This commentary is based on the December 2000 version of the Bill (see now Bill 3 of 2001: the Unemployment Insurance Bill). When comparing the December version with the (official) March 2000 version (see Government Gazette 20952 of 2 March 2000)(vol 417) (General Notice 943 of 2000), it becomes clear that certain important amendments have been made. Some of these are clearly an improvement on the former version; some, however, are evidently retrogressive in nature. It is also clear that many of the problem areas which existed in relation to the March 2000 versions have not yet been addressed satisfactorily.

1. The UIB contains no provision showing that the drafters have seriously considered, or plan to seriously consider, measures to prevent unemployment. The only indication in the UIB that the Bill is not restricted to curing the effects of unemployment, is in clause 48 which empowers the Unemployment Insurance Board to advise the Minister on unemployment insurance policy and on policies arising out of the application of the Bill, and making recommendations to the Minister on changes to legislation insofar as it impacts on unemployment policy. In countries where unemployment was reduced, the reduction has been attributed largely to a shift from passive labour market policies to active labour market policies. The swing in the European Union towards active labour market policies has been re-emphasised as recently as March 2000, in a bid to create at least 20m jobs in a decade and lifting the European Union's annual growth rate. Although the UIB is primarily aimed at administering a fund for purposes of alleviating the effects of unemployment, the UIB, being the statute directly relevant to the issue of unemployment, is the suitable statute in which to provide for the state's obligation to institute measures to address preventative or curative measures in regard to the unemployment problem in SA. In disregarding the need to combat unemployment, the UIB takes a step backwards from the Unemployment Insurance Act which empowered the Minister to introduce schemes to combat unemployment. It is recommended that the provision in the present UIA which empowers the Minister to introduce schemes to combat unemployment be retained.
2. It is regrettable that those provisions in the March version of the UIB which could be interpreted as potentially having some bearing on preventing/ avoiding/combating unemployment have been removed – in particular the provisions empowering the Board to advise the Minister on policies for minimising unemployment, and on the creation of schemes to alleviate the effects of unemployment. It is recommended that clauses 39(1)(a)(ii) and (iv) of the March version of the UIB.
3. Related to this shortcoming, is the lack of measures to reintegrate persons who had become unemployed into the labour market. It is recommended that the UIA provision that a contributor employed by two employers simultaneously, who loses one employment and continues in the other, does not lose his entitlement in respect of the lost employment simply because he retains the other employment, should be retained. Further measures to reintegrate the unemployed should be introduced. See further the discussion below.

1. COVERAGE/SCOPE OF APPLICATION: QUESTIONING THE MODE OF EXTENDED INCLUSION AND THE JUSTIFIABILITY OF CERTAIN EXCLUSIONS
1. Limited nature and effect of extended scope of coverage

The UIB attempts to broaden the scope of coverage of statutory unemployment insurance mainly by including certain categories of employees excluded under the Unemployment Insurance Act of 1966 (UIA) (in particular high-income earners). It is, however, submitted that including these previously excluded categories has only limited significance as far as broadening the scope of coverage is concerned. High-income earners, it could be argued, should be in a position to rely on other occupational-based or private measures should they become unemployed. Of course, their inclusion seems to be primarily based on the philosophy that their inclusion would help to strengthen the financial base of the fund, and to help sustain those unemployed who were low-income earners through a system of redistribution. While one does not find fault with these underlying assumptions, the extreme manner in which the UIB attempts to bring this about, could perhaps be challenged (see further the discussion in this regard below).

It is regrettable that the December version of the UIB, in contrast with the March 2000 version, again excludes two categories of employees from the scope of coverage of the UIB, namely seasonal workers and migrant workers who have to return to their country once their period of service, apprenticeship of learnership comes to an end.

2. The specific exclusions
1. Public servants

Public servants are excluded from the UI systems in some countries, and included in the systems of others. If the rationale for exclusion in the UIB is that public servants are regarded as having job security and therefore need no protection against unemployment, reliance on this very rationale is open to serious criticism. Public servants in South Africa no longer have job security (neither legally nor factually) to the extent that their exclusion from unemployment protection can be justified. The unemployment figures released by Statistics SA at the end of March 2000 indicate that the biggest job losses were in the public service and the mining sector. Secondly, the argument may be that public servants are cared for financially by the State as employer and/or the pension fund in the event of a loss of job, as severance packages and pension pay-outs are allegedly quite advantageous. This, however, is open to challenge. It is submitted that these payments (i.e. severance packages and pension pay-outs) are certainly not more favourable than those given in the private sector.

