Unemployment Insurance Amendment Bill: adoption

Meeting report

LABOUR PORTFOLIO COMMITTEE
26 August 2003
UNEMPLOYMENT INSURANCE AMENDMENT BILL: DELIBERATIONS

Chairperson: Mr D. Olifant (ANC)

Relevant Documents handed out:
Outline of Black Sash Submission (Appendix 1)
COSATU Submission on the Unemployment Insurance Amendment Bill (Appendix 2)
Department of Labour Proposed Amendments to the Unemployment Insurance Fund.
Unemployment Insurance Amendment Bill [B35-2003]

SUMMARY
This meeting served to adopt the Unemployment Insurance Amendment Bill informally by the Committee.  The Bill was agreed to in its entirety excepting the sections dealing with Public Servants and the section dealing with pensioners.

MINUTES
The Committee went through the Bill clause by clause and accepted the Bill except for sections 2(a) part (c) and 2(b). These issues would be addressed at a later date.  

It was agreed that the submissions presented by COSATU and Black Sash at the meeting yesterday would also be addressed at this later date.

Discussion
Mr Olifant (ANC) proposed that the Committee informally ratify the Unemployment Insurance Amendment Bill (“the Bill”).

Mr Makhonto (Department of Labour Commissioner) said he had nothing to add at this stage but he wanted to contextualise the discussion. In terms of the NEDLAC Agreement of 2000 it was agreed that there were a number of issues in the Unemployment Insurance Act of 2001 (“the Act”) aside from those raised in this Bill that need to be addressed. These issues would be addressed after two years had elapsed after the adoption of the Act. This was to allow the time for a full actuarial review of the Unemployment Insurance Fund (“the Fund) to be conducted.

Therefore, Mr Makhonto said this Bill was proposed to deal solely with administrative issues arising out of the adoption of the Act.

Mr Redcliffe (DA) asked Mr Makhonto about the Department’s position with regard to extending the Bill to incorporate those people who resigned from their employment. Additionally, he asked where the funds collected from pensioners after April 2001 would go given that these pensioners were not able to receive any benefits from the Fund in terms of the Act.

Mr Oliphant (ANC) questioned what the effect was of not discussing the possible amendments not dealt with in the Bill.

Mr Makhonto stated that at NEDLAC the Bill was supported by the parties on condition that these amendments would follow after a full review of the fund had been undertaken.

Mr Olifant reiterated that the submissions presented by COSATU and Black Sash yesterday could not be incorporated into this Bill but they would be debated at a later date. Therefore, he appealed to the Committee to look at the Bill as it stands.

The State Law Adviser said she was happy that the Committee did so.

Ms Thabethe (ANC) said that it was only in the implementation of these amendments that their effect would be apparent.

Mr Oliphant agreed to go through the informal adoption of the Bill but he wanted to clarify the position regarding those amendments still subject to debate. For example: the issue surrounding the exclusion of pensioners from the Fund.

Mr Makhonto said that what this amendment sought to do was to remove the obligation of pensioners to contribute to the Fund when they were in fact unable to claim any benefit from the Fund. With regard to Mr Redcliffe’s (DA) question concerning the funds collected from pensioners, he said he did not have a mandate to discuss the issue. 

Mr Oliphant  accepted the Commissioner’s position and said that the Committee should give the Department some time to consult on the issues surrounding the exclusion of pensioners from the Bill.

Mr Olifant asked if everyone accepted sections 1(a) and 1(b).

The Committee accepted these sections.

Mr Oliphant asked the Commissioner about the composition of the Regional and National Appeals Committees mentioned in sections 1(b) and (c).

Mr Makhonto said these Committees would be comprised of people from government, business, labour and the community.

The Committee accepted section 1(c).

Mr Redcliffe (DA) wanted clarity as to why the definition of “seasonal worker” was to be deleted.

Mr Makhonto said that the present legislation excluded certain categories of workers who were previously entitled to benefits under the Fund. Therefore, these had their right to claim removed. The Department did not want to compartmentalise these workers as there were many types of seasonal workers. Additionally he said these workers experienced an employer-employee relationship and therefore it was unfair not to treat them like other workers.

The Committee accepted sections 1(d), (e), (f) and section 2 (a) part (b).

