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Protection of Workers' Claims (Employer's Insolvency) Convention, 1992 (No. 173) - Zambia (RATIFICATION: 1998)

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CMNT_TITLE

In order to provide a comprehensive view of the issues relating to the application of ratified Conventions on wages, the Committee considers it appropriate to examine Convention No. 131 (minimum wages), and Conventions Nos 95 and 173 (protection of wages) together. The Committee notes the observations of the International Trade Union Confederation (ITUC) on the application of Convention No. 131, received on 1 September 2019.

Legislative developments. The Committee notes the adoption of the Employment Code Act 2019, which repeals a number of pieces of legislation which previously gave effect to the Conventions on wages, including the Employment Act and the Minimum Wages and Conditions of Employment Act.

Minimum wage

Article 1(1) of Convention No. 131. Coverage of the minimum wage system. Further to its previous comments, the Committee notes the information provided by the Government in its report, including the adoption in 2018 of amendments to the statutory orders fixing the minimum wage rates. Moreover, the Committee previously noted the Government’s indication that workers in the informal economy were not covered by minimum wage protection; in view of the large proportion of workers in that sector, the Committee requested the Government to take the necessary measures to extend the protection to such workers. In this respect, the Committee notes that the Employment Code Act 2019, like the repealed Employment Act, is potentially broad enough to cover workers in the informal economy.

Articles 3 and 4. Criteria for the determination of minimum wages. Operation of the minimum wage fixing machinery. Further to its previous comments, the Committee notes that the Employment Code Act 2019 establishes a new system for fixing and adjusting minimum wage rates. It notes in particular that the Labour Advisory Committee has the mandate to: (i) inquire into the wages and conditions of employment in any undertaking or sector in order to recommend minimum wages and conditions of employment; and (ii) review at least every two years and make recommendations to the Minister on the minimum wages and conditions of employment for any group of employees. The Committee also notes that the Government reiterates that the consumer price index is taken into account for the determination of the minimum wage levels. The Committee notes that the ITUC considers that, despite their revision in 2018, minimum wages in Zambia remain widely inadequate to meet the needs of workers and their families. The Committee requests the Government to provide its comments on the ITUC observations. It further requests the Government to provide information regarding the work of the Labour Advisory Committee in the context of the next examination of the minimum wage rates, including on the criteria taken into account when making recommendations to the Minister on the minimum wage levels.

Article 5. Enforcement. Informal economy. The Committee previously noted the Government’s indication that workers in the informal sector are not covered by minimum wage protection, and requested the Government to take the necessary measures to extend that protection to workers in the informal economy. While noting that the Government refers in its reply to the provisions of Part X of the Employment Code Act 2019 on the labour inspectorate and those on sanctions and redress, the Committee observes that legislative measures do not suffice to guarantee protection and that their application in practice is essential in this regard. The Committee requests the Government to take the necessary measures to ensure the effective application of minimum wage orders, including in the informal economy, and to provide information in this regard, including on labour inspection activities and other enforcement measures.

Protection of wages

Article 2 of Convention No. 95. Protection of wages of all persons to whom wages are paid or payable. The Committee notes that the Employment Code Act 2019 is the main legislation implementing the Convention. section 2 of the Act excludes from its application various categories of workers, including the Defence Force, the Police and Correctional Services and the Security Intelligence Service. Moreover, it provides that additional exclusions may be made by statutory instrument, after consultation with the Tripartite Consultative Labour Council. The Committee recalls that the Convention applies to all persons to whom wages are paid or payable. The Committee requests the Government to indicate how effect is given to the Convention for the categories of workers excluded from the scope of the Employment Code Act 2019.

Article 7(2). Works stores. Further to its previous comments, the Committee notes the Government’s reference to section 70(2) of the Employment Code Act 2019, which provides that employers may establish a shop for the sale of provisions to employees and that an employee shall not be compelled to purchase provisions at that shop, thereby giving effect to Article 7(1). The Committee recalls, however, that Article 7(2) provides that, where works stores for the sale of commodities to the workers are established or services are operated in connection with an undertaking, and access to other stores or services is not possible, the competent authority shall take appropriate measures with the object of ensuring that goods are sold and services provided at fair and reasonable prices, or that stores established and services operated by the employer are not operated for the purpose of securing a profit but for the benefit of the workers concerned. The Committee is bound to reiterate its request to the Government to indicate the measures taken to ensure compliance with this provision of the Convention.

