Dis-Chem’s ‘no whites’ employment equity plan is irrational and unlawful

A moratorium on external appointments and internal promotions of white workers in an internal document written by Dis-Chem founder and CEO Ivan Saltzman recently made its way into social media. The memo announced a prohibition on hiring white workers and announced plans to link the performance appraisal of management to achieving employment equity targets.

Saltzman cautioned that the company might be rendered inoperable by a 10% fine of its annual revenue for failing to meet employment equity targets. What stood out from the statement was that Saltzman was not motivated by ideals of substantive equality and racial representation within the workplace. There is no recognition in the memo of the advantages of inclusiveness.

Salzman could have referred to the history of racial exclusions and oppression in South Africa. Salzman could also have argued that it makes good business sense to have workers in the employ of the company who more accurately reflect the customers of the company. Instead, Saltzman was motivated by capitalist greed. That is all.

I find myself unsympathetic to Dis-Chem. Dis-Chem was founded in 1978. This means that Dis-Chem has had ample opportunity to correct racial underrepresentation at the company.

If one only counts the years following the entering into force of the Employment Equity Act (EEA), Dis-Chem would have had more than two decades to implement a representative employment equity plan.

As a starting point, it is essential to consider that section 9(2) of the Constitution of the Republic of South Africa, 1996, authorises measures that promote equality. It is designed to protect and advance persons disadvantaged by unfair discrimination.

The EEA also serves this aim but limits the kinds of affirmative action programmes companies may implement. Section 15(3) of the EEA states that affirmative action measures include preferential treatment and numerical goals but exclude quotas. Considering the difference between a numerical target and a quota may be worthwhile. Quotas contain fixed numbers.

In SAPS v Solidarity obo Barnard, the Constitutional Court explained the difference between numerical goals and quotas by stating that “the primary distinction between numerical targets and quotas lies in the flexibility of the standard”.

The Labour Appeal Court applied this principle in Solidarity v Department of Correctional Services, where it was held that “an inflexible set of numbers with which the designated employer is required to comply ‘come what may’ constitutes a quota and would therefore be in breach of s 15(3) of the EEA”.

Scope for deviation, it was ruled, is necessary for a target to pass legal muster. On appeal to the Constitutional Court, it was confirmed that targets do not constitute quotas if deviations are provided.

The Labour Court then followed this approach in Solidarity v Minister of Safety and Security, where the court held that what is required to distinguish a numerical goal from a quota is “a provision that tells decision-makers under what circumstances the pursuit of the targets can yield to other considerations when recommending or making an appointment”.

In the recent case of Ethekwini Municipality v Nadesan, the Labour Court provided the following helpful list of affirmative action measures that may be found to be irrational:

“(a) Where the restitutionary measure has no logical chance of addressing the identified demographic imbalances, it may be irrationally applied.

 “(b) If the equity plan was not in force when it was applied, the resultant decision must be irrational.

 “(c) If an equity plan imposes quotas it would not be in compliance with the EEA, therefore be invalid, and thus be irrationally applied.

“(d) If the demographic statistics upon which the restitutionary measure was based were substantially wrong, the restitutionary measure is irrationally applied.

“(e) If demographic targets in the occupational category have already been met, then the continued provision of preferential treatment to members of designated groups goes beyond ‘equitable representivity’ and the measure is thus probably irrationally applied.

“(f) If the employee negatively affected by implementation of the equity plan was [an underrepresented member of a designated group], the restitutionary measure applied against him may have been irrationally applied.”

The effect of these principles is that an affirmative action programme will be irrational and therefore unlawful when it concerns a rigid quota and the complete exclusion of specific racial groups from consideration to appointment to positions. The relevant affirmative action plan must provide for deviation and may not be fixed objectives but flexible goals.

Dis-Chem has since apologised for the wording and tone of the leaked memo. It backtracked by stating that the memo was not aligned with its values. The company stated that the intention of the memo would, however, remain and that the company stood by “the unequivocal imperative to continue our transformation journey”. The company stated that “equality, diversity and inclusivity are important throughout Dis-Chem”.

The original memo shows Dis-Chem’s plan contains no deviation clause. Our courts have held that a deviation clause is “a provision that tells decision-makers under what circumstances the pursuit of the targets can yield to other considerations when recommending or making an appointment”.

Judged solely on the leaked memo and clarifying statements by Dis-Chem, the only possible deviation is by means of direct approval by Saltzman.

As a result, based on the available information, it is difficult to conclude that Dis-Chem’s plans will pass judicial scrutiny. This is particularly so as reaching the company’s targets are planned to be coupled with performance appraisal processes.

In Solidarity v Minister of Safety and Security, the Labour Court found that the numerical targets set by the employer were not merely goals that the SA Police Service endeavoured to achieve, but fixed objectives that, if not met, could result in adverse performance assessments or even disciplinary sanctions.

If judicially challenged, the fact that Dis-Chem’s plans are linked to performance appraisal processes should contribute to a finding that Dis-Chem’s plans amount to quotas and not numerical targets.

A moratorium (to use Saltzman’s own word) amounts to a quota by its very nature. It says that 0% of new appointments may be white. It seems axiomatic that it is unfair for Dis-Chem to lay the blame at the feet of fines that may be imposed upon the company. It is, in fact, Dis-Chem itself that dragged its feet.

They are now placed in a position where they face a fine. It seems patently unfair that white workers should be barred from employment at the company. Therefore, white workers bear the brunt of Dis-Chem’s failure to take workplace transformation seriously within its four decades of existence.

All South Africans should therefore be outraged by Dis-Chem’s actions. DM