Mr Redcliffe (DA) asked Mr Makhonto whether there were any benefits paid to Public Servants mistakenly.

Mr Makhonto said that there were no Public Servants who had incorrectly received benefits. He said the purpose of this amendment was to clarify who qualified as a Public Servant for the purposes of this Act. There had been some confusion as to whether employees of State-funded organisations were included as Public Servants. These persons did not qualify as Public Servants.

Mr Pillay (NNP) asked if the Local Government was to be included as Public Servants.

Mr Makhonto said the Local Government would continue to contribute to the Fund and they wold receive benefits from the Fund.

Mr Mshudulu (ANC) asked whether this section could be flagged for discussion when the Committee had the Public Service Act of 1994 in their possession.

This was agreed to by the Committee.

Mr Redcliffe (DA) questioned the effect of adopting section 2 (b).

Mr Makhonto said that pensioners would not be required to contribute to the Fund as a result of the amendment

Mr Redcliffe (DA) asked whether those pensioners who had contributed to the benefit could access the benefits.

Mr Makhonto said these pensioners could not access their benefits. He said that only their dependents would be able to access these benefits on the death of the pensioner.

The Committee agreed to flag this issue.

The Committee accepted section 2 (c).

Mr Oliphant (ANC) asked if it is necessary for the Director-General to delegate to the Commissioner the compilation of the business plan mentioned in section 3.

Mr Makhonto said this was administratively preferable.

The Committee accepted section 3.

Mr Redcliffe (DA) wanted clarity as to how the benefits in terms of section 4 would be calculated.

Mr Makhonto provided the following example. He said if for example a domestic worker earned R100 from each of her employers, if she were to lose all five of her jobs, she would be entitled to 60% of her full income, being R300. If she were to lose three or more of her jobs, the Fund would pay her benefits to bring her total income to this R300 level. Thus, if she lost three of her jobs, she would still be earning R200 and the Fund would pay her R100. He said the Fund would not pay any benefit to the domestic worker if it would mean she would earn more that this R300.

Mr Pillay (NNP) asked how long it takes for claimants to receive their benefits.

Mr Makhonto said if the workers are on the system they should receive their payout within 24 hours of claiming or they would receive their payout on a specified “pay day.”

The Committee agreed to sections 4, 5, 6, 7, 8, 9, 10, 11 and 12.

Mr Mshudulu (ANC) asked the secretary to contact those political parties not represented at the meeting to make them aware that they Committee would formally adopt the Bill next week.

Meeting was adjourned.
 

Appendix 1
OUTLINE OF BLACK SASH SUBMISSION

This is a summary of the attached submission and mentions the pertinent issues raised in the submission.

LEGISLATIVE OVERVIEW

· Benefits accruing in the event of termination of employment in terms of Section 16 of Unemployment Insurance Act of 2001 (the Act).

· Comparison with old dispensation UIF Act 1966.

· Engagement with the department.

RATIONALE FOR EXCLUSION

· Exposure to fraud.

· Insurance principle not allowing benefit for a person who causes own misfortune.

BASIS FOR INCLUSION

· Progressive realisation of social security rights in terms of Section 27 of the Constitution.

· Laws should be in line with the normative status of a country.

· Legislative anomaly of protecting illegal acts while excluding resignation.

POSSIBLE MANNER FOR INCLUSION

· Amending Section 16 to include protection of all resigning employees.

· Alternatively protecting resignation which is occasioned by compelling reasons.

25th August 2003.

BLACK SASH POSITION ON THE UNEMPLOYMENT INSURANCE

AMENDMENT BILL

INTRODUCTION:

The Black Sash has as one of its goals to ensure the creation of a comprehensive legislative framework for the vulnerable in our society. Through our advice offices, we daily serve people who seek assistance in enforcing their rights, and we take this opportunity to bring the experiences of these people to the attention of the committee insofar as it pertains to the draft amendment bill currently before the committee, especially as the Black Sash was one of the civil society organ isations that engaged with this committee during the passage of the 2001 Unemployment Insurance Fund Act.

