Contract of Employment

As with any other contract, the employment contract follows the same rules, including the Basic Conditions of Employment Act.

The starting point should be that a written contract of employment is not strictly a necessary requirement for the validity of an employment relationship.

However, the Basic Conditions of Employment Act (No. 75 of 1997 – the BCEA) compels an employer to give an employee a host of prescribed employment details in writing when they start work with that employer. This is to ensure certainty between the employer and employee and attempts to protect the ‘vulnerable’ employee against the employer who holds the purse strings in the event of any disagreement as to the details.

It, therefore, makes more sense to enter into a detailed contract of employment upfront with the employee, and thereby bind him/her to the Company’s disciplinary codes and the like at the same time, rather than to provide a list of prescribed details in a rather ad hoc or non-contextualized manner.  

A comprehensive contract also has the benefit of being signed by both parties and is therefore legally binding.  It is very often the essence of an employment relationship – it details its commencement, currency, and termination – since in most cases the document will ‘speak for itself.

Prescribed Written Particulars

These are dealt with in Section 29 of the BCEA.  They are:

• The name and address of the employer - These may seem like obvious details, but many an employee claim has been thwarted either by insufficient or incorrect details in this regard (e.g. regarding the identity of the employer party, especially in a group or division of companies, and in enforcing a judgment).
• The employee’s name - Again apparently an obvious requirement but it provides certainty as to the parties.
• The employee’s occupation or a brief description of the work for which the employee was employed - Certainty on this issue is required for reasons relating to advancement and remuneration, giving instructions which are reasonable to that post, performance, discipline, and the like.
• The employee’s place of work - and if the employee is required or permitted to work at various places, an indication of this. The employee should agree at the outset of the employment relationship that s/he would be required to travel, work at various stations, etc, failing which s/he may not easily be compelled to do so at a later date without agreement.  The employer may have to remunerate the employee additionally for undertaking work at different places, and could not simply compel the employee to do so if it has not been agreed initially in the contract.
• The date of commencement of employment - this is important for the calculation of benefits such as leave, recognition of length of service, and the benefits attached to it – e.g. severance pay in a retrenchment.
• The employee’s ordinary workdays and work hours - The BCEA sets minimum standards (more specifically, maximum hours and days that may be worked) in this regard, which may not be changed in most cases even with an employee’s consent.   The regulation of working hours will be addressed in more detail below.
• The employee’s wage or the rate and method of calculating wages - This has undoubtedly been included for certainty, consistency, and protection for the employee, in addition to ensuring that the employee is fairly remunerated for leave, for overtime, etc.
• The overtime rate - Similar to above.
• Any other payments in cash or kind to which the employee may be entitled (and for payments in kind, the value of those payments) - Again important for calculating the monetary value and benefits to which an employee would be entitled during leave, on termination (e.g. severance pay on retrenchment is calculated at one week’s remuneration per completed year of service, not one week’s base salary.  Remuneration includes the value of a number of benefits.
• The date when remuneration will be paid - promotes certainty and consistency.
• Details of any deductions that will be made from the remuneration - In addition to reasons of certainty, the nature and amount of deductions that can be made from an employee’s remuneration is strictly regulated by the BCEA.
• The amounts of leaves which can or must be taken -   This aspect will be dealt with in detail below.  It will suffice to state that the BCEA strictly regulates when and how much leave may and shall be taken. This relates not only to annual leave, but also sick, maternity, and family responsibility leave in respect of which there are legislated minimums that may not be contravened.
• The period of notice - This too is strictly regulated by the BCEA - the quantity and manner of giving notice of termination of a contract of employment will be specified below.
• A description of any bargaining council or sectoral determination that covers the employer’s business - This too is in the protection of employee rights since it is often the case that terms and conditions of employment more favourable to the BCEA are collectively negotiated within a bargaining council.  The bargaining council standards will then take precedence over those set out in the BCEA.
• Any period of employment with a previous employer that counts towards the employee’s period of employment.  For E.g. the length of service with a seller who transfers its business to the purchaser is obliged to recognize the employee’s previous length of service, for the purpose of calculating benefits, such as severance packages, long service awards, and the like.
• A list of any other documents that form part of the contract - (and an indication of where a copy of these documents may be obtained).  This would relate to policies and procedures, and the like, of the employer.  It again provides certainty to the parties to the employment relationship.