Article 8(1). Deductions from wages. Further to its previous request, the Committee notes the Government’s reference to section 68 of the Employment Code Act 2019, which sets out the types of deductions from wages that are permitted. The Committee observes, however, that the Employment Code Act 2019 does not set out limits to those deductions. Recalling that, according to Article 8(1), deductions from wages shall be permitted only under conditions and to the extent prescribed by national laws or regulations or fixed by collective agreement or arbitration award, the Committee requests the Government to take the necessary measures to establish limits to the amount of deductions authorized under section 68 of the Employment Code Act 2019.

Article 12. Regular payment of wages. The Committee has noted for many years recurrent difficulties with regard to wage arrears in the country, including but not limited to workers in the public sector. It requested the Government to provide detailed information regarding the amount of wage arrears, the number of workers affected, and the sectors of economic activity, if any, affected by irregular payment of wages. While noting the information provided by the Government on the relevant provisions of the Employment Code Act 2019, the Committee recalls that legislative conformity in itself does not guarantee compliance with the Convention. The Committee therefore requests the Government to provide information on the measures taken or envisaged to address situations of wage arrears in the country.

Article 14(b). Wage statements. Further to its previous request, the Committee notes that the Government refers to section 72 of the Employment Code Act 2019, which provides for the obligation of the employer to explain to the employee, before they commence employment or when changes in the nature of the employment take place, the rate of wages and conditions relating to the payment of the wages. The Committee requests the Government to indicate the measures taken to ensure that workers are also informed, in an appropriate and easily understandable manner, at the time of each payment of wages, of the particulars of their wages for the pay period concerned, in accordance with Article 14(b) of the Convention.

Protection of Workers’ Claims (Employer’s Insolvency)

Articles 5, 6 and 8 of Convention No. 173. Application to business rescue proceedings. With regard to business rescue proceedings under the Corporate Insolvency Act 2017, the Committee previously noted that the Act does not indicate whether wage claims prior to the commencement of the business rescue proceedings benefit from a privilege (Article 5), and that subsequently, the Act does not regulate the coverage (Article 6) and rank of such privilege (Article 8). In the absence of new information in response to its previous request in this regard, the Committee requests once again the Government to take the necessary measures to ensure that the protection of workers’ claims by means of a privilege is extended to business rescue proceedings. It requests the Government to provide information in this regard.

Article 8(1). Rank of privilege in situations of winding-up and receivership. The Committee notes that the Government does not respond to its previous comments concerning sections 8 and 127(2) of the Corporate Insolvency Act 2017, pursuant to which workers’ claims have a lower rank of privilege attached to them than state claims, in the context of winding-up and receivership. The Committee recalls that, in accordance with Article 8(1), national laws or regulations shall give workers’ claims a higher rank of privilege than most other privileged claims, and in particular those of the State and the social security system. The Committee therefore requests once again the Government to take the necessary measures in order to ensure full compliance with Article 8(1) and to provide information in this regard.

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In order to provide a comprehensive view of the issues relating to the application of the ratified Conventions on wages, the Committee considers it appropriate to examine Convention No. 131 (Minimum Wage Fixing) and Conventions No. 95 and No. 173 (Protection of Wages) in a single comment.

Minimum Wage Fixing Convention, 1970 (No. 131)

Article 1(1) of the Convention. Coverage of all groups of wage earners. The Committee notes that the Minimum Wages and Conditions of Employment (General) Order 2011, as amended in 2012, excludes from its scope of application employees of the Government and local authorities and employees in management positions. It notes in addition that the Minimum Wages and Conditions of Employment (Shop Workers) Order 2011, as amended in 2012, excludes from its application certain categories of workers (such as persons employed in the motor trade industry or the petroleum industry, in the running of coffee stores, in the sale of agricultural produce, in bread making, in the reception, storage and treatment of fish, meat, poultry, game, fruit and other perishable foodstuff, etc.). The Committee recalls that Article 1(1) undertakes to establish a system of minimum wage which covers all groups of wage earners whose terms of employment are such that coverage would be appropriate. The Committee therefore requests the Government to provide information regarding the application of the Convention to the categories of workers excluded from the application of the statutory instruments mentioned above.