In particular, we argued strongly in favour of the extension of the right to cover for domestic and seasonal workers. As with many a statute, the UIF Act 2001 came with some problem areas of its own. We will address the committee on the perplexing exclusion of resigning employees

This issue were raised on various occasions with the Department. In fact, Commissioner Shadrack Mkhonto, referred to the exclusion of resigning employees as a "legislative blind spot" that should be attended to. The Unemployment Insurance Amendment Bill (the Bill) is measured against this background.

The Bill

1. Contributions by domestic workers who receive social assistance:

The bill effects changes to a number of areas, including the issue of domestic workers. However, we believe that pensioner domestic workers should be brought within the safety net.

2. Benefits to people who resign from their employment:

Conspicuously, benefits for resigning employees remain excluded.

Interestingly, the UIF Act no 30 1966 which was repealed by the UIF Act of 2001 catered for this now disempowered group of employees. The legislative purpose that the former Act sought to address did not alter at all. If anything, the need for a comprehensive social security net has deepened.

Curiously, the common reason given by the department for the exclusion has nothing to do with unemployment as such. The broad rationale is that the old system, which covered resigning employees, was vulnerable to fraud. In other words, gaps in administrative systems, is sufficient reason to take away pre-existing rights. Section 27 of the Constitution guarantees the right to social security, which right is subject to progressive realisation.

The removal of the pre-existing right to unemployment insurance is a regressive move that we do not feel is justified under our constitution for the reasons set our below.

The Black Sash is in possession of a heavy body of anecdotal evidence of the extent of suffering and exposure to grinding poverty the status quo has on the poor people in our country. For the purposes of this position brief, mention can be made of only the following:

4:. Only yesterday, Nosakhele Mhambi of Cross Roads approached the Black Sash Cape Town Advice Office, as she wanted to claim unemployment benefits. She had just resigned to take care of her son Vincent who was disabled by a stray bullet lasi month.

4:. Other employees who, due to impossibly long distances between their homes and places of work, end up resigning in order to avoid adverse employment records (as they may be dismissed of consistent lateness or absence without leave). Invariably, these are breadwinners who are fit and available for work.

4:. The situation is compounded by the prevalence of illness in the family, and in particular the effect of HIVIAIDS for many in South Africa. Many employees resign out of a desperate need to take care of their sickly loved ones. This is a social problem and our laws are supposedly crafted to respond to our societal problems.

Many of such cases abound and the applications for benefits are routinely declined by the Department. The common denominator is that most of this group of employees do not resign to pursue other business and I or employment interests but are compelled by situations far beyond their control.

Legal Overview

One of the hallmarks of an effective legislation is that it should respond adequately to its intended beneficiaries' circumstances. For this particular group of contributors, the Bill fails lamentably.

The legal justification for the exclusion is that an established principle of insurance law does not cover a person who caused his/her own misfortune. The obvious reasoning is that resigning employees should look in the mirror for the person to blame.

It is a moot point whether such rationale would withstand legal scrutiny if a generous interpretation were employed. This is precisely the case because most of the employees, as shown above, do not cause the insured harm on themselves and their dependants.

To illustrate and simplify the point, no insurance company repudiates a claim arising out of an accident where the insured driver, consciously avoided an oncoming danger, smashed and damaged the vehicle in the process. Such driver, although s/he may literally have caused the damage, cannot be prejudiced by a situation which was overwhelmingly caused by outside I other forces.

Our Constitution, in terms of section 9 further promotes the notion of equality before the law. The continued exclusion is an affront to this solemn promise.

Conclusion

Policies, which result in law, should not be divorced from a normative status of a country. Our laws should be sensitive to and appreciate the keen challenges facing the majority of our workforce.

Given the large gaps in the current social security safety net for people between the ages of 9 and 60 (65 for men), for most employees, the Unemployment Insurance Fund represents the only security net. In addition, few have access to alternative schemes such as pension or provident funds. (This, though, is not an attempt to convert the Unemployment Insurance Fund into a Pension or Provident Fund).

Incongruously, the status quo allows for an employee who is dismissed for a gross infraction to benefit from the Fund, but starve one who resigns for plausible reasons. It is hoped that the portfolio committee can make the much-needed intervention and correct this injustice.