If and when any of the above details change, the employee is to be notified of the change and be given a copy of the change.

Employment contracts are of two types.

Fixed-term contracts: The duration of the contract is clearly specified between the parties. The contract will endure for the specified period, or upon the happening of a particular event, or until a particular task has been completed. Unless otherwise agreed, such a contract cannot be terminated during its currency without good cause, unless the parties have agreed otherwise. If after the contract has lapsed and the employee remains in the employ of the employer, the contract may be tacitly renewed, provided that it is consistent with the parties’ conduct. The LRA expressly provides that non-renewal of a fixed-term contract is equivalent to dismissal in circumstances where the employee expected the employer to renew it on the same or similar terms but the employer either failed to renew the contract at all or offered to renew it on less favourable terms [Section 186 LRA].

Indefinite-period contracts: The duration of the contract is not specified by the parties. The contract will endure until:

• it is terminated by agreement;
• one of the parties gives the contractually specified or reasonable notice to the other;
• either party elects to terminate on fundamental breach;
• on the retirement of the employee at the agreed age;
• summary termination of the employee;
• death of either party; and
• insolvency of the employer.

Probation

It is quite common that employers engage employees for a probationary period, which may be negotiated and stipulated in the contract of employment. After the expiry of the probationary period, the employer is entitled to decide whether to retain the services of the employee on a permanent basis. The Code of Good Conduct, contained in the LRA, expressly provides for probationary periods and employees. The Code stipulates that the probationary period must be reasonable given the circumstances of the job and the time it takes to determine the employee’s suitability for the job. The probationary period can be extended, in suitable circumstances.

The Code also states that following termination of the probationary period, probationary employees should not be dismissed unless they have been given appropriate remedial treatment and they have been allowed a reasonable period for improvement but have failed to improve their performance. If the employer fails to counsel the probationary employee and thereafter fails to confirm the employee’s employment, such termination will amount to a dismissal.

Termination of Contract of Employment

The contract of employment can be terminated on the following grounds:

• on the expiration of the agreed period of employment;
• on completion of the specified task;
• by notice duly given by either party;
• by summary termination in the event of a material breach on the part of either party;
• by repudiation;
• by mutual agreement;
• by the death of either party;
• by the insolvency of the employer; and
• by the supervening impossibility of performance, where either party becomes permanently unable to perform his/her obligations in terms of the contract.

The contract may not be terminated in the absence of a justified reason.

The LRA expressly recognises the following grounds for termination of the employment contract:

• misconduct on the part of the employee;
• the employee’s poor work performance and/or incapacity;
• the operational requirements of the employer.

The concept of unfair dismissal is a right created by statute and contained in the LRA.  Chapter VIII of the LRA, along with an accompanying code of practice, has made a large contribution to systematising and clarifying this important area of South African employment law.  Unfair dismissals now fall into four categories:

• Automatically unfair dismissals
• Dismissals which an employee cannot justify on the basis of:
• the employee’s conduct;
• the employee’s capacity;  or
• the operational requirements of the business.

Besides these substantive grounds, dismissal will also be unfair where it is not effected in accordance with a fair procedure.

The meaning of dismissal has been extended by statute to include:

• a failure to renew a fixed-term contract when there was a reasonable expectation of renewal;
• a failure to allow an employee to resume work after maternity leave;
• selective employment following a collective dismissal;
• a situation where an employee terminates the contract because the employer has made continued employment intolerable (constructive dismissal);

A dismissal is automatically unfair if it:

• offends against an employee’s rights to freedom of association;
• is by reason of an employee’s refusal to do protected strikers’ work;
• is effected to compel an employee to accept a demand relating to employment;
• constitutes victimisation for exercising any rights under the statute;
• is by reason of an employee’s pregnancy;
• constitutes discrimination on some arbitrary ground.

