UNIT 5

CONTRACT OF EMPLOYMENT
 TEXTBOOKS
• Botha (Labour law) Chapter 24
• Fouche (Contract of Employment) Chapter 22
 EMPLOYMENT AND THE CONSTITUTION
• This right is Constitutionally protected in section 23.
• Section 23 gives everyone the right to fair labour practices and gives every
worker the right to:
1. Form and join a trade union;
2. Participate in the activities and programmes of a trade union;
3. Strike to try to force their employer to take note of their demands regarding
working conditions.

• Section 23 gives the employer the right to join employers organisation and to
partake in the activities of that organisation.
 LEGISLATION THAT GOVERNS
EMPLOYMENT CONTRACTS
• The Labour Relations Act 66 of 1995 (the LRA);
• The Basic Conditions of Employment Act 75 of 1997 (the BCEA);
• The Employment Equity Act 55 of 1998 (the EEA);
• The Compensation for Occupational Injuries and Diseases Act 130 of 1993
(COIDA);
• The Unemployment Insurance Act 63 of 2001;
• The Occupational Health and Safety Act 85 of 1993 (OHSA) and
• The Skills Development Act 97 of 1998.
 WHY IS IT N.B TO FIND OUT IF ONE
IS AN EMPLOYEE

• To safeguard their Constitutional rights to free and fair labour practices;