Article 3. Criteria for determination of minimum wages. The Committee notes that the Government refers to the consumer price index as the criteria used for the determination of the level of the minimum wage. It also notes the Government’s reference to the ongoing reform of the labour legislation, and in particular that section 124(2) of the draft Labour Code 2017 provides that in making recommendations about the minimum wage to the Ministry of Labour and Social Welfare, the Labour Advisory Committee shall take into consideration both the needs of the workers and their families and economic factors. The Committee notes that these criteria would correspond to those set out in Article 3. The Committee therefore requests the Government to provide information on the progress made in the revision of the labour legislation.

Article 5. Enforcement. Informal economy. The Committee notes that the Government indicates that workers in the informal sector are not covered by minimum wage protection. It also notes that according to the Labour Force Survey of 2014 published by the Central Statistical Office of the Ministry of Labour and Social Security, the informal sector accounted for 83.9 per cent of the total employed population. The Committee wished to draw the Government’s attention to the Transition from the Informal to the Formal Economy Recommendation, 2015 (No. 204) which provides that through the transition to the formal economy, Members should progressively extend, in law and practice, to all workers in the informal economy, social security, maternity protection, decent working conditions and a minimum wage (paragraph 18). Noting that a substantial percentage of the workforce operates in the informal sector in Zambia, the Committee requests Government to take the necessary measures to extend the protection afforded by the national minimum wage system to workers in the informal economy.

Protection of Wages

Protection of Wages Convention, 1949 (No. 95)

Article 7(2) of the Convention. Works stores. The Committee notes that the Government’s report does not provide information on the application of Article 7(2) which provides that, where works stores for the sale of commodities to the workers are established or services are operated in connection with an undertaking, and access to other stores or services is not possible, the competent authority shall take appropriate measures with the object of ensuring that goods are sold and services provided at fair and reasonable prices, or that stores established and services operated by the employer are not operated for the purpose of securing a profit but for the benefit of the workers concerned. The Committee therefore requests the Government to indicate the measures taken to ensure compliance with this provision of the Convention.

Article 8(1). Deductions from wages. The Committee notes that section 45 of the Employment Act lists the authorized wage deductions. However, there appears to be no provision limiting the overall amount of deductions, whereas according to Article 8(1), the extent of authorized deductions from wages shall be prescribed by national laws or regulations or fixed by collective agreement or arbitration award. In this respect, the Committee wishes to draw the attention of the Government to paragraph 296 of its 2003 General Survey on the protection of wages. The Committee requests the Government to indicate the measures taken to ensure compliance with this provision of the Convention.

Article 14(b). Wage statements. The Committee notes that section 51 of the Employment Act establishes the obligation to provide the employee with information on wages at the commencement of the employment relationship or when changes in the nature of such employment take place. However, the Committee notes that the Employment Act does not contain provisions providing for the issuance of a wage statement to the worker at the time of each payment of wages. The Committee recalls that Article 14(b) establishes that effective measures must be taken, where necessary, to ensure that workers are informed in an appropriate and easily understandable manner at the time of each payment of wages, of the particulars of their wages for the period concerned, in so far as such particulars may be subject to change. The Committee requests the Government to specify how this provision is applied in law or in practice (for example, by means of payslips).