Black Sash 25August2OO3

Appendix 2
COSATU SUBMISSION ON UNEMPLOYMENT BILL [B35-2003]

1.      introduction

COSATU welcomes the opportunity to comment on the Unemployment Insurance Amendment Bill (hereafter "the Bill"). The Unemployment Insurance Act 63 of 2001 (UIA) introduced a number of welcome changes including a progressive scale of benefits with lower income earners getting a higher proportion of their income than high-income earners; the extension of coverage to high-income earners which recognises the principle of solidarity and equity and brings greater stability to the Unemployment Insurance Fund (UIF); and the "delinking" of unemployment benefits from maternity benefits that allows pregnant women to claim maternity benefits without affecting their rights to claim their unemployment benefits.

Nevertheless at the time the UIA was passed, COSATU and various other civil society organisations raised a number of serious concerns around the substance and process. While some of these have been addressed, such as the recent inclusion of the domestic workers and seasonal workers, a number of contentious issues have remained unresolved. These include the:

·        Continued exclusion of public sector workers from the fund;

·        Limitation of maternity benefits; and

·        Lack of financial guarantees and general financing of the Fund.

In addition to responding to specific provisions in the Bill, this submission focuses on the extent to which the above concerns are addressed in the current process as well as other processes around unemployment insurance. Further, the UIA has been in operation for more than a year, making this an appropriate time to address various problems that have been identified in the course of its implementation. In this respect the submission takes into account the following exclusions from benefits under the UIA:

·        Workers who receive old age pensions; and

·        Workers who have resigned.

1.      The Continued Exclusion of Public Service Workers

We have consistently registered our objections to the continued exclusion of public service workers from benefits under the UIA. Excluding certain sections of the labour market from specific labour legislation significantly undermines the realisation of a unified labour market dispensation, which is the stated aim of the Department of Labour. We strongly believe that such an exclusion is unconstitutional, since it unfairly discriminates against public service workers and violates their constitutional rights to equality. Further, it contradicts the State’s obligation to progressively realise everyone’s rights of access to social security under section 27 of the Constitution.

Apart from concerns about equity and discrimination, the inclusion of public service workers would substantially contribute to the stability and viability of the Fund. This would further entrench the principle of solidarity already incorporated into the Act.

During the Parliamentary process on the UIA, the Committee instructed the Department to investigate and report to the Committee on the financial implications and viability of including public service workers. We note that this investigation has been completed and the Department subsequently briefed the Committee in November last year on the findings. In terms of these findings the recommendations were to retain the current exclusion of permanent state employees.

We note with concern that the full report has not been made public on the grounds of "confidentiality", which we believe contradicts the Promotion of Access to Information Act. We are therefore calling on the Committee to instruct the Department to release the report publicly and to allow for a process of public comment. There is a need to allow civil society organisations to engage with the underlying financial and legal considerations informing the recommendations against including public service workers.

2.      Financing

It has been our consistent view that the State underwrite the fund and make good any shortfalls. However, the UIA merely makes provision for the Minister of Labour to request the Minister of Finance to make an emergency allocation to cover any deficit in the Fund. Thus the Minister of Finance retains a discretion to refuse such a request.

We note as a positive development that for the first time in a number of years the Fund has reflected a surplus of R1.4 billion for 2002/03. This is due to a combination of reasons. Firstly, the increased efficiency and capacity through the use of the South African Revenue Services (SARS) as the collection agency. Secondly, the inclusion of higher-income earners, who were previously excluded, has contributed to the stability of the Fund. Finally there has been a considerable increase in budgetary allocations over the past few years to the Fund.

For the years 2001/02, 2002/03 and 2003/04 the respective amounts of R 612 million, R 327 million and R 257 million were transferred to the Fund. This is compared to the mere R 7 million allocated in previous years. This confirms our view that the State should play an active role in guaranteeing the stability of the fund.

While we recognise that the R 1.4 billion surplus for 2002/03 represents a positive development, this should not create a false sense of security. Firstly, domestic workers and seasonal workers have only just been included. These are particularly vulnerable sectors, with lower income earners who face cyclical unemployment. Accordingly, contributions from these sectors are less likely to substantially increase the size of the Fund, although it is to be expected that there may be a considerable increase in the number of claims for benefits. Further, collection of contributions from these sectors are undertaken by the Department as opposed to the SARS, which places increased administrative and capacity demands on the Department.