An employee’s rights emanate from either statute or common law.  Whilst there does exist certain residual common law rights arising out of breach of contract which may be proceeded with by an employee to the High Court of South Africa, the exercise of these rights is rare and the relevance to EPL liability issues extremely limited.  By far the vast majority of cases arise out of a breach of statutory rights and obligations.  The statutory rights may relate to the following issues:

• Automatically unfair dismissals
• Unfair dismissals
• Operational terminations (redundancy/retrenchment)
• Residual unfair labour practices
• Transfer of businesses
• Alleged discrimination, etc.

A dismissal that is not automatically unfair is deemed to be unfair unless the employer proves that the dismissal is for a fair reason either related to the employee’s conduct or capacity or based on the operational requirements of the employer.  In addition, the employer must prove that the dismissal was effected in accordance with a fair procedure.  Accordingly, even if the dismissal is proven to be related to the employee’s conduct, capacity, or based on the employer’s operational requirements (i.e. substantively fair), it will nevertheless still be unfair (procedurally unfair) if the employer has not followed a fair procedure.

Remedies Available

If an unfair dismissal claim succeeds the CCMA has a choice of remedies.  The commissioner may:

• Order the employer to reinstate the employee from any date not earlier than the date of dismissal.
• Order the employer to re-employ the employee, either in the work in which the employee was employed before the dismissal or in other reasonably suitable work on any terms and from any date not earlier than the date of dismissal.
• Order the employer to pay compensation to the employee.

The primary remedy applied by the CCMA in respect of a dismissal that is substantively fair is to order reinstatement or re-employment.  In the event that the employee does not wish to be reinstated or re-employed or the circumstances are such that continued employment would be either intolerable or no longer reasonably practical or the dismissal is unfair only because the employer did not follow a fair procedure, the commissioner may award compensation rather than reinstatement/re-employment.  There are certain limits on compensation.  In the case of automatically unfair dismissal, the commissioner is enjoined to make an award that is “just and equitable” in all the circumstances, but not more than the equivalent of 24 months’ remuneration.  In an unfair dismissal, the commissioner may award up to a maximum of 12 months’ remuneration as compensation.

The Labour Appeal Court has held that compensation arises out of the statute and does not relate to patrimonial loss.  The Labour Courts have discretion on whether compensation should be awarded or not.  If the Labour Courts decide that the case is such that compensation should be awarded, they have no discretion in respect of the amount.  Compensation must be awarded from the date of dismissal to the date of adjudication, subject to a maximum of 12 months compensation.

This has serious ramifications for procedurally unfair dismissals.  In the past, a commissioner/arbitrator may have decided to award a month or two’s compensation because of the minor nature of the employer’s lack of procedural compliance.  The Labour Courts are now faced with adopting an “all or nothing” approach and now have to award either 12 months or nothing to an employee who has been visited with procedurally unfair dismissal.  In most instances, other than cases of trivial procedural deficiencies, this will result in 12 months of compensation being awarded to the employee for procedural unfairness because of the inherent delays in having such matters heard.

In the event that a party can establish that the delay is due to the fault of the other party is not expeditiously pursuing his or her remedies, the court is empowered to take such delay into account in calculating compensation.  

Hours of Work and Leave
The BCEA sets clearly defined limits on working hours for employees who earn below R89 455, 00 per annum, and for employees (irrespective of their gross annual earnings) who are empowered by the Company with the authority to ‘hire and fire’.  The working hours provisions do also not apply to sales staff who travel to customers and regulate their own hours, or to employees who work less than 24 hours per month. 

Save for the exceptions outlined above, the working hours of all other employees must be regulated in accordance with the BCEA and cannot be contracted out of or excluded.

What then are those statutory hours of work?

Ordinary hours of work (i.e. not overtime) may not be more than 45 hours in a week or 9 hours in a day.  For employees who work a 6-day week, it is 8 hours per day.

Any additional hours will be considered overtime for which a specified amount of additional remuneration is prescribed.

Overtime is limited to a total of 10 hours per week and then too, may not exceed 3 hours of overtime per day.

An agreement is necessary between the employer and the employee for overtime work.

Overtime work must be paid at no less than 1.5 times the normal hourly rate, or time off (equivalent to 1.5 times), or partially paid and partially paid time off.

