Learning unit 2

Labour law

The definition in the core labour legislation:

Employee means any person excluding an independent
contractor who works for another person or for the state who receives, or is entitled to
receive, any remuneration and any other person who in any manner assists in carrying out
or conducting the business of an employer.

 The definition excludes the independent contractor which means they are excluded
from labour law protection.
 The independent contractor has the protection of the constitution as well as the
service level agreement or regulator contract.
 The ability to exclude workers and in some cases exclude employees by disguising
them as independent contractors is open to abuse, hence additional tools have been
developed by the common law to assess who is an independent contractor and who
is an employee.
The erosion of employment and the need for additional tools: Pg 71

 As a result of the cloudy definition of employee employers have tried to put legal
distance between themselves and employees, this is achieved through the
process of externalisation and the hiring of casual employees and of temporary
service employees.
 In the case of temporary service employees, it has become increasingly difficult
to identify the bona fide employer, thus in 2002 a legislative presumption was
introduced to assist in this.
 Further to this, the courts have developed Jurisprudential common law tests to
assist in identifying an employee.
 Section 23 of the Constitution is also a factor in protecting not only the employee
but also the independent contractor.
The common law test for employment

The common law test for employment is concerned with the nature of the contract between
the parties and whether or not it gives rise to an employment of style of relationship thus it is
necessary to explore the evolution of common law tests for employment.
The control test:

 The control test is predominantly used in cases concerned with vicarious liability,
in the case off Colonial Mutual life assurance Society v McDonald the court held
that:
 The test is the existence of a right of control over the agent in respect of the
manner in which his work is to be done and that the relation of master and
servant cannot exist with there is a total absence of the right of supervision and
control that the Workman I subjected to under the contract
  After this judgement the control test became the detriment of employment
regardless of the context. However, by the mid 1970s the control test was no
longer adequate in explaining the developments of modern employments this
common law test was replaced with the dominant impression test which is the
preferred means of identifying employment.
 The court's favour the dominant impression test as the best tool to adequately
decide between an employer and an employee in terms of the common law tests.
The dominant impression test: Pg 76

 In the AvBob case the AD accepted that the control test is no longer a decisive
tool when analysing the employment relationship and that the court must ask
what is the dominant impression created by the contract.
 After the AD handed down this judgement it was in the Smit v Workmans
Compensation test case that the test gained full momentum and the court
emphasised several inquiries that must be examined.
 The court investigated the common law meaning of contract of service, and the
judge returned to the Roman Dutch distinction between Locatio conductio
Operarum and the Locatio conductio operis and contrasted their legal
characteristics.
What does the Dominant impression test consider? Pg 76
• The right to supervision
• The right of the contractee to work elsewhere
• The right of the contractee to determine their own hours of work
• The right of the contractee to take a vacation without the consent of the contractor
• The contract doesn’t automatically terminate on the death of the parties

SUMMARY OF COMMON LAW TESTS

1. Control test: 2. Organisation test

• Looks at the control the employer • Whether the person is part and
has over the work the person does, parcel of the business/organization
the manner in which the work must of the employer. The person’s work
be done and when and where the must be integrated into the business
work must be done. of the employer and must not just be
an accessory to the business.

The reality test closely linked to D. I Test : Pg 79

• The courts routinely rely on the dominant impression test but in 1999 and in the
essay broadcasting corporation case the labour appeal court said that in addition to
relying