Despite this the Department of Finance intends once again reducing the budgetary allocation over the medium term with the allocation for 2005/06 reverting to R 7 million. The Consolidated Report of the Committee of Enquiry into Comprehensive Social Security noted the following:

"… although falling claim levels and improved financial controls have eased the financial crisis for the meanwhile, the UIF remains vulnerable. Until the special conditions in which the UIF is required to operate are acknowledged, and appropriate Government top up funds (in the form of a regular contribution to the UIF) are provided, this vulnerability will remain.

3.      Actuarial Review

Agreements reached at NEDLAC in 2000 on the Unemployment Insurance Bill provided for the implementation of a comprehensive, holistic actuarial review, which would look into a number of issues including the status of the Fund, financial guarantee from the State, and the level of benefits. This would allow a number of questions to be addressed in particular the low amounts of benefits and the frequency at which they may be claimed. We are prepared to submit more detailed questions on these issues if the Committee wishes to pursue the matter.

4.      Resignations

Section 16(1)(a) of the UIA identifies the various categories that qualify for unemployment benefits, which are limited to:

·        Workers whose contracts have been terminated by their employers or as a result of the ending of a fixed-term contract;

·        Workers who have been dismissed by their employers as defined by section 186 of the Labour Relations Act (LRA). This includes constructive dismissal; and

·        Unemployment as a result of insolvency.

We believe that a serious anomaly has arisen in respect of the above since resignations are not covered. Accordingly, workers are not eligible for unemployment benefits even if they resign for legitimate reasons. For example, a worker may resign because conditions are made intolerable owing to sexual harassment by another worker, or conditions at home force a rural worker to resign owing to the death of the head of the household. However, despite these being legitimate reasons for resignation, these workers would not be able to claim unemployment benefits. We believe that this situation is extremely discriminatory and has caused considerable hardship for many affected workers.

Further, the inclusion of constructive dismissals has created an anomalous situation, since it often takes the form of a resignation. Many workers who are constructively dismissed may state that they resigned either because they are unwilling to damage future job prospects or are not informed about what constitutes a constructive dismissal. This is further complicated by the fact that deciding what constitutes a constructive dismissal is a highly subjective process. These raise serious questions in respect of implementation, especially around the administration of the applications for benefits.

Accordingly we are calling on the Committee to insert an amendment into section 16(1)(a) to provide for the inclusion of resignations under certain defined conditions, and subject to a fair process. While the question of exclusions is not specifically covered in this Bill, we believe that it is important that the Committee address this problem within the current process. Further, it is relevant since the Bill reviews other exclusions as well.

1.      Specific Provisions on the Bill

1.      Inclusion of Seasonal Workers and Domestic Workers

All references in the Bill to seasonal workers and domestic workers are deleted especially where these provide for their exclusion. These amendments are in line with recent inclusion of the application of the UIA to domestic and seasonal workers. We strongly welcome this since it is something we have long called for.

2.      Exclusion of Persons Who receive Old Age Pensions

In terms of the current legislation people who receive old age pensions and continue to work are in an anomalous position. Currently they are excluded from claiming benefits in terms of section 14(a)(I), although they are required to pay contributions to the UIF. The Bill seeks to address this by inserting a new section 3(1)(e), which removes the requirement to contribute to UIF.

We recognise that the underlying emphasis is to protect old age pensioners. However, after considering the implications we have concluded that it would be more appropriate to do the reverse which would be to ensure that this category or workers is properly included.

This concern is especially relevant to domestic workers of pensionable age. According to our discussions with SADSAWU a larger proportion of domestic workers are in fact over the age of 60 years. In many cases they are forced to work as domestic workers to supplement their pensions. In order to qualify for a pension, one has to comply with a means test. It is important to note that the minimum wage stipulated by the sectoral determination is lower than the maximum income to qualify for a pension. Accordingly, it is not irregular/illegal to draw a pension and work.

It is also important to bear in mind that those domestic workers drawing pensions have to contend with significantly reduced payouts that take into account their working income. Consequently in such a case a domestic worker who becomes unemployed may end up having a lower income than other state pensioners who receive the full pension benefit. Therefore it is important that the unemployment benefit be made available to ensure that the income does not fall below a minimum threshold.