The BCEA does recognize a certain amount of flexibility in arranging shifts and work times. These are however also regulated – e.g. a compressed working week can be implemented by means of a written agreement, to allow for 12 ordinary hours of work (including meals) to be done in a day. It may however only be done in terms of a 5-day week, and with regard to the statutory daily rest periods. Averaging of hours is also recognized by the BCEA, to enable more hours to be worked on a particular day and less on another provided it ‘averages’ out over a period of 4 months to the statutory weekly limit on ordinary and overtime hours of work per week. Averaging can however only be done in terms of a collective agreement (i.e. a written agreement concluded with a registered trade union), and must be subject to the daily and weekly rest periods.

A meal interval of at least one hour is compulsory for employees who work more than 5 continuous hours. The meal interval can be reduced to 30 minutes by written agreement (e.g. in the contract of employment) with the employee.

An employer must allow an employee a daily rest period of at least 12 consecutive hours between ending and restarting work.  There is also a compulsory weekly rest period of at least 36 hours. The rest period must include a Sunday unless otherwise agreed.  There is some flexibility permitted and it would be advisable to include such issues in the contract of employment.

Employees can only be required to work on a Sunday or a public holiday where they have agreed to it.  The employee must be paid at double his normal wage/rate, if he does not ordinarily work on Sundays, and at 1.5 times his ordinary rate if he does ordinarily work on Sundays.  Paid time off may be agreed to instead of additional payment.

Employees are entitled to at least the 12 current public holidays provided for in the Public Holidays Act. However, by agreement, a public holiday may be exchanged for another day.  An agreement is also required to get an employee to work on a public holiday. Double pay (or ordinary wage plus paid time off) must be paid if the employee works on a public holiday that falls on an ordinary workday. 

Employees who perform night work enjoy special protection in terms of the BCEA.  Night work means work done between 6 o’clock in the evening and 6 o’clock the next morning. An employer can only require an employee to do night work if there is an agreement with the employee (e.g. in the contract of employment), the employee is paid an allowance (which may be a shift allowance) or receives a reduction in working hours, and if there is transport available between the employee’s home and the workplace.  There are a number of strict regulations around night work, including those contained in a code of good practice passed in terms of the BCEA, in ensuring the health and safety of employees who do night work.

Paid Leave
The BCEA prescribes a leave period of no less than 21 consecutive days per completed year of employment (or 1 day for 17 day’s worked, or 1 hour for 17 hours worked), on full pay. Public holidays are not part of annual leave, and may not be ‘encashed’.  Leave can also not be accumulated from one year to the next.  It is important to note that an employer is compelled to ensure that statutory leave is taken within a period of 6 months of the end of the annual leave cycle.

Additional holiday leave may however be agreed upon between employer and employee and may be dealt with in any way agreed, usually set out in the contract of employment.

Sick Leave
There is also an entitlement to a minimum number of sick leave on full pay. An employee is entitled to one day’s paid sick leave for every 26 days worked during the first four months of employment, and thereafter to 30 days paid sick leave for every 36 months worked (the leave cycle). An employer will only be obligated to grant paid sick leave of longer than two days or for longer than one day when more than two absences occurred in a space of eight weeks if the employee produces a valid medical certificate that has been issued by a medical practitioner.

Maternity Leave

Employees are entitled to maternity leave of no less than 4 months, which is to start from 4 weeks prior to the due date of birth, and end not less than 6 weeks after the birth of the child. Maternity leave is classified as unpaid leave unless otherwise agreed by the parties. There are also strict provisions around the nature of work that a pregnant or nursing employee is not permitted to perform where it could be hazardous to her or the child’s health.

Family Responsibility Leave

Employees are also entitled to take family responsibility leave. An employee who has been employed for longer than four months and who works four days or more for the employer is entitled to three days paid leave during each twelve-month leave cycle to discharge family responsibilities in the following circumstances:

• When the employee’s child is born or falls ill;
• In the event of the death of the employee’s spouse or life partner, parent, adoptive parent, grandparent, child, adopted child, grandchild, or sibling.