… or on any other arbitrary ground”.

Recently, this phrase was relied on in a case of unfair discrimination against an employer. The employer paid newly employed workers 80% of the full wage for the first two years of employment. Thereafter they moved up to the full wage.

Some newly employed staff (via their union) took the employer to the CCMA and alleged unfair discrimination in that they did exactly the same work as other employees who had been there two years or more. The employees won their case at the CCMA but this was reversed on appeal to the Labour Court, which held that: “The differentiation complained of was not irrational; was not based on an arbitrary unlisted ground; and was not unfair.”

What must the complainant prove?

The judgment set out what a complainant must prove to establish pay discrimination:

  • The work performed by the complainant is equal or of equal value to that of a more highly remunerated comparator; and
  • Such difference in pay is based on a prohibited ground of discrimination.

To show unfair discrimination on an arbitrary ground, the complainant, held the

Court, must identify the arbitrary ground, prove that it is the reason for the disparate

treatment and show that:

  1. The conduct complained of is not rational;
  2. The conduct complained of amounts to discrimination; and
  3. The discrimination is unfair.

The judgment gave weight to the government’s Code of Good Practice on Equal Pay

Remuneration for Work of Equal Value which states that it is not unfair

discrimination if the difference is fair and rational and based on “the individuals’

respective seniority or length of service”.  It also specifically recognises length of

service as a factor justifying differentiation in pay.

Thus in appropriate circumstances it is permissible to pay your staff based on their period of employment.    As always however, take full advice on your particular circumstances – our labour laws are complex and the consequences of non-compliance severe.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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