M Forere

MBA – employment contract continued

Formation of individual contract of employment

A contract of employment is an agreement between two parties in terms of which employee undertakes to place his personal services at the disposal of employer for an indefinite or specified period in return for fixed remuneration, and which entitles the employer to define the employee’s duties and to control the manner in which employee discharges the duties (Grogan, 2010)

Essential elements of employment contract: agreement

From these definitions = a number of characteristics of a contract can be identified:

► Agreement is the basis of contract (true consensus ad idem or a meeting of the minds of the parties Not all agreements are contracts – only where such agreement

creates obligations There must be at least 2 parties to a contract Only persons privy to a contract are bound by it (‘privity of

contract’) The parties must not only have consensus, they must also

have the intention to create legally enforceable rights and obligations

A contract is enforceable by law – therefore, where the law does not countenance the type of contract (illegal) = not so enforceable and therefore also not a valid contract

Essential elements of employment contract: Parties

Parties: • There must be two parties to the contract of employment

– employer and employee• Whereas employer can have contracts with more than one

employee, employee cannot ordinarily do so• NB. Despite plurality of employees, employer has an

individual contract with each employee• Whereas employer can be juristic person, employee

cannot • Cession without consent of other party not permitted due

to personal nature of employment contract

Essential elements of employment contract: capacity

Capacity to act/perform a juristic act Both parties, employer and employee, must have capacity to conclude employment

contract. General principles of contract applies equally to employment contract. Thus, minor below 7 cannot conclude employment contract = void Contract involving a minor between 7 and 18 is voidable??????? Can it be ratified by the guardian? BCEA criminalizes employment of minors below 15 - Exception: a child of any age can

be employed in advertising, sports and cultural activities Therefore, employment contract with a minor below 15 cannot be ratified But one with a minor between 15 and 18 can be ratified provided – The work is appropriate and does not place a minor at risk in relation to well-being,

education, physical and mental health Unjustified enrichment: a minor who performed under voidable contract is not liable to

refund remuneration received Edelstein v Edelstein & Others 1952 (3) SA 1 (A)

Essential elements of employment contract: legality

Remember: Object of a contract is to create legally enforceable obligations inter partes;

Also one of the key requirements for a valid contract to come into being that the parties must both have this intention (animus contrahendi)

Therefore: No valid contract will come into being where the law would not enforce those obligations

E.g. where such a contract is illegal = law will not enforce Illegality: A contract may be illegal due to

A statutory prohibition OR In terms of the common law (the contract is ‘contrary to public policy’)

Compare Kyle v Van Zyl (2007) 28 ILJ 470 (CCMA) and Discovery Health (2008) 29 ILJ 1480 (LC) Where statute prohibits formation or performance of certain contracts =

contracts void, worker not given any protection Where statute imposes a sanction for conclusion of certain contracts but

work performed therein is lawful, employee will be given protection

Essential elements of individual employment contract: possibility

► A contract that is at the time of contracting impossible to perform = void for impossibility, ab initio

Equally, rights and duties agreed under employment contract must be possible to perform

► Distinguish between physical and legal impossibility

► Physical impossibility:

Absolute/objective impossibility = no-one can render the performance – agreement is void

► Performance will be regarded as objectively impossible where, even though it is physically possible, it is totally impracticable because it is extremely difficult, dangerous or risky or costly

Subjective impossibility = contract valid, can be held liable for breach of contract (claim for damages; not order for specific performance)

Therefore note: Subjective impossibility does NOT affect the validity of a contract

► Legal impossibility:

Law does not recognise or make provision for a performance

Essential elements of individual employment contract: formalities

Similar to other contracts, a contract of employment comes into existence when employee accepts employer’s offer & agreement is perfecta

Therefore, no formalities are required under common law

However, BCEA now requires employment contract to be in writing where employer has more than 5 employees, sec 28 & 29

Can a contract not reduced to writing be declared void?

Essential elements of individual employment contract: contents

BCEA requires written contract to contain the following: Full name & addresses of employer Name and occupation of employee Place of work Commencement date Employee ordinary hours and days of work Employee’s salary or calculation thereof Any other cash payments employee is entitled Any payment in kind and its value Frequency of remuneration Deductions on employee’s remuneration Leave entitlement Notice period for termination List of documents forming part of employee’s contract & where copies can be

obtained

Essential elements of individual employment contract: implied/tacit terms► 2 Implied terms:► Distinguish

Tacit terms Terms implied to give effect to a trade usage Terms implied through common law principles or statute

► (a) ‘Tacit terms’ Are implied to give effect to the parties’ intention – actual or

presumed Parties were silent on an issue OR they failed to foresee some

contingency 2-pronged test: ‘Business efficacy’ and the ‘bystander’ test

► NB note that the inference of a term must be a necessary inference - in order to give business efficacy to a contract; NOT whether the implied term is reasonable

► Term must not contradict the express terms of the contract► Term must not be ambiguous► To promote fairness or justice or good faith?► Read: SA Forestry Co v York (2005)► Read: Wilkens NO v Voges (1994)

Essential elements of a individual employment contract: terms

►2 Implied terms (cont.):► (b) Terms implied to give effect to a trade

usage: Usages in effect in a certain trade and/or locality Requirements:

►Must be certain►Must be reasonable and not contrary to law►Must be generally known and universally observed►Must be consistent with other provisions of the contract

Even though parties may not have known of the usage

Essential elements of a individual employment contract: terms

►2 Implied terms (cont.):► (c) Terms implied through common law

principles or statute: E.g. the naturalia in respect of certain specific

types of contract (sale, lease etc) E.g Every employment contract is now subject

to BCEA – parties may not exclude certain basic rights; ‘floor of rights/protection’ sec 4, BCEA

Collective Agreements: terms agreed upon between unions and employers supersede individual employment contract – they are therefore read into it, sec 23, LRA

Essential elements of individual employment contract: commencement

Commencement date of contract of employment is key

Upon concluding the contract, parties agree to commence work at the particular future date

Failure by the employer to allow employee to commence work = dismissal, LRA

Essential elements of individual employment contract: Duration

1) Fixed term Parties conclude contract for a specified period or upon completion of a particular task Contract comes to an end upon completion of task or upon the date agreed upon For contracts concluded for a specific tasks, the onus is on the employer to prove that the task has be

completed For contracts with specified termination date, if the employee continues rendering services and receives

remuneration after termination date = tacit renewal Employee will continue with the same terms as the previous contract However, duration may not be the same as the previous contract The duration of the new contract is a matter to be decided according to the circumstances of each case If employer does not renew a fixed term contract or renews it on unfavourable terms against expectations

of employee = dismissal Similar to other contracts, it can be terminated by agreement or by material breach

2) Indefinite (permanent) Parties do not specify termination date Contract comes to an end upon death of employee or upon reaching retirement age Otherwise, it can be terminated by agreement on notice or by fundamental breach

Essential elements of individual employment contract: employer’s command power

Employee must subordinate himself to employer

Employer must obey lawful instructions from employer