• Ensure that they are able to get protection from the Labour Relations Act
and Employment Equity Act.
 LOCATIO CONDUCTIO OPERARUM
• The contract of service is similar to the lease agreement as the employee
leases his services to the employer in return for remuneration.
• The common law perspective is that the employee subjects himself to the
control of the employer in exchange of remuneration.
• Legislation has been enacted so as to protect the employee’s common law
approach. An example is paid sick leave.
• Common law does not require an employee to grant paid sick leave to an
employee, yet statute law caters for the employer granting the employee a
number of days paid sick leave. (s22 of the Basic Conditions of Employment
Act).
• The negotiation of a contract by the employer and employee (labour law) is
limited by the legislation Basic Conditions of Employment Act.
 A CONTRACT OF EMPLOYMENT ?
• It is imperative to look at the difference between a contract of employment
(location conductio operarum) and a contract of service (location conductio
operis)
• An employment contract is:
“A reciprocal contract in terms of which an employee places his
services at thee disposal of another person or organisation, as
employer, at a determinable remuneration in such a way that the
employer is clothed with authority over the employee and exercises
supervision regarding the rendering of his services”.
• The contract of employment involves the rendering of service by the
employee to the employer in return for remuneration, while the employee
subjects himself to the supervision and control of the employer.
• The employee subjects himself to the authority of the employer.
 CONTRACT OF EMPLOYMENT
• Sometimes it is difficult to determine whether someone is an
employee or an independent contractor so the control test is used
to determine what he is.
• Independent contractors are generally persons working under a
contract for work where they will try to produce a specified result.
By contrast, employees are generally used by the employer for
whatsoever tasks the employer chooses.
• An example is a domestic worker, they are considered
employees, they are obliged by law to obey the lawful instructions
of their employer. On the other hand the painter, who has been
hired for only a week to paint the house. The painter may not take
note of tips you might wish to give him or her regarding a better
painting method.
• The employee is subject to the control of the employer.
 WHO IS AN EMPLOYEE
• Common law factors that indicate an employment relationship include the
fact that the person alleging to be an employee:
1. Is obliged to render his services personally and may not delegate this
obligation;
2. Has to keep fixed hours and is paid a regular wage or salary;
3. Is subject to the alleged employer’s disciplinary code;
4. Is entitled to benefits, such as membership of a pension fund or medical aid
scheme;
5. Is subject to a degree of control by the employer.
 WHEN CAN A PERSON BE PRESUMED
TO BE AN EMPLOYEE
• The revised LRA creates a presumption that a person is an employee, to protect
employees from exploitation by the organisation. The independent contractor
does not enjoy the same benefits as the employee.
• A presumption is an educated guess, which becomes a legal rule, unless there is
evidence that it should not apply.
• A person is presumed to be an employee if one or more of the following factors is
present:
1. The way in which the person works is subject to the control or direction of another
person.
2. The person’s hours of work are subject to the control or direction of another
person.
3. The person works for an organisation, and forms part of that organisation.
4. The person has worked for the other person for an average of forty hours per
month for the last three months.
5. The person is economically dependent on the person for whom they work.
6. The person receives the necessary supplies or other work equipment from the
other person in order to do work.
7. The person only works for, or provides services to, one person.
 THE CONTRACT OF SERVICE
• In Leon-Cachet v De Jager it was held that where someone only receives
remuneration for specific work and not a salary then he is not an employee
but an independent contractor.
• In Borchards v Peach & Sheward t/a Lubrite Distributors the court determined
that the person was an independent contractor based on the following:
1. He only earned a commission only;
2. He was remunerated only when he produced results;
3. He was not registered as an employee with the Department of Labour;
4. No deductions for tax purposes had been made;
5. The control exercised over him was minimal;
6. He could leave whenever he wished;
7. He received no leave or sick pay.
 CONCLUSION OF THE CONTRACT
• The contract of employment is like every other contract and should follow all
the requirements of a valid contract.
• No formalities are required;
• May be a verbal or written agreement; but in the BCEA it is stated that the
contract should be in writing;
• Employees are often appointed by means of a letter of appointment and
the document contains terms of the agreement in full or provision of the
most important terms.
• The document may be altered by both parties on agreement.
 ESSENTIALIA OF THE CONTRACT
• There are two essentials to the employment contract which are specified
work and remuneration.
• The parties must agree on the type of work that he or she must do.
Unspecified tasks which are related to the main work must be carried out so
long as they are not unlawful.
• Where am employee is expected to carry out work that demotes his status
then he must cancel the contract and claim damages.
• In Smith v Cycle and Motor Trade Co. instead of working as stores controller
he found himself working as an ordinary storeman , the court held that he
was entitled to resile the contract and claim damages.
 ESSENTILIA OF THE CONTRACT
• The parties must agree on the remuneration upon conclusion of the
contract.
• Amount need not be fixed but it should be reasonably ascertainable.
• Remuneration may be paid in money or in natura, or partly in money and
partly in natura.
• The employee may share in the profits of the organisation.
• Parties may agree on how they remunerate each other, whether weekly or
monthly.
• Parties are allowed to negotiate and agree on any amount provided that it
is not less than the statutory minimum.
 DUTIES OF THE EMPLOYER
• The common law duties of the employer are as follows:
1. To accept the employee into his service;
2. To provide the employee with work;
3. To pay the remuneration agreed upon;
4. To pay a quantum meruit;
5. To provide safe working conditions.
 TO ACCEPT THE EMPLOYEE INTO
HIS/HER SERVICE
• If the employer fails to accept an employee he will have committed a breach
of the contract.
• If he does not accept the employee then the employee can sue the employer
for the loss of earnings that he would have made.
 TO PROVIDE THE EMPLOYEE WITH
WORK
• An employer is usually not expected to provide work to the employee according
to caselaw, so long as he pays the agreed remuneration.
• However there are instances where he will be in breach of contract if he doesn’t
provide work to the employee:
1. Where the remuneration is based on amount of work done, such as a sales
representative or someone doing piece-work;
2. Where the failure to provide work brings about a reduction in the status of the
employee;
3. Where the employer has undertaken to train the employee in a certain
profession or trade;
4. Where a person’s earning capacity is linked to the publicity which he receives
from the work he does, for example an actor.

Work must be provided to him in order to ensure his professional success.