There being no principled reason for excluding public sector employees, their exclusion may well be attacked on constitutional grounds. Section 27(1)(c) of the Constitution grants the right to access to social security to everyone. As provision is also not made for an alternative mode of coverage, e.g. by way of voluntary contributions or via a separate scheme for public servants, and as their exclusion appears to be based on rather flimsy grounds, a constitutional challenge remains a real possibility.

2. Learners

Under the 1996 UIA any person who has entered into or works under a contract of apprenticeship or a contract of learnership, is a contributor. The exclusion of a group that was previously included, bucks the trend towards extending coverage. The reason for excluding learners from the ambit of the UIB is not clear. Learners are normally employed for a considerable time (mostly 1 to 2 years) so that administration of contributions and enforcement of the statutory provisions should be reasonably manageable. It is submitted that learners belong to a particularly vulnerable group since the economy at present appears to be unable to absorb the young and newly qualified. Learners are therefore in need of protection against unemployment, and should have a right of access to social security in the form of unemployment benefits.

3. Domestic workers and seasonal workers

The UIB (as is the case with the UICB) provides that "the Minister must, as soon as possible after this section takes effect, appoint a body to investigate and make recommendations regarding the inclusion of domestic workers and seasonal workers under the application of the Act". The investigation must be concluded within 18 months, and the Minister must consult the Board on the outcome of the investigation. The provision relating to the completion of the plan is vague since inclusion as a definite outcome is not ensured.

The statutory prescription regarding an investigation in connection with the inclusion of domestic servants stands in stark contrast to the position of other excluded groups, in connection with whom there seems to be no consideration of future inclusion. There appears to be no reason in principle why a plan regarding future inclusion of one group is enacted whilst no reference is made to the possibility of revisiting the position of the other categories of excluded employees - in particular public servants and learners. Furthermore, the inclusion of a process which has a limited time period (and which is not unequivocally committed towards inclusion of this excluded category) in a statute which hopefully remains valid for a long period, is inappropriate. It is suggested that a plan for inclusion should be moved from the statute to the policymaker's desk.

4. Persons whose remuneration is based on output of work done

While the UIA of 1966 includes in the definition of "contributor" "… somebody whose earnings are calculated … by work done", such a person will now effectively be excluded if his or her remuneration is based on the quantity or output of work done, unless the amount is part of the employee's minimum compensation in terms of any law, collective agreement or contract or employment. It is submitted that in modern day terms the quantity or output of work done is increasingly contractually made to constitute the sole basis for remuneration, while no minimum compensation is provided for. Despite the administrative difficulties which might accompany the collection of contributions under these circumstances, it is suggested that the exclusion of this previously included category may tend to weaken the Fund's ability to accommodate developing trends in work and employment, especially in South Africa, and may contribute to encourage "abuse" in this regard (e.g. where employers agree with employees to be paid purely on an output or quantity basis, in order not to be burdened with UIF responsibilities). This is a particularly serious issue as minimum compensation is relatively seldom prescribed by law, in particular in non-organised contexts.

5. Migrant workers

The exclusion of migrant workers who have to leave South Africa upon termination of the contract of service, apprenticeship or learnership from UIF coverage is open to some forms of abuse and does not appear to be sufficiently justified. One example of possible abuse relates to a contractual term imposed by the employer to the effect that the migrant worker has to leave the country upon termination of service. According to the wording of clause 3(1)(d) of the UIB the migrant worker would under these circumstances not qualify as a contributor. One could envisage that employers who would want to avoid both the liability of contributing to the Fund in respect of foreign workers and the accompanying administrative burden could use this clause as a mechanism to appoint foreigners on a fixed-term basis only, irrespective of the period of appointment (subject, of course, to governmental approval).

Excluding contract-bound foreign workers also appears to be short-sighted and does not take into account the need to introduce measures of social security co-ordination in the field of unemployment coverage, especially in the SADC region.

In keeping with international norms in this regard, retrenchment benefits for these workers could consist of a lump sum for settlement costs and subsidies for job creation in the migrant's home country. Various ILO Conventions require co-ordination on the part of State parties in order to guarantee migrant workers complete and continuous protection on the basis of effective equality and reciprocity. It has to be noted that the provision contained in the March 2000 version of the UIB, to the effect that there is no entitlement to benefits during a period of absence from the country, has been removed. It makes little sense to remove same and replace it with a clause which basically has the same effect.

3. Other excluded categories: the predicament of the atypically employed

The pattern that can be discerned from both the present UIA and the envisaged legislation is evident: namely to restrict unemployment protection only to those who qualify as "employees". In this regard the UIB appears to be much less progressive in terms of coverage than other recent labour legislation (see the written commentary for details). Case law in this country makes it clear that major categories, such as independent contractors, are excluded from the employee concept. From this it follows that the self-employed, the informally employed, and several other categories of the atypically employed will still for all legal and practical purposes be excluded from UIF coverage.

