The Labour Relations Amendment Bill of 2024 introduces transformative changes to the Labour Relations Act (LRA), which include limiting the remedies available to high-income employees in cases of unfair dismissal.
Read: Labour laws set for major overhaul
The amendments propose to restrict employees earning above a prescribed threshold to compensation capped at the same amount, except in cases of automatically unfair dismissals. Reinstatement and re-employment, traditional remedies under the LRA, will no longer be available for these employees unless their dismissal is deemed automatically unfair.
The focus on high-income employees emerged from the need to address the disproportionate impact of reinstatement orders on employers, particularly in cases involving senior executives, and to create a more predictable framework for managing dismissals.
The proposed amendments are the culmination of negotiations at the National Economic Development and Labour Council (Nedlac). The labour law reform process began in April 2022, driven by concerns over the inefficiencies in the current labour dispute resolution system, particularly the lengthy and costly reinstatement proceedings that burden the Commission for Conciliation, Mediation and Arbitration and the Labour Court.
The Nedlac Report on the Labour Law Reform Process, published in February 2025, documents the proposals and outcomes of the discussions, which resulted in 47 amendments to the LRA, alongside changes to other labour statutes.
The amendments in sections 39, 43, and 46 of the Labour Relations Amendment Bill introduce the following changes to the LRA:
- Employees earning above R1.8 million a year will no longer be entitled to reinstatement or re-employment in cases of unfair dismissal, except when the dismissal is automatically unfair (for example, because of discrimination, whistleblowing, or participation in protected activities). For other unfair dismissals, the remedy is limited to compensation, capped at R1.8m a year, which also applies to unfair labour practices.
- The income threshold will be adjusted annually to reflect changes to the Consumer Price Index, ensuring it remains aligned with economic conditions.
- Full remedies, including reinstatement, re-employment, and uncapped compensation, remain available for automatically unfair dismissals.
The amendments also include transitional provisions in Schedule 7 to facilitate a smooth implementation of the new rules.
Implications of the amendments
The proposed amendments have significant implications for employees, employers, the labour relations system, and constitutional principles.
For employers
In a commentary on the proposed amendments, Webber Wentzel says they provide employers with increased certainty by reducing the risk of long-term reinstatement orders, which can be particularly burdensome in executive dismissals.
“The limitation of remedies to compensation for high-income employees creates a more predictable framework for managing executive exits,” the law firm states. This could lead to fewer protracted legal battles and lower costs associated with unfair dismissal claims.
However, there is a risk that employers might exploit this change by dismissing high-income employees more readily, knowing their liability is capped unless the dismissal is automatically unfair. This potential for abuse could lead to an increase in dismissals, particularly in sectors with high executive turnover.
For employees
For high-income employees, the amendments represent a significant reduction in protections. The loss of reinstatement and re-employment as remedies weakens their bargaining position, making it easier for employers to terminate their contracts.
Webber Wentzel highlights that “employees will need to focus on maximising compensation within the cap of R1.8m per annum”, which may not fully compensate for the loss of employment, particularly for executives with high earning potential.
Employees might strategically pursue whistleblower claims or other avenues to qualify for automatically unfair dismissal status, thereby accessing full remedies. This could lead to more complex and contentious legal disputes, potentially offsetting the intended reduction in burdening the courts.
Constitutional considerations
The amendments raise significant constitutional concerns, particularly regarding socio-economic discrimination. By differentiating remedies based on income levels, the changes may violate section 9 of the Constitution, which guarantees equality before the law and prohibits unfair discrimination. Section 23, which enshrines the right to fair labour practices, could also be interpreted as requiring uniform protections for all employees.
Webber Wentzel warns that “the amendments may amount to socio-economic discrimination, undermining the universality of labour rights”. The firm suggests that the constitutional validity of these changes is likely to be tested in court, given the potential for abuse and the perceived erosion of protections for high-income employees.
A two-tiered system of labour rights, where high-income employees receive less protection, could set a precedent for further differentiation based on economic status, challenging the principles of equality and fairness.
Broader systemic implications
The amendments aim to reduce the burden on the Labour Court and the CCMA, which handled 188 619 referrals in the 2023/24 financial year, with unfair dismissal cases accounting for 52% of all referrals. By limiting reinstatement hearings, the changes could streamline dispute resolution and foster predictability in the system.
The amendments may also influence the broader economy, with employers potentially finding it easier to manage executive performance, but high-income employees might demand higher compensation or stronger contractual protections to offset reduced statutory remedies, potentially increasing labour costs.
The information in this article should not be understood as a substitute for professional legal advice.