 TO PAY REMUNERATION AGREED UPON
• Most important obligation of the employer;
• Where there is no agreement on the period of payment, common law
prescribes that payment should be at the end of the period of service.
• Employee will render services first before receiving payment;
• The common law rule ‘no work, no pay’ applies. If the employee fails to work
or to tender services without a valid reason he is not entitled to payment.
• In terms of common law if the employee is absent from work due to illness
then he will not be remunerated. But in terms of the BCEA the employer
provided for paid sick leave.
• The employee is entitled to full payment in the case of suspension unless it is
a sanction.
 TO PAY A QUANTUM MERUIT
• A quantum meruit is a reasonable remuneration for services rendered.
• Where an employee absconds the job before completion he is not entitled
to remuneration not even pro rata payment in respect of the work
completed.
• The quantum merit is obligatory if the employee did not complete the work
bona fide (in good faith), reasonable remuneration will have to be paid.
• Where the employee believes in good faith that he has completed the job
then he will be entitled to reasonable compensation.
• The claim is based on unjustified enrichment. Calculated according to the
employers enrichment as a result of the services rendered or the extent to
which the employee or contractor has been impoverished…. Which ever is
lesser
 TO PROVIDE SAFE WORKING CONDITIONS
• Employer must provide sufficient machinery and equipment, properly trained supervisory staff and
a safe system in terms of which the work is carried out.
• Should failure to do so lead to the injury of the employee, the employer may be held delictually
liable.
• If an employee has knowledge of a hazardous state of affairs and realises the nature yet he
subjects himself voluntarily to this hazard and it leads to his injury or death the liability of the
employer will be excluded (also known as volenti non fit injuria).
• In terms of common law the employee will institute action against the employer for the injuries
arisen due to the inability of the employer to provide safe working conditions. He has to prove that:
1. The act or omission that led to the injury was due to the fault of the employer or a person for
whose actions he assumes liability;
2. The act or omission was unlawful;
3. The employee sustained damages and/or personal injuries.
• The Compensation for Occupational Injuries and Diseases Act caters for the omission in common
law by providing for the payment of compensation to an employee who is injured on duty or in the
course of his service.
• The compensation is claimed from the Compensation Fund and not the employer.
EMPLOYEE’S REMEDIES
 EMPLOYEE’S REMEDIES
1. Specific performance
• Reinstatement is problematic where the employee is dismissed but will occur.
2. Cancellation
• Material breach of contract committed by the employer allows the
employee to resile from the contract.
3. Damages
• If an employee suffers loss as a result of a breach by the employer he may
claim damages. The amount of damages is calculated in accordance with
the remuneration he would have received had the breach not occurred.
THE EMPLOYEE’S OBLIGATIONS
 TO MAKE HIS SERVICES AVAILABLE
• Services must be rendered as stipulated in the contract agreed upon by
both parties.
• The employer may not force him to perform different work unless the parties
agreed to this.
• Employee must commence working on an appointed day and render his
services consistently at the times agreed upon. Where he is absent for no
reason he liable for breach of contract.
• If the employee proves unsuitable for the work, he is in breach of contract.
• However according to labour law and the Labour Relations Act he may not
be summarily dismissed. He must first be granted an opportunity to improve
his performance and the employer must give him proper orders, counselling
and possibly also training.
 TO OBEY THE EMPLOYER
• Employee must obey the employer and carry out the duties issued out
punctually.
• Disobedience amounts to breach of contract, but will not in all cases justify
the dismissal of the employee. Each case must be judged on its own merits.
• If the order by the employer is unlawful then he is justified in refusing to follow
such an order and will not be dismissed.
 TO BE SUBORDINATE TO THE
EMPLOYER
• Must show respect and be subordinate due to the position of authority of the
employer.
• Insubordination incorporates an element of disrespect, disobedience or a
challenge to the authority of the employer.
• Refusal to carry out unlawful instructions will not amount to insurbodination.
• Examples of insubordination are:
✔ Passing insulting remarks
✔ Using offensive remarks/language.
 MAINTAINING BONA FIDES
• Maintaining good faith.
• The employee is obliged to act in good faith and not to do anything that
may hurt or harm the relationship of trust between employer and employee.
• He may not disclose information to the opposition or use it for personal gain.
If he does so then he is in breach of contract and the employer will be able
to take action against him.
• To determine whether there is any breach of contract the question should
be whether the competition of the employer would be able to use the
information against the employer.
• Can the competition exploit the information against the employer ? To gain
financial leverage or superiority.
•
 TO EXERCISE REASONABLE CARE
WHEN USING THE EMPLOYER’S
PROPERTY
• Employee must always exercise reasonable care when using the property of
the employer.
• Negligent behaviour by the employee causing damage to the property of
the employer constitutes breach of