In essence then, the effect of relying on the "employee" notion in order to signify coverage, is that large categories of those who work atypically, in particular independent contractors, so-called dependent contractors, the self-employed, and the informally employed, as well as the long-term unemployed, are excluded from protection. The specific exclusion, in addition, of vast categories of persons confirms this conclusion. Given the strict categorical approach of South African social assistance, whereby no provision is made for an unemployment assistance scheme, the position thus is that these persons, as a rule, do effectively not enjoy unemployment protection. It is submitted that very few of them are in a position to make their own private provision in this regard. Extending coverage to them, either by allowing for voluntary contributions to the Fund, or by setting up a separate system, would be in keeping with recommendations made by the 1996 ILO country review and the SA Labour Market Commission (see below), and with the findings of an important recent ILO study on the position of the atypically employed.

In certain European countries separate social protection and/or unemployment insurance schemes have been developed for the self-employed. These schemes usually operate on the basis that the self-employed make voluntary contributions, which are sometimes (as is the case with Denmark) subsidised by the State. Although subsidising the self-employed may not be an option for South Africa, it is submitted that serious consideration be given to the introduction of a voluntary scheme for the self-employed.

Wider coverage than the current position is also in accordance with the constitutional right of access to social security which is a right accorded to "everyone". Of course, extended coverage must be effected according to measures which are reasonable (bearing in mind, one would think, the administrative capabilities of the Fund); the availability of financial resources appears to be a less important consideration, given the insurance nature of UIF coverage in this country. It is suggested that by allowing for voluntary contributions to the Fund, or the setting up of a separate system, the constitutional provision will be complied with because everyone so excluded will have access.

4. Dependants

Serious shortcomings exist as far as the provision on the right to dependants' benefits is concerned. It would appear that the amendments to the March 2000 version of the UIB have not succeeded in clarifying most of the problems with the earlier version.

1. Spouse: Clause 30 extends coverage to a "surviving spouse or life partner". It is unclear how extensively the notion of "spouse" should be interpreted, as there is no definition of the notion. Section 38(7) of the present legislation, apart from its shortcomings, is much more precise. The notions of "spouse" and "life-partner" could be interpreted to exclude certain categories of dependent partners. It is, for example, not clear whether and, if so, to what extent a life-partner or spouse who was married to the deceased employee in terms of customary or religious law would qualify as a beneficiary if there was also a civil law marriage with a or another wife subsisting at the time of the employee's death. It is doubtful whether the exclusion of any of these categories of de facto dependants will eventually pass constitutional and equality muster, given the constitutional prohibition of unfair discrimination based on marital status, religion and sexual orientation. It is submitted, further, that irrespective of the exact nature of the relationship/partnership, the primary question should be whether a person was (wholly or mainly) financially dependent on the deceased.
2. Child: The absence of an age restriction and of the requirement that the claiming child must or would have been dependent on the deceased contributor, is conspicuous. Furthermore, if the assumption is that the surviving spouse will look after the child and that for this reason the child can only claim if the spouse has not done so, then this can lead to undesirable results, as the assumption can easily be false - such as where, for example, the child of the deceased is not the child of the surviving spouse. Also, what would be the position if a surviving life partner has claimed benefits? Would this disentitle the child from claiming benefits as well? A textual reading of clause 30(2) would not support this inference. This, however, leads to anomalous results when compared with the scenario where there is a surviving spouse.
3. General: The primary question should be whether a person was or would have been (wholly or mainly) financially dependent on the deceased. In the event of more than one dependant, there should either be a clear ranking of would be beneficiaries, or an equitable sharing of the benefits can perhaps be ordered (much along the same lines as is the case with pension/provident fund payments).

 

5. Concluding remarks

In the South African context many of the exclusions mentioned above, apart from being archaic in nature, have a distinct racial and/or gender flavour: because of the country's history of employment-based racial and gender hierarchy, these groups are most likely to be African and/or women. Given the preponderance of Africans and women in many of these categories, and given the absence of a reasonable justification for their exclusion, it might well be that the disparate treatment meted out can be regarded as a form of indirect discrimination. It is, therefore, suggested that the recommendation contained in both the ILO Country Review and the Labour Market Commission that coverage extensions (including the self-employed also) be introduced, find true reflection in the envisaged legislation.

