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Employers have to be careful when cancelling job contracts

By Ivan Israelstam

         

The courts have found that an employee is considered to be fully employed and therefore protected under labour law legislation from the moment the employment contract is concluded even if the employee has not yet actually started work. This applies even if nothing has been put into writing or signed, and the contract of employment has only been verbally agreed between the two parties.

              

According to section 213 of the Labour Relations Act an employee is:

              
"(a) any person, excluding an independent contractor, who works for another person or for the state and who receives, or is entitled to receive, any remuneration; and
"(b) any other person who in any manner assists in carrying out or conducting the business of an employer."
                    
This definition strongly implies that the employer's legal obligations begin only on the day the employee physically starts working. But this is not necessarily so. For example, in the case of Wyeth SA (Pty) Ltd v Manqele, Manqele was offered a position as sales representative by the employer.
                       
The parties concluded a written contract of employment according to which he was to start work at the employer's premises on April 1. Before Manqele started working, he was informed that the employer was no longer prepared to employ him. In terms of the contract of employment, among other things, Manqele had been entitled to a company vehicle. The employer believed that Manqele had made a misrepresentation as to the status of the car he had chosen.

              

Because of this, the employer took the view that there was no contract between the two parties. The employer reasoned that this was because they had reached agreement as to the condition of the motor vehicle stipulated in the letter of appointment. Manqele took the matter to the Commission for Conciliation, Mediation and Arbitration (CCMA), and the arbitrator ruled that Manqele had become an employee the moment he accepted Wyeth's offer of employment.

                  

Wyeth then took the arbitrator on review at the Labour Court on the grounds that the arbitrator had arrived at an "unjustifiable conclusion in ruling on the definition of an employee". Wyeth argued in the Labour Court that Manqele had not actually started working for it and that he did not become an employee merely because of the employment contract. This argument is supported by an earlier Labour Court finding in the case of Whitehead v Woolworths (Pty) Ltd (1999 20 ILJ 2133).

                         

In that case, the Labour Court found, according to the report, that a person who is party to a contract of employment but who has not yet started working is not an employee for the purposes of the Labour Relations Act. However, despite the finding in the Whitehead v Woolworths case, in the Manqele case the Labour Court found that, as a party to a valid and binding contract of employment, Manqele was an employee for the purposes of the Labour Relations Act.

              

The employer recently took the matter further to the Labour Appeal Court but, yet again, the finding that Manqele was an employee was upheld. The Labour Appeal Court upheld the earlier decisions by the CCMA and Labour Court that Manqele had achieved legal employee status the moment his employment contract was signed.

                       

This decision raises a number of issues that should be of concern to employers: 

  • First, the fact that two different benches of Labour Court judges (hearing the Woolworths case on the one hand and Wyeth case on the other) made two such diametrically opposed decisions on a matter as fundamental as this one creates major uncertainty about the law in this regard;
  • Second, employers are now clueless about whether they can cancel employment contracts before a person starts working; and
  • Third, where the parties have agreed in principle that the employee will get the job, it is now unclear whether a disagreement on the terms of the employment does or does not delay the legal validity of the contract of employment.

                   

In the light of these dangers, employers should:

  • Avoid entering into employment agreements until all the terms and conditions have been dealt with thoroughly;
  • Ensure that, before offering anybody a job, there are no obstacles to allowing the candidate to take up the position;
  • Make it clear that the discussion of the terms and conditions of a contract in no way constitutes an offer of employment; and
  • Never employ, contract with or cancel the employment contract of any person without involving a labour law expert experienced in dealing with these tricky issues.

                               

Ivan Israelstam is chief executive of Labour Law Management Consulting. Call him at 011-888-7944, e-mail This email address is being protected from spambots. You need JavaScript enabled to view it.
Our appreciation to Ivan and The Star newspaper for permission to publish this article…

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