In South Africa’s evolving regulatory and compliance environment, employers are under increasing pressure not only to embrace transformation but to actively prevent unfair discrimination within the workplace. The Employment Equity Act 55 of 1998 (as amended) prohibits both direct and indirect unfair discrimination across a wide range of employment policies and practices. A finding of unfair discrimination by the Commission for Conciliation, Mediation and Arbitration (CCMA) or a court is no longer just a reputational concern. It carries significant legal, operational, and strategic implications, particularly following the recent legislative amendments and the implementation of the 2025 Employment Equity Regulations.

 

Understanding unfair discrimination – what constitutes unfair discrimination?

Section 6(1) of the Employment Equity Act prohibits discrimination, whether direct or indirect, on a range of specified grounds. These include race, gender, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language, and birth. It also includes any other arbitrary ground.

Discrimination is deemed unfair when an employment policy or practice places an individual or group at a disadvantage, or denies them a benefit, based on one of these grounds. For such differentiation to be lawful, it must be both rational and justifiable in relation to a legitimate business objective. Unfair discrimination may be direct, such as refusing to hire a woman because she is pregnant, or indirect, for instance where a seemingly neutral rule like requiring employees to work late without notice disproportionately affects women with childcare responsibilities.

Section 6(4), introduced through the 2013 amendment, further expands the scope of protection by stating that differences in terms and conditions of employment, including remuneration for employees performing the same, similar, or work of equal value, may amount to unfair discrimination if those differences are based on any of the prohibited grounds.

 

When is discrimination not unfair?

Not all differentiation is inherently unfair or unlawful. The law acknowledges that distinctions in the workplace can be justified if they are based on legitimate, objective criteria. In such cases, the differentiation must serve a lawful business purpose and must not be rooted in bias or prejudice.

The 2025 Employment Equity Regulations, specifically Regulation 7, outlines the grounds upon which differences in remuneration or employment terms for work of equal value can be justified. These include factors such as an employee’s length of service or seniority, qualifications and competencies that exceed the minimum job requirements, consistent and objective performance-based assessments, temporary or trainee status, and the market value associated with specific skill sets. In cases of organisational restructuring, employers may also justify maintaining an employee’s higher salary during a demotion if that salary is preserved on a fixed basis.

The CCMA and courts also assess whether an employer’s conduct aligns with Section 11 of the Employment Equity Act. This provision places the burden of proof on the employer once an employee has alleged unfair discrimination on a listed ground. The employer must then demonstrate that the alleged discrimination either did not occur or was fair and justifiable under the circumstances.

An illustrative example is the Constitutional Court decision in South African Police Service v Solidarity obo Barnard (2014). In this case, the court found that preferential treatment to advance members of designated groups under a valid affirmative action policy did not constitute unfair discrimination. The treatment was consistent with the objectives of the Employment Equity Act and proportional to the need for equitable representation.

 

The legal and commercial consequences of a discrimination finding

A finding of unfair discrimination, whether by the CCMA, Labour Court, or High Court, can result in a range of penalties that extend beyond compensation to include systemic corrective measures, financial sanctions, and restrictions on business opportunities.

Compensation and damages

Section 50 of the Employment Equity Act empowers the Labour Court, and in some instances the CCMA, to order employers to compensate employees for loss or damages resulting from unfair discrimination. This includes financial losses such as withheld salaries or denied benefits, as well as general damages for psychological harm, emotional distress, and injury to dignity. Interest may be awarded on any monetary compensation, calculated from the date the discriminatory act occurred. Courts may also direct the employer to take remedial action, such as reinstating the employee, offering alternative employment where reinstatement is not feasible, or amending discriminatory policies and procedures.

Administrative fines

Although a finding of unfair discrimination does not automatically lead to an administrative fine, non-compliance with the broader obligations of the Employment Equity Act may result in significant financial penalties. These obligations include, among others, preparing and implementing an employment equity plan, submitting accurate EE reports, and addressing income disparities. The fines are prescribed in Schedule 1 of the Act and escalate based on the number of contraventions. For a first offence, the maximum fine is R1.5 million or 2% of annual turnover, whichever is greater. This increases progressively to R2.7 million or 10% of turnover for a fifth or subsequent offence. This sliding scale ensures that fines remain impactful regardless of company size.

