Consumer Information

Author : Lea Jacobs

Property Professional March/April 2011

It’s time to brush up on those human resources skills

The proposed amendments to the labour laws will directly affect the property industry, writes Lea Jacobs

Principals who bury their heads in the sand, ignoring the various changes in the industry, could find themselves paying huge fines or spending time behind bars. The proposed new labour laws area case in point and, if passed, the changes will have a direct impact on how principals run their offices and deal with their agents.

In a nutshell, the amendments to the bill, if passed, will enforce the law governing the full-time employment of agents. Although the Estate Agency Affairs Act of 1976 defines an estate agent as an independent contractor, over the years The Commission for Concilliation, Mediation and Arbitration [CCMA] as well as the Labour Court has found that agents are, in fact employees.

While this fact, has , to a large extent, been ignored by principals, the latest proposed amendments to the Act indicate that Government is serious about banning labour brokers and temporary employment services in an effort to create ‘decent’ employment and this will have a direct effect on principals who regard their agents as independent contractors.

“Although a number of the amendments are still under debate, the new act is set to regulate the property industry, said James McLuckie, the vice-chairman of SSETA, who has been conducting road shows across the country, discussing the implications of the new bill.

He says that traditionally, principals have always adopted a fairly informal approach to employment and, as such, tended to have a very loose working relationship with their agents.

This is set to change under the new Act and principals will have to supply both letters of appointment outlining the various requirements as well as an employment contract. The minimum wage law will apply and principals may have to pay their agents a basic salary. Essentially agents will receive the same benefits as other employees in the agency, such as sick and annual leave.

Government has indicated that failure to comply could result in fines equaling one per cent of the agency’s annual turnover and/or a prison sentence.

“The amendments will change the entire working relationship that principals currently enjoy with their agents,” says Dina Porteous, a Pam Golding franchisee and repesentative of the Real Estate Education Forum. “Although there are many agencies who have already addressed this grey issue with their agents, the majority of the principals have not – those who are not compliant when the legislation gets passed by Parliament will face stiff fines and, in some cases, prison sentences.”

The amendments, perhaps for the first time, will give agents the opportunity to pick and choose which company they want to work for, based on what that company is offering. “Agents will have to weigh up all the benefits,” says Porteous, “and it would be short-sighted to believe that the principal who pays the highest commission, would automatically be the best option. Issues such as office support, brand value and sales areas could all ultimately play a larger role.

The new legislation will undoubtedly affect the type of agents employed and the days of taking all and sundry and turning them into estate agents could well and truly be over.

“The education standards required by estate agents have already weeded a number of non-performers out of the industry, and the new labour laws are going to force principals to take a cautious look at the productivity and performance levels oftheir agents. It stands to reason that agents who adopt a casual, lacklustre approach to their jobs will not receive full-time employment contracts. Principals, on the other hand, are going to have to sharpen their knowledge of human resources to ensure that they avoid the penalties and jail terms which have been sanctioned for non-compliance,” says Porteous.

She says that although Principals may argue that all of their agents act in the capacity of independent contractors, this could prove to be problematic in the future.

The definition of an ‘independent contractor’ means a person who works for or supplies services to a client or customer as part of the former person’s business, undertaking or professional practice: “It could be argued from this definition that an ‘independent contractor’ refers to a separate business entity. It needs to be noted that the triangular relationship that exists in Temporary Employment Service [TES] is directly impacted and has been removed through these proposed amendments to the Labour Act. This will directly affect the real estate industry. The Estate Agency Affairs Act and the Standard of Training of Estate Agents Regulations, 2008, will again come into effect and it could be required that the independent contractor complete an NQF 5 Real Estate Qualification and register as a principal agent.”

While the legislation still has a way to go before it is finally promulgated, principals should be warned that although some parts of the Act may be rewritten, it is unlikely that Government is going to change its stance on the employment of ‘independent contractors’. It’s time to brush up on your labour law knowledge, or consult a labour attorney, to ensure that everything is in place and your agency is operating above the law.