Consumer Protection Act A clause included in the Basic Conditions ...

Consumer Protection Act
A clause included in the Basic Conditions of Employment Amendment Bill might impact on employer
based medical scheme membership in the future.
An Amendment Bill to the Basic Conditions of Employment Act 75 of 1997 was recently introduced in the
National Assembly. Section 33A of the Bill provides as follows:
“(33A) Prohibited conduct
(1) An employer may not
(a) Require or accept any payment by or on behalf of an employee in respect of the employment of, or
the allocation of work to, any employee;
(b) Require an employee to purchase any goods, products or services from the employer or from any
business or person nominated by the employer.
(2) Subsection (1)(b) does not preclude a provision in a contract of employment or collective agreement in
terms of which an employee is required to participate in a scheme involving the purchase of specific
goods, products or services, if
(a) The employee receives a financial benefit from participating in the scheme;
(b) The price of any goods, products or services provided through the scheme is fair and reasonable;
and
(c) The purchase is not prohibited by any other statute.”
Although the language of Section 33A was not clear, it would appear that an obligation on an employee to
belong to a medical scheme of the employer’s choice might be prohibited conduct as envisaged in section
33A(1)(b). However, in terms of sub-section 33A(2) a condition of employment in terms of which an
employee was required to purchase a product or service, i.e. medical scheme cover from a scheme
designated by the employer, was acceptable provided that the following 3 conditions were met:
1. The employee received a financial benefit;
2. The price of the product or services was fair and reasonable; and
3. The purchase was not prohibited by any law.
Since an employee would receive financial benefits in respect of health care services by belonging to a
medical scheme, the first condition would probably be met. The third condition would also be met as the
purchasing of medical scheme cover was not prohibited by any law.
The price of the medical scheme cover would, however, also need to be fair and reasonable in terms of
the second condition. This would be determined in the light of the relevant circumstances. It could be
contemplated that employees wishing to belong to another scheme than the one designated by the
employer might argue that the price of the service was not fair and reasonable should their scheme of
choice offer less expensive cover.
This could impose challenges for employer-based restricted schemes and schemes designated by
employers, which generally offered favourable underwriting to employer groups.
IMPACT ON BENEFICIARIES: Employees who were beneficiaries of employer-based restricted schemes or
employer groups on open schemes might potentially use this section in the Bill, if passed into law, to
choose a medical scheme of their own choice. This might, however, result in waiting periods and late
joiner penalties being imposed on these employees.
IMPACT ON FINANCIAL ADVISERS: Should this clause be enacted and successfully used by employees to
choose their own schemes, it might impact on the business of financial advisers who had employer
groups as clients.

IMPACT ON SCHEMES: Employer-based restricted schemes might not be sustainable should this clause be
enacted and successfully used by employees to make their own scheme choices. Open schemes that
rely on employer groups as part of their membership might also loose these groups with resultant
negative consequences.