PURPOSE-BUILT EMPLOYMENT CONTRACTS

Labour law sets strict requirements that employers must comply with.  To comply with legislation is not negotiable and the scope of labour law can be overwhelming as it is a highly regulated environment.  Non-compliance holds a serious business risk for employers that is often underestimated and left unaddressed.  Arbitration awards against employers have a definite financial impact and can also negatively affect the business’s brand name.

INDUSTRY SPECIFIC LEGISLATION

Firstly, make sure you comply with all applicable labour legislation depending on your specific industry.  Do your business activities fall under the scope of application of a Sectoral Determination or Bargaining Council main collective agreement?

Secondly, use labour law to your advantage to protect your business and rights as an employer.  As a business owner, the employer should always anticipate what can go wrong with regards to the employment relationship, in order to best position yourself going forward and mitigate risk.

WRITTEN OR VERBAL?

One of the biggest mistakes employers make is not implementing written employment contracts and relying on verbal agreements. Section 29 of the Basic Conditions of Employment Act requires the employer to supply an employee upon employment with written particulars of employment. By implementing a written employment contract, the employer not only meets this legal requirement, but the employer also has physical proof of the agreed terms and conditions of employment. If the employee is illiterate, the employer must make use of witnesses, and an interpreter where necessary, to implement a written employment contract.

A written employment contract creates clarity in the relationship and protects the employer in terms of the employment relationship going forward.  Take note that labour legislation applies to all employers and employees, irrespective of how the employment relationship is recorded, or the term thereof.

FIXED TERM OR PERMANENT?

Employment on a fixed term contract without a valid reason would be ineffective, as such a contract lacking justifiable grounds might be treated as a permanent employment agreement. Additionally, parties cannot mutually agree to terms that are less favourable than what the law stipulates or include illegal provisions. Legislation makes a clear distinction between permanent and fixed term employment contracts. Make sure to use the right type of employment contract from the start and include proactive clauses to protect the employer’s rights. Then the employer has a valid agreement to fall back on should a dispute arise. Remember that the employee is deemed a permanent employee if they have been rendering services for more than 48 hours per month without a contract.

A permanent employment contract is used when the position is of a permanent nature (for an indefinite period), as opposed to a fixed term employment contract which is used when the position is of a temporary nature, for a specific period or a specific project. The reason for a fixed term employment contract must be justifiable in terms of the Labour Relations Act and this reason must be clearly stated in the employment contract.

USE THE EMPLOYMENT CONTRACT TO YOUR BENEFIT

By including proactive clauses in the employment contract, employers can protect their business and mitigate risk by addressing possible future disputes between the employer and employee.  These clauses include:

• Reference to policies, procedures and a disciplinary code that describes rules and procedures the employer and employees must adhere to. The disciplinary code serves as a guideline for employers of what the appropriate sanction is for certain offences.  The disciplinary code also ensures that all employees are aware of the rules in the workplace as well as the consequences should these rules be broken.
• Time periods – probation period, retirement age, short time, lunch breaks, etc.
• Consent – medical testing, alcohol and drug testing
• Consent – deductions for damages, training, etc.

In addition to the employment contract, the employer can add annexures to further protect the business going forward.  Typical annexures include:

• Declaration of duties – what is expected from the employee with regards to duties and the employer’s fixed operational standard
• Restraint of trade and confidentiality agreement – this is crucial where specialised business activities take place to protect confidential information, unique methods and procedures, patents, etc. and prevent this sensitive information ending up with the competition

The employment contract can be of immense value to the employer if used effectively.  Making a mind shift regarding employment contracts from an “administrative burden” to “risk mitigating tool” can save employers a lot of time and money in the long run.

TAKE NOTE

Employers should be careful not to simply assume that their employment contracts are in line with applicable labour law. An outdated employment contract can cause an unnecessary headache for the employer when a dispute arises. Employers should continuously keep abreast of the latest developments on the labour front and update their employment contracts accordingly. Employers can do this by way of annexures to the employment contract, revising the contract as a whole, or implementing new policies. Remember that the employment contract may not be amended unilaterally without consulting the employee.