The dangers lurking in employment agreements

Ivan Israelstam

Some months ago we reported on the outcome of the Wyeth v Manqele labour court case. New case law developments now confirm that employers must beware of concluding employment contracts that they are unable or unwilling to implement. The courts have found that the employee is protected by labour law from the moment the employment contract is concluded. These contracts can be legally concluded in writing or orally.

According to section 213 of the LRA 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 on the day that the employee physically begins work. However, this is not necessarily so. For example, in Wyeth v Manqele, Manqele was offered a position by the employer as a sales rep. The parties concluded a written contract of employment in terms of which he was to commence work on April 1. Prior to Manqele beginning work, he was advised that the employer was no longer prepared to employ him. In terms of the contract of employment, Manqele had been entitled to a company vehicle.
                                          
The employer believed that Manqele had made a misrepresentation on the status of the car he had chosen, and on this basis took the view that there was no contract, as the parties had not reached agreement as to the condition of the vehicle stipulated in the letter of appointment.
                         
Manqele took the matter to the CCMA, where the arbitrator ruled that Manqele had become an employee the moment he accepted Wyeth's offer of employment. Wyeth 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 court that Manqele 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. In that case the court found, according to the report, that a person who is party to a contract of employment but who has not yet commenced employment is not an employee for purposes of the LRA. However, despite the Woolworths case finding, the court found that as a party to a valid and binding contract of employment, Manqele was an employee for the purposes of the LRA.
                  
The employer took the matter further to the labour appeal court, but lost yet again. The 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 poses a number of concerns for employers:

• Firstly, the fact that two different benches of labour appeal court judges (Woolworths on one hand and Wyeth on the other) made two such diametrically opposed decisions on a matter as fundamental as this one creates uncertainty in the law.
• Secondly, employers are clueless as to whether or not they are entitled to cancel employment contracts prior to commencement of work.
• Thirdly, where parties agreed in principle that the employee will get the job, it is now not clear whether disagreement on employment terms delays validity of the contract.In the light of these dangers, employers should avoid entering into employment agreements until all terms and conditions have been dealt with.

• Ivan Israelstam is the chief executive of Labour Law Management Consulting. Contact him on This e-mail address is being protected from spambots. You need JavaScript enabled to view it or call 011-888-7944.
• Our thanks to Ivan and The Star newspaper for permission to publish this article