Ineligibility for Employment Equity Compliance Certification

One of the most far-reaching consequences of an unfair discrimination finding is disqualification from receiving an Employment Equity Compliance Certificate. As of 1 January 2025, no employer, whether designated or non-designated, may be issued a certificate if there has been a CCMA or court finding of unfair discrimination or a breach of the National Minimum Wage Act within the preceding 12 months.

This has serious commercial implications. Without a valid certificate, an employer becomes ineligible to do business with any organ of state. This includes bidding for public tenders, renewing or obtaining business licences, or accessing state-funded grants and incentives. This restriction not only limits market access but can undermine competitiveness, particularly in industries reliant on government procurement or regulatory approvals.

Reputational and operational fallout

Although reputational damage is not explicitly legislated, it is often one of the most immediate and lasting effects of a discrimination finding. Employers may face negative media coverage, heightened public scrutiny, and diminished trust among stakeholders and employees. Internally, morale may suffer, attrition may increase, and additional claims may be brought by other employees who perceive similar treatment. The broader impact on employer branding can also hinder recruitment and undermine transformation goals.

Corrective action and systemic reform

Where systemic discrimination is identified, the Labour Court may issue binding instructions that go beyond individual remedies. Employers may be required to revise employment policies, undergo compliance monitoring, submit progress reports to the Department of Employment and Labour, and even host follow-up inspections by labour inspectors. These interventions are often accompanied by strict deadlines and oversight mechanisms to ensure sustained compliance.

 

Strategic and compliance risks

The risks associated with a finding of unfair discrimination extend well beyond legal liability. Such a finding can derail transformation strategies, damage stakeholder relationships, compromise compliance ratings, and negatively affect investor and client confidence. For designated employers, this may also impact their B-BBEE scores and standing in relation to industry sector codes.

 

Lessons from case law and practice

South African case law continues to demonstrate that even well-intentioned or facially neutral policies can result in unlawful indirect discrimination if their application disproportionately affects certain groups. Recent trends show a growing number of claims related to unequal pay, highlighting the need for employers to conduct regular internal audits and equity assessments to identify and address disparities before they become litigious issues.

 

Proactive measures: Embedding equity in practice

To prevent findings of unfair discrimination and protect eligibility for Employment Equity Compliance Certification, employers should adopt a proactive and integrated approach to equity compliance.

Employers should begin by conducting regular equity and discrimination risk assessments. These assessments must include a thorough evaluation of employment policies, pay structures, recruitment processes, and overall workplace culture to identify and eliminate any potential biases or unjustifiable disparities.

It is equally important to provide comprehensive training for managers and HR leaders. These individuals play a critical role in implementing employment practices and must be equipped with the knowledge and tools to identify unconscious bias, understand legal obligations, and respond effectively to grievances.

Employers should establish transparent and accessible grievance mechanisms, ensuring that all employees are aware of the procedures for reporting concerns and that all claims are promptly and impartially investigated. Furthermore, decisions related to hiring, promotion, and remuneration should be based on consistent, objective criteria that align with the inherent requirements of each role.

Documentation plays a vital role in demonstrating compliance. Employers should maintain detailed records of employment decisions, policy updates, and the progress of their employment equity plans, particularly where they relate to sectoral numerical targets. These records are essential during departmental audits or in response to allegations of unfair practices.

Finally, employers must ensure that their EE plans are aligned with the sectoral numerical targets issued by the Minister of Employment and Labour. Progress should be reviewed regularly, with deviations justified and documented where necessary, particularly where external conditions such as skills shortages or restructuring impact implementation.

 

Conclusion

In an era where employment equity is central to South Africa’s transformation agenda, a single finding of unfair discrimination can trigger far-reaching legal, commercial, and reputational consequences. Employers must move beyond box-ticking exercises and compliance checklists and instead cultivate a workplace culture grounded in fairness, transparency, and accountability. Preventing unfair discrimination is not only a statutory obligation, it is a strategic imperative and a test of leadership for any organisation seeking to thrive in an inclusive and sustainable economy.

References

1. Employment Equity Act No. 55 of 1998 (as amended)
2. Employment Equity Amendment Act No. 47 of 2013
3. Employment Equity Amendment Act No. 4 of 2022
4. Employment Equity Regulations, 2025