Employment contracts and labour disputes

Key considerations for employers

Are you an employer? Perhaps you are a small business on the verge of expansion, taking on staff for the first time. What do you need to know about employment contracts to ensure you stay on the right side of employment law and, more importantly, your employees?

There is a complex framework of legislation governing employment relationships in South Africa. This includes the Labour Relations Act (LRA), Basic Conditions of Employment Act (BCEA) and Employment Equity Act (EEA). This framework establishes the minimum standards for employment and provides appropriate mechanisms to resolve disputes between employers and employees. If you understand how to structure employment contracts and handle potential labour disputes you will be more likely to maintain respectful workplace relations and avoid expensive litigation costs. What should an employment contract contain and how should you deal with a labour dispute, should one arise?

Role of the employment contract

A well-drafted employment contract is the cornerstone of any employment relationship. This contract establishes the rights and obligations of both parties and can significantly impact how disputes are resolved. An effective employment contract should contain:

• A clear description of the employee’s position, responsibilities and performance expectations. 
• Details regarding salary, bonuses, commission structures and other benefits, including payment schedules and conditions for performance-based compensation.
• Working hours, overtime policies, leave entitlements and workplace conditions in compliance with the BCEA.
• Duration of employment, i.e., whether the position is permanent or fixed-term and the specific duration and conditions for renewal if fixed-term.
• Probationary periods: duration, assessment criteria and notice requirements if employment is terminated during this period.
• Grounds for termination, notice periods and procedures for termination by either party.
• Confidentiality and restraint of trade provisions, if applicable. These clauses must be reasonable in scope and duration to be enforceable.

Common mistakes in employment contracts

If a contract is unclear or incomplete, disputes are more likely to happen. The contract should not contain:

• Vague or ambiguous terms: Unclear wording can leave room for misinterpretation of the clauses and may lead to misunderstandings and disagreements. Where terms have more than one meaning, clarification within the contract is necessary to avoid conflicts. 
• Inconsistency with labour laws: Provisions that contravene minimum standards established by labour legislation cannot be enforced.
• Outdated information: As job responsibilities change and employees are promoted or moved into new roles, contracts should be promptly updated.
• Overly restrictive restraint of trade clauses: Courts often invalidate restraint provisions that unreasonably limit an employee’s future employment opportunities. The most common types of restraint are geographical, i.e., unable to work for a competitor within a certain radius, or duration, i.e., restricted from working for a competitor for an unreasonable period of time.

Labour disputes

Despite a well-drafted contract, labour disputes are sometimes unavoidable. When they arise, employers need a thorough understanding of legal procedures. Professional legal advice is also strongly advised.

Labour disputes arise from a variety of circumstances but all involve a disgruntled employee. Sometimes the employee’s dissatisfaction is unfounded; everyone feels unfairly treated at some point in life. But the complaint may be legitimate. Not all organisations are model employers. Reference to a sound contract can often resolve the dispute. If the parties are unable to settle their differences internally, there are dispute resolution vehicles available. Disputes mostly fall into one of the following categories:

• Unfair dismissal: This is the most common dispute, when an employee alleges termination was substantively or procedurally unfair.
• Unfair labour practices: This includes unfair conduct related to promotion, demotion, probation, training or benefits.
• Discrimination: An employee may allege unfair discrimination based on race, gender, age, disability or other protected grounds.
• Wage and benefit disputes: Disagreements may occur over compensation, overtime, leave pay or other financial entitlements.

In an organisation with a large number of employees, it is inevitable that disputes will arise. It is not possible to entirely mitigate the risks. In a small business with a handful of employees and close relationships between employer and staff, it is easier to prevent disputes through regular communication. In either situation, certain organisational behaviours will reduce the potential for labour disputes.

Clear documentation and accurate record keeping are critical. Maintain detailed records of all employment-related matters, including performance reviews, disciplinary actions and attendance records. Apply workplace policies consistently across all employees to avoid claims of discrimination. Periodically review company policies to ensure compliance with evolving labour legislation. Establish mechanisms for employees to raise concerns before they escalate into formal disputes. And ensure managers understand labour law basics and proper procedures for handling disciplinary matters.

Unfair dismissal

Unfair dismissal claims represent a significant risk area for employers and are a common cause of labour disputes. Employers should be familiar with and avoid breaching the LRA’s three recognised grounds for dismissal: misconduct, incapacity and operational requirements. Regardless of the grounds, dismissals must be both substantively and procedurally fair.

Substantive fairness refers to the valid reason for dismissal. There are three reasons an employer might dismiss an employee:

1. Misconduct: The employer must prove the employee violated a reasonable workplace rule or duty despite understanding that rule or duty and their obligation to fulfil it.
2. Poor performance: The employer must demonstrate reasonable performance standards were not met despite adequate support and opportunity to improve.
3. Operational requirements: The employer must show that genuine business needs prompted the dismissal.

Even with justifiable grounds for dismissal, employers are obliged to follow correct procedures. They must conduct a thorough investigation into alleged misconduct or performance issues. They must provide the employee with notice of allegations and sufficient time to prepare a response. An impartial disciplinary hearing must be conducted where the employee can present their case. Before dismissal, alternatives such as warnings, training or reassignment should be considered. The employee also has a right to appeal and the appropriate mechanisms for an internal appeal of disciplinary decisions should be available. 

Internal grievance procedures should provide clear steps for raising and addressing concerns; ensure impartial handling of complaints; include timeframes for responses; and document all stages of the process.

Formal dispute resolution mechanisms

If the internal dispute resolution mechanisms fail, South Africa’s labour law provides several alternatives. The Commission for Conciliation, Mediation and Arbitration (CCMA) is probably the best known and is often the first forum for resolving labour disputes. The process involves conciliation, which is an attempt to resolve the dispute through facilitated discussion. If conciliation fails, an arbitrator hears evidence and makes a binding decision. CCMA proceedings are more informal than court proceedings but arbitration awards are legally binding and can be made an order of court for enforcement purposes.

More complex disputes may proceed to the Labour Court, which has jurisdiction over reviews of CCMA arbitration awards; interpretation of labour legislation; disputes involving senior executives; and claims for compensation exceeding CCMA limits.

SD Law can help

Compliance with South African labour law requires careful attention to both employment contracts and dispute resolution procedures. If you need help to comply with current legislation or to develop labour relations strategies that address your particular circumstances, contact Cape Town attorney Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za for a confidential, personal discussion.

Further reading:

• Online dispute resolution
• Discrimination in the workplace
• Sexual harassment in the workplace
• Unfairly dismissed?

SD Law

View more posts from this author