We believe that the basis for the payment of UIF must be distinguished from that of the old age pension, which accrues as a right as a citizen to a form of social welfare to be used by older persons. The UIF on the other hand is a temporary measure to compensate for loss of employment income. Our argument in this respect should be distinguished from the exclusion of a person from drawing both pension and disability benefits, both of which are social welfare payments. It is discriminatory to exclude someone from enjoying the benefits of their contributions, including those which were made before they reached pensionable age.

The continued exclusion from the UIA will have the effect of undermining the principle of achieving a unified labour dispensation, since affected workers will not be able to rely on the legislation for protection.

It must be borne in mind that we are dealing with a very vulnerable sector of the labour market, which is predominantly represented by black women who are amongst the lowest paid. Age as a factor considerably compounds this and increases likelihood of exploitation.

Further, there is a substantial incidence of households headed by older persons whose pensions serve as the primary source of income. The incidence of HIV/AIDS, cyclical forms of unemployment and general prevalence of poverty have substantially contributed to this phenomenon.

Of further concern is that there is a perception amongst domestic workers who draw pensions that they are not allowed to work. This has impacted significantly on the registration process. This has the indirect effect of undermining efforts to formalise their working arrangements and creates opportunities for avoidance of obligations in respect of the minimum wage and conditions. We believe that complete exclusion from the UIF will only further entrench this misconception that their working arrangements are illegal.

Further, where a domestic worker is approaching the official retirement age (but is not as yet eligible for a pension) they often choose not to register for UIF on the basis that they are unlikely to benefit. However, this leaves them unprotected in the intervening phase.

Accordingly we recommend that the proposed exclusion not be implemented. Further, section 14(a)(i) should be deleted. This would then allow affected workers to draw unemployment benefits if necessary.

1.      Need for Clarity Regarding Previous Contributions

Notwithstanding our recommendations noted above, we believe that the Department should clarify its intentions in respect of the previous contributions that it collected from affected workers before they reached a pensionable age.

3.      Partial Loss of Employment

Clause 4 inserts a new section 12 A, which recognises the right to benefits if a domestic worker becomes partially unemployed. Clause 5 provides for a new section 13(6), which states that the total income (including the wage and the unemployment benefit) should not exceed the benefit that would have been paid out had the worker become wholly unemployed.

We welcome these amendments as they recognise the peculiar situation that domestic workers face in that they often have multiple employers. It recognises that it is crucial to address even a partial loss of income. Further provision should be made to ensure that a worker would receive the maximum benefit applicable taking into account the credits accumulated.

4.      Death of an Employer

Clause 6 proposes that unemployment benefits may be paid to a domestic worker who is unemployed as a result of the death of the employer. We welcome this provision since it addresses the situation that is specific to domestic workers.

5.      Topping Up of Benefits in respect of Illness, Maternity, and Adoption

Currently, benefits paid out in respect of the above are set off against any payments received from the employer. So if the income from the employer is greater or equal to that the UIF benefit, then no UIF benefit will be payable.

In terms of the proposed amendments to sections 21, 24 and 27 a top up benefit will now be applicable in respect of illness, maternity or adoption. Therefore it is possible to receive both the benefits from the employer and the UIF. The proviso is that the total income should not exceed total remuneration.

We strongly welcome this amendment, which goes a substantial way to addressing our concerns about the limited maternity benefits provided. Having noted this we believe that more needs to be done to address the situation of more vulnerable workers who earn lower incomes and who are less likely to be unionised. As such they are less likely to get paid maternity leave from their employers. This creates a situation of inequality when compared to higher income earners who are more likely to get a 100% of their normal income.

Accordingly we believe that there is a need to urgently investigate increasing maternity benefits on a general scale (which would also benefit lower income earners.)

1.      Delinking of Maternity Benefits from the Employment Period

Provision also needs to be made to delink the maternity benefits from the period that a woman has been employed for. This would protect women who fall pregnant but have not accumulated the full quota of credits and so therefore do not receive benefits for all four months.

2.      Investigation and Report into Maternity Benefits

As with the question of public service workers, the Committee instructed the Department to investigate and report on the extension and increase in the level of maternity benefits. We believe that this report needs to be released publicly and made subject to comment.