According to ILO Convention 168 the persons protected in terms of a UIF scheme should comprise not less than 85% of all employees. The exclusion of certain categories of employees from the UIB, will undoubtedly set the level of employees covered by the UIB well below 85%. Even though the Convention has not been ratified and a specific declaration in favour of a lower threshold has not been made by South Africa, the Convention remains important for any constitutional discussion on the topic in South Africa, as a court is obliged to take into account provisions of international law when interpreting the constitutional right of everyone to access to social security. And, of course, it sets a threshold which should be followed by any country which claims to have a progressive system in this regard.

 

2. BENEFITS
1. Calculation problems and uncertainties

See the written commentary for details.

2. The quantum and the graduated scale of benefits: the need for revision

See also the written commentary.

Article 15 of Convention 168 requires that benefits should be no less than 45% of the previous earnings. Whereas the UIA of 1966 complied with this requirement by granting benefits at a rate of 45% of previous earnings, the UIB provides for a graduated scale of benefits ranging from 29.5% to 58.6% of previous earnings. While one would generally subscribe to the underlying rationale for introducing a graduated scale of benefits, there is nevertheless at least one problem to which attention should be drawn. This relates to the fact that the rate at the lower end of the graduated scale is an extremely low 29.5%, well below the internationally accepted target of 45% of previous earnings. This is an additional factor which could infuse resistance and could make the envisaged system highly unpopular across the spectrum of the higher earners.

It is suggested that the basis upon which the scale is graduated be reviewed, and a more equitable distribution be devised. Ideally, the minimum rate should be set at 45%, with higher rates for earners at the lower end of the income spectrum.

 

3. Entitlement to benefits
1. Partial unemployment and suspension of employment: the need for protection and a reintegration strategy

1. Partial employment

ILO Convention 168 provides for benefits in circumstances of partial unemployment, described as the loss of earnings as a result of the temporary reduction in the normal or statutory hours of work. The aim of this provision is to reintegrate unemployed persons into the workplace. The Convention states that each member state must endeavour to provide payment of benefits to a contributor who has found part-time work during a period that a part-time worker actually seeks full-time employment. The benefits should be kept to a particular level so that the total of benefits and earning from the part-time work may be such as to maintain incentives to take up full-time work.

In several jurisdictions across the world the philosophy behind this provision is echoed, namely to create incentives to the unemployed to be employed or re-employed, and incentives to part-time workers to work full-time. Payment of benefits to part-time workers are aimed at bringing the unemployed back into the world of work, because they do not lose their benefits merely due to the fact that they have found a job, or because they started their own business. In may countries, such as the United States, Canada, Australia, New Zealand and the more developed member states of the European Union, an unemployed person will retain some benefits while making his/her way back into the world of work.

In the light of the above, it is suggested that the UIA provision that a contributor employed by two employers simultaneously, who loses one employment and continues in the other, does not lose his entitlement in respect of the lost employment simply because he retains the other employment, should be retained.

2. Suspension of employment

Convention 168 of 1991 also provides that benefits should be paid in circumstances of suspension or reduction of earnings due to a temporary suspension of work, without any break in the employment relationship, for reasons of an economic, technological, structural or similar cause. Where there is such a suspension of work and a resultant suspension of earnings, benefits must be on the same level as benefits for full employment. The rationale is clear: namely to protect and maintain some measure of income replacement in the event of such a contingency occurring, and to ensure speedy reintegration in the labour market once the suspension comes to an end.

This contingency is legally and factually highly relevant to the South African scenario. The suspension of the contract of employment, such as in the event of a protected strike, or as a result of the employer's operational requirements, legally has the result that the employer's obligation to pay remuneration and ancillary benefits is suspended as well. Except for one scenario of limited (insolvency-related) application, the payment of benefits in the event of the suspension of the contract of employment necessitated by the employer's operational requirements is clearly not foreseen by the UIB. The Bill stipulates that unemployment benefits are payable in respect of any period of unemployment if the reason for the unemployment is the termination of the contributor's contract of employment by the employer or the ending of a fixed-term contract.

3. Recommendation

There is at least one issue with regard to the loss of entitlement to benefits which has to be reconsidered: the measures aimed at avoiding double-dipping of benefits.

1. Double-dipping and state-provided income-replacement benefits

The UIB evidently attempts to avoid double-dipping by providing that a contributor is not entitled to benefits for any period that the contributor is, amongst others:

• in receipt of a monthly pension or disability grant from the State
• in receipt of a benefit from the Compensation Commissioner as a result of an occupational injury or disease which caused total or temporary unemployment.