Protection of Workers’ Claims (Employers’ Insolvency Convention), 1992 (No. 173)

Articles 5, 6 and 8 of the Convention. Application to business rescue proceedings. The Committee notes the adoption of the Corporate Insolvency Act, No. 9 of 2017 and of the new Companies Act, No. 10 of 2017. It further notes that the Corporate Insolvency Act provides for the possibility of initiating business rescue proceeding which, according to section 2(1) of this Act, is the process of facilitating the rehabilitation of a company that is financially distressed. The Committee also notes that the legislation does not indicate whether wage claims prior to the commencement of the business rescue plan benefit from a privilege, and subsequently does not regulate the coverage and rank of such privilege. The Committee recalls that the Convention requires that workers’ claims arising out of their employment shall be protected by a privilege (Article 5), that such privilege shall cover wages due at least three months before the insolvency or termination of contract, claims for holiday pay, other types of paid absence and severance pay (Article 6) and that these claims shall have a higher rank of privilege than most other privilege claims, in particular those of the State and the social security system (Article 8). The Committee therefore requests the Government to take the necessary measures in order to ensure the application of these provisions of the Convention to business rescue proceedings.

Article 8(1). Rank of privilege in situations of winding-up and receivership. The Committee notes that section 127(2) of the Corporate Insolvency Act provides that amounts owed to an employee shall be paid after claims related to taxes and Government rent; this constitutes a downgrading of the rank of the privilege attached to employees’ claims in the event of winding up of a company vis-à-vis State’s claims, compared to previous legislation. Moreover, according to section 8 of the Insolvency Act, the same provision applies by extension to receivership. Recalling that Article 8(1) requires workers’ claims to have a higher rank of privilege than the claims of the State, the Committee notes that, as a consequence of the recent legislative change, national legislation is no longer in conformity with this Article. The Committee therefore requests the Government to adopt the necessary measures in order to restore compliance with this provision of the Convention.

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Part IV of the report form. Application in practice. While noting the Government’s difficulties in obtaining statistical data on the amounts paid to workers in application of the Preferential Claims in Bankruptcy Act, 1995 and the Companies Act, the Committee wishes to recall that legislative conformity alone is insufficient to constitute satisfactory compliance with the Convention unless the law is effectively enforced in practice. The Committee therefore trusts that the Government will make every effort to collect and transmit together with its next report up to date information concerning the manner in which the Convention is applied in practice, including for instance statistics on the number of bankruptcy proceedings, workers’ claims settled and sums paid, copies of important court decisions involving questions of principle relating to the application of the Convention, etc.

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The Committee notes that the Government’s report has not been received. It hopes that a report will be supplied for examination by the Committee at its next session and that it will contain full information on the matters raised in its previous direct request, which read as follows:

Part IV of the report form. Further to its previous comments, the Committee once again requests the Government to provide general information on the manner in which the Convention is applied in practice. In particular, it would be grateful if the Government would provide information on the amounts paid to workers whose claims are protected by priority in the context of bankruptcy proceedings.

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The Committee notes that the Companies Act (Cap. 388), as amended, and in particular section 346, the terms of which are similar to those of section 2(1) of the Preferential Claims in Bankruptcy Act (No. 9 of 1995), gives effect to the provisions of the Convention.

CMNT_TITLE

The Committee notes with regret that the Government’s report has not been received. It hopes that a report will be supplied for examination by the Committee at its next session and that it will contain full information on the matters raised in its previous direct request, which read as follows:

The Committee notes that the Government would appreciate receiving a copy of the Companies Act (Cap. 388), as amended by Act No. 6 of 1995.

The Committee would be grateful to the Government for providing, in accordance with Part IV of the report form, information of a practical nature concerning the application of the Convention, including the number of workers covered by the relevant provisions.

CMNT_TITLE

The Committee notes that the Government refers in its report to the Companies Act (Cap. 388), as amended by Act No. 6 of 1995. The text of the amended Act not being available in the Office, the Committee would appreciate receiving a copy of that document.

CMNT_TITLE

The Committee notes that the Government refers in its report to the Companies Act (Cap. 388), as amended by Act No. 6 of 1995. The text of the amended Act not being available in the Office, the Committee would appreciate receiving a copy of that document.

The Committee would be grateful to the Government for providing, in accordance with Part IV of the report form, information of a practical nature concerning the application of the Convention, including the number of workers covered by the relevant provisions.

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The Committee notes with interest the Government’s first report.