Employment Contracts 101: What Your Boss Hopes You Don’t Read
Employment contracts are often overlooked, yet they form the foundation of the employer-employee relationship. Many employees sign them without fully understanding their implications, while some employers draft contracts that are vague, unfair, or even legally unenforceable. A well-drafted employment contract protects both parties, ensuring clarity and compliance with South African labour law.
An employment contract is a legally binding agreement between an employer and an employee that outlines the terms and conditions of employment. The Basic Conditions of Employment Act (BCEA) requires that certain minimum terms be included, such as working hours, leave entitlements, remuneration, and notice periods. However, many contracts go beyond these basics, addressing confidentiality, restraint of trade, and performance expectations. While verbal agreements are technically valid under South African law, they are difficult to enforce, making written contracts essential.
One of the most contentious clauses found in employment contracts is the restraint of trade. This clause restricts an employee from working for a competitor or starting a similar business for a specified period after leaving the company. While restraint of trade agreements are not automatically enforceable, South African courts will uphold them if they are deemed reasonable and necessary to protect the employer’s legitimate business interests. In the landmark case of Reddy v Siemens Telecommunications (2006), the court upheld a restraint of trade clause, emphasising that such agreements must strike a balance between an employee’s right to work and an employer’s right to protect its business.
Another critical aspect employees often overlook is the probation clause. Employers may include a probation period to assess an employee’s suitability for the role, but this does not mean the employee can be dismissed arbitrarily. The Labour Relations Act (LRA) requires that dismissals, even during probation, must be substantively and procedurally fair. This was highlighted in the case of ANC v Municipal Manager of George Local Municipality (2010), where the court found that the employer failed to follow due process before terminating an employee’s contract during probation.
Employees should also pay close attention to clauses related to remuneration and benefits. Some contracts include discretionary bonuses, which are not guaranteed and depend on the employer’s financial performance. It’s crucial to clarify whether bonuses and other benefits form part of the agreed salary package or are subject to the employer’s discretion.
For employers, having a clear and legally sound employment contract minimises the risk of disputes and costly legal battles. Ambiguous or unfair clauses can render a contract unenforceable, leaving the employer vulnerable to claims for unfair labour practices. Employers must ensure that contracts comply with the BCEA, LRA, and other relevant labour laws to avoid legal repercussions.
Understanding your employment contract is not just about legal compliance- it’s about protecting your rights and ensuring a fair working relationship. Before signing any contract, employees should carefully review the terms, seek clarification where needed, and consult a legal professional if necessary. Employers, on the other hand, should ensure that contracts are clear, comprehensive, and in line with South African labour laws. An informed approach to employment contracts benefits both parties, fostering a more transparent and productive work environment.