The UIB therefore excludes double-dipping between the Unemployment Insurance Fund and the Compensation Fund. However, it is suggested that there are other state-provided benefits which should be included as well - such as benefits from the Road Accidents Fund. Although some limitation on double-dipping between the Compensation Fund and the Road Accidents Fund (RAF) exists, a similar provision restricting the payment of benefits under the UIF and the RAF should also be enacted. The rationale behind this is that the amount of benefits received as unemployment benefits should take into account income-replacement benefits received from other parts of the social security system, in particular state-provided benefits. It might, therefore, be advisable to include a general provision in the envisaged legislation which avoids double-dipping with regard to all income-replacement state-provided benefits. This might then also cover the eventuality where the beneficiary under the UIF system is or becomes the recipient of state-provided benefits other than a State pension or disability grant.

However, it appears to be wrong in principle to exclude a contributor altogether from receiving any UIF benefits if he/she is in receipt of, for example, the meagre old-age or disability pension (to be raised to R570 per month). It would be more appropriate to stipulate that the state-provided unemployment benefit is reduced to the extent that the contributor is entitled to other income-replacement state-provided benefits as well. Such an approach would be in keeping with the spirit behind the provision in the UIB that a contributor will be entitled to receive benefits, once a retrenchment, gratuity, severance pay, or similar payment from whatever source has been exhausted at a rate equal to the usual remuneration earned by the contributor.

It has to be stated that there is little chance that double-dipping can be avoided effectively in the absence of a proper database system, which is linked to other social security benefit schemes. It is suggested that the very limited provision in the UIB which envisages the creation of a database is for various reasons wholly insufficient - it does not, amongst others, envisage any link to other social security databases.

2. Double-dipping and bargaining/statutory council unemployment benefits

Receiving benefits from any unemployment fund of scheme established by a bargaining or statutory council also excludes the contributor from the entitlement to unemployment benefits.

One should question the wisdom of excluding a contributor from receiving benefits in terms of the UIF system if there is a council agreement to pay benefits. Why should an employee and his/her employer not be allowed to make additional occupational-based provision? This leaves one with a further anomaly: if the employee has made private provision for the contingency of unemployment, payment of unemployment benefits is not forfeited. One has great difficulty in understanding the discrepancy between occupational-based (council) payments and private payments.

Furthermore, it appears to be wrong in principle to exclude a contributor altogether from receiving unemployment benefits under these circumstances. A reduction in the amount of unemployment benefits would have been more appropriate. It is submitted that the provision in the UIB (discussed below) which requires the exhaustion of retrenchment-like benefits before unemployment benefits can be taken up is inapplicable, as this provision seems to regulate the exhaustion of lump-sum payments only. Even if the latter were not to be restricted to lump-sum benefits, the separate treatment of bargaining/ statutory council benefits in clause 14(a)(iii) creates the impression that these benefits have to be dealt with in a manner different from retrenchment-like benefits referred to in clause 14(a)(iv).

3. Double-dipping, retrenchment-like and other payments: some serious inconsistencies

Clause 14(a)(iv) of the UIB stipulates that a contributor is not entitled to benefits for any period that the contributor is in receipt of "any retrenchment gratuity, severance pay or similar payment received, from whatever source, as a result of that contributor's unemployment with that employer, except that the contributor shall be entitled to receive benefits, once such retrenchment, gratuity, severance pay, or similar payment has been exhausted at a rate equal to the usual remuneration of that contributor, … whilst that contributor was employed with that employer".

There are several problems with the interpretation and application of this provision. One of these relates to the nature of, for example, severance pay, and the reason why this is being paid to an employee who has lost his/her employment due to external circumstances. It might have been correct to require the exhaustion of such payment in full if the sole or main rationale behind the receipt of such payment is to tide the employee over during the period of unemployment subsequent to his/her losing employment. However, as is evident from judgements of our courts in this regard, several purposes are served by the payment of severance benefits, over and above the purpose to ameliorate the period of unemployment that lies ahead - it serves in particular also as a form of gratitude for years of faithful service and to compensate employees who lose their jobs through no fault of their own. In the light of the above, it appears suspect and unfair to require the exhaustion of all such benefits before the contributor may become entitled to UIF unemployment benefits.

The second problem concerns the question what is meant by "any retrenchment, gratuity, severance pay or similar payment received …as a result of the contributor's unemployment…". This specific formulation leaves the impression that a lump-sum payment is intended. If that is so, the question remains whether it is not necessary to introduce measures similar to those applicable to other categories of UIF benefit entitlement, where retrenchment-like payments are made on another basis than a lump-sum payment basis (i.e. where such payments are made on a periodical or ongoing basis). For example, the provisions relating to the calculation of illness, maternity, adoption, and dependant's benefits could be made applicable here as well. In terms thereof it could be stipulated that where retrenchment-like payments are received on a regular basis, the weekly UIF unemployment benefit may not be more than the remuneration the employer would have paid the contributor if the contributor had not been unemployed, when taking into account any regular retrenchment, gratuity, severance pay or similar payment, from whatever source, to which the contributor is entitled.

The third problem relates to fact that payments forthcoming "from whatever source" will fall foul of the exhaustion rule. Should the net be cast this wide? It is ostensibly similarly wide in the event of dependant's benefits. And yet, when looking at illness, maternity and adoption benefits, one finds an even more relaxed regulation: all that is taken into account are payments payable to the contributor in terms of "… any law, collective agreement or contract of employment" for purposes of giving effect to the rule that the benefit may not be more than the remuneration the contributor would have received if the contributor had not been ill, in confinement, or at work were it not for the adoption.

Moreover, in the fourth instance, these rules and restrictions do not seem to apply in the event where the contributor's employment is terminated for reasons other than in retrenchment-like cases. For example, where the contract of employment is terminated for reasons related to the contributor's misconduct or incapacity, and the contributor were to receive payments from whatever source as a result of his/her unemployment, according to the current provisions of the UIB no exhaustion has to take place - payments so received are simply not taken into account, and none of the rules referred to above and applicable to the other categories of UIF benefits appear to be relevant.

Finally, according to the UIB, double-dipping has to be avoided where the contributor is in receipt of retrenchment-like payments, "as a result of that contributor's unemployment". Would this include payments received from a retirement fund as a result of the contingency of unemployment arising, or compensation payable to the contributor were the dismissal found to be unfair or unlawful? One would think not. It is suggested that the wording of the provision be amended to exclude payments arising from any of these sources.

1. Unemployment benefits

Apart from issues concerning unemployment benefits dealt with elsewhere in this commentary, there are three additional matters to be raised.

The first one relates to the fact that these benefits are claimable only where the reason for the unemployment is the termination of the contributor's contract of employment by the employer of that contributor, or the ending of a fixed-term contract, or where the contract of employment has been suspended in terms of the provisions of the Insolvency Act 24 of 1936. This is an evident attempt to bring South African legislation in this regard in line with international norms, in terms of which only persons who became involuntarily unemployed should be entitled to benefits.

And yet, it would seem that the rules in this regard formulated in the UIB are much too narrow. There are other instances, apart from those mentioned, where the employee also becomes unemployed involuntarily. The obvious examples that spring to mind are those where the contract is terminated by operation of law under circumstances other than those mentioned in clause 16, and not by the making of any of the parties - such as where the contract of employment terminates because the employer has passed away.

Also, the reference to insolvency-related suspension of the contract of employment is not of much help – partly because, according to envisaged amendments to the Insolvency Act, this would be of limited duration and would only occur in the event of a transfer of a business as a going concern, and partly because the liquidator may still decide to terminate the contract. In all other instances of insolvency of the employer (i.e. where the business is not transferred as a going concern), the normal rule would apply, namely that the contract of employment terminates automatically.

Finally, as the clause presently reads, it would also mean that a contributor would not qualify for benefits if there has been mutual agreement between the employer and employee that the contract of employment would be terminated as an alternative to outright retrenchment. Justice would demand that the employee should not forfeit unemployment benefits under these circumstances.

Perhaps we can take our clue from the provisions of ILO Convention 168 of 1991 in this regard. The Convention stipulates that benefits may be refused, withdrawn, suspended or reduced to the extent prescribed when it has been determined by the competent authority that the person concerned has left the employment voluntarily without just cause, or when it has been determined by the competent authority that the person concerned had deliberately contributed to his or her own dismissal.

It is, therefore, recommended that the provisions of clause 16(1)(a) of the UIB be amended to cover situations – at least - where the contract of employment is terminated by operation of law.

The second issue concerns the fact that the date on which entitlement to unemployment benefits commences, is restricted when compared to the other benefits. Whereas almost all the other benefits under the UIB may be calculated retrospectively to the date when the risk commenced, unemployment benefits are calculated only from the date of application unless the delay was caused by circumstances beyond the control of the applicant. There seems to be no administrative or other rationale for the more restricted provision with regard to unemployment benefits, particularly in light of the personal trauma that a contributor may experience as a result of having lost employment involuntarily. In contrast, at least those persons who may become eligible for maternity and adoption benefits will know beforehand that they should lodge their applications for benefits; they may nevertheless lodge their claims much later and will be paid benefits retrospectively.

The third issue relates to the penalty up to a maximum of thirteen weeks which may be imposed if the contributor refuses to accept available work, or undergo training and vocational counselling. This provision apparently contradicts clause 16(2)(b) of the UIB, which stipulates that the contributor is not entitled to (any) unemployment benefits if s/he refuses without good reason to undergo training and vocational counselling under an approved scheme. Furthermore, the meagre penalty of thirteen weeks seems to be disproportionally low when compared to the provision on the suspension of benefits in the event of fraudulent activity, which sets the maximum penalty at five years. It will do little to support the link between the unemployment dispensation and encouraging employees who have become unemployed to become integrated in the workforce again.

2. Illness benefits

Apart from issues concerning illness benefits dealt with elsewhere in this commentary, there are some additional matters to be raised.

In the first place, there is in principle an entitlement to illness benefits if the contributor is unable to perform work on account of illness, or if the contributor meets with any prescribed requirements in respect of any specified illness. However, what seems to have been omitted is the requirement that a person loses the right to illness benefits if the illness was caused by his/her own misconduct. There is indeed such a restriction in the present UIA. It is submitted that retaining such a restriction in the envisaged legislation is in keeping with the principle that a contributor should be covered only if she has become unemployed involuntarily and/or has not deliberately contributed to his/her unemployment, as discussed above.

Secondly, it would appear that a contributor is excluded altogether from entitlement to UIF illness benefits if s/he is entitled to UIF unemployment benefits. This is an apparent attempt to avoid double-dipping as far as the various categories of UIF benefits are concerned. While the UIB introduces the possibility of double-dipping as far as maternity and other UIF benefits are concerned, one would think that illness benefits should also not accrue if the contributor has been or is receiving adoption benefits. It is suggested that the provision in clause 20(2)(c)(i) be amended to include this additional restriction as well.

Thirdly, it is not clear why there is deemed to be no period of illness for purposes of illness benefits in terms of the UIF system, if the sick employee receives 50% or more of the normal remuneration from the employer as a result of the illness. The implication is that if the employee receives, for example, 55% of the usual remuneration, the UIF illness benefits cannot be used to make up the difference between the 55% and full renumeration. This is wrong in principle and also inconsistent, since this exclusion from entitlement does not apply to other categories of UIF benefits. This appears to be a serious oversight, which needs to be rectified.

 

3. Maternity benefits

Apart from issues concerning maternity benefits dealt with elsewhere in this commentary, there are two additional matters to be raised.

The first issue relates to the innovative provision to the effect that a contributor who has claimed maternity benefits in terms of the UIB does not thereby lose her entitlement to claim any other category of UIF benefits. While one would wholeheartedly subscribe to the notion that there should be proper maternity protection in the monetary sense of the word, over and above unemployment protection, it is submitted that the UIB is the wrong place to do so and, moreover, that the way in which this is done is inappropriate.

Apart from the fact that the envisaged provision may have serious implications for the financial soundness of the Fund, it arguably implies a skewed notion of solidarity, as contributors who are contributing towards dealing with the effects of and prevention of unemployment now have to see their contributions being applied towards family (planning)-related issues.

It is submitted that a separate system should cater for contingencies relating to family-related benefit requirements. To do otherwise, in particular to allow for maternity benefits over and above other UIF benefits to be paid out of the UIF, would imply a loss of proper focus as far as the Fund should be concerned - which is to provide for benefits in the event of more or less unavoidable unemployment, combating unemployment, and promoting integrative labour market policies aimed at preventing unemployment and creating incentives for integration and/or re-integration in the labour market.

4. Adoption benefits

There is basically one additional issue that needs be raised. Accommodating adoption benefits in a UIF statute might, as is the case with maternity benefits, imply a loss of proper focus as far as the Fund should be concerned - shifting the emphasis from dealing with more or less unavoidable unemployment, combating unemployment, and promoting integrative labour market policies, to family-related benefits. It is submitted that this is an issue that needs to be covered in terms of a separate family-related benefit system.

 

5. Dependants' benefits

In addition to other issues already raised, attention should be drawn to the abortive attempt by the drafters of the UIB to exclude dependants from receiving benefits in the event that the dependant has received monies from whatever source as a result of the contributor's death. Apart from being wrong in principle to provide for a total exclusion, the attempt is abortive as the main provision in this regard, namely clause 14(a)(iv), has been applicable to contributors only, and not to dependants as well.

1. REMUNERATION

See the written commentary for details.

 

2. ADMINISTRATION AND ADMINISTRATIVE ENFORCEMENT

See the written commentary for details.

6. RESOLUTION OF DISPUTES: THE NEED FOR MORE STREAMLINING

ILO Convention 168 of 1991 provides that a dispute concerning the refusal, withdrawal, suspension, reduction or the quantum of benefits must be resolved by the body administering the scheme. There should also be an appeal procedure. The body administering the benefit scheme is not necessarily best equipped to resolve disputes, and an outside body may be more independent and therefore better equipped to deal with resolving disputes.

1. Two adjudicating institutions?

See the written commentary for details.

While the UIB confers upon the Labour Court the jurisdiction to adjudicate most of the disputes under the Bill, clause 37 determines that disputes concerning benefits may be referred "for arbitration" to the CCMA. It is debatable whether the CCMA should be vested with the power to deal conclusively with benefit-related issues. Two considerations should in this regard be instructive. The first is that CCMA commissioners do not have to be legally qualified, which may make the CCMA the inappropriate forum to deal with disputes which normally are of a highly technical and legal nature. Secondly, resolution by the CCMA would imply that there will be no compliance with the ILO requirement of an appeal procedure. CCMA awards and proceedings are subject to review by the Labour Court, which is a power to be exercised within narrow boundaries, and certainly does not include an appeal.

Finally, the Labour Court is empowered to deal with a question of law, but apparently does not have the power to deal with matters on the basis of appeal. The power of the Court to review administrative actions and decisions taken in terms of the UIB and the UICB has also been taken away, although it could be argued that the provisions of the recently introduced Promotion of Justice Act 3 of 2000 now cover these issues. Still, however, it cannot be said that the UIB or the UICB provides for an appropriate appeal procedure, as required in terms of the ILO Convention 168 of 1991.

7. CONCLUDING REMARKS

Both the UIB and the UICB introduce a number of innovative principles in an attempt to streamline the public unemployment insurance system. There are many of these innovative approaches which must in principle be welcomed - such as the (re-)introduction of some solidarity between higher and lower-income earners, and the avoidance of double-dipping, in particular as far as state-provided income-replacement benefits are concerned.

And yet, there is much in the two Bills that causes serious concern. The more important of these concerns relate to:

• Administrative overlap between and shortfalls in the roles allocated to two different institutions, viz the UIF and the SARS, as well as the lack of sufficient administrative and logistical support systems (with particular reference to appropriate and linked database systems)
• The lack of properly addressing the aims of prevention, avoiding and combating unemployment as hallmarks of a modern and progressive unemployment insurance system, showing little sensitivity to active labour market policy approaches and the re-integration of the unemployed
• Unjustifiable coverage exclusions from public regulation, notably public servants, certain categories of migrant workers, learners, (still also) domestic workers and seasonal workers, persons whose remuneration is based on output of work done, and the atypically employed
• Serious definitional problems, in particular with regard to dependants ("spouse" and "child") and the concept of remuneration
• Problems with regard to the way in which benefits are regulated, with particular reference to calculation problems and uncertainties, and inappropriate quantum levels and an inequitable graduated scale of benefits
• Serious shortcomings in the regulation of entitlement to benefits, in particular as far as the following are concerned:
• partial employment and suspension of the contract of employment
• confusing, skewed and inconsistent double-dipping provisions
• particular problems related to the different categories of UIF benefits
• The need for more streamlined dispute resolution mechanisms

Finally, there are two matters of principle which should be raised. Firstly, the wisdom of including illness, maternity, adoption and dependants' benefits alongside unemployment benefits is questioned. The unnecessarily wide ambit of benefit categories covered by the envisaged legislation (as is the case with the present UIA) may lead to (i) employees exhausting their benefits for reasons other than "pure" unemployment and not being able to claim when unemployment in the strict sense eventually strikes; (ii) a loss of proper focus as far as the Fund should be concerned, namely to provide for benefits in the event of more or less unavoidable unemployment, combating unemployment, and promoting integrative labour market policies aimed at preventing unemployment and creating incentives for integration and/or re-integration in the labour market. It is strongly suggested that the operation of the Fund be restricted to "pure" unemployment issues, and that one or more separate systems cater for most of the other contingencies (e.g. a separate family benefit system, dealing with, amongst others, maternity and adoption benefits).

Secondly, one would expect that a revision of the present unemployment system would serve the dual purpose of impacting both on the broadening of coverage and on enlarging the contributor base. Of course, a broadening of the coverage and of the contributor base are linked but are based on different perspectives: the first is to extend entitlements and the second is to increase Fund income. The outcome of restructuring legislation will depend on the where the emphasis is placed. Care must be taken, when restructuring the scheme, that the emphasis is not too much on the broadening of contributor base since the aim and purpose of the Act is to provide assistance where the need arises. It is submitted that the emphasis in the UIB and the UICB is indeed essentially on the broadening of the contributor base. A broader approach is advocated, in terms of which coverage is increasingly and as a priority extended to those who are in real need thereof.

PROF MARIUS OLIVIER (083-6348197)

MARCH 2001

(A revised and updated version of an earlier commentary (April 2000) on the March 2000 versions of the UIB and UICB by Prof Marius Olivier, RAU and (as she was known) Prof Esther van Kerken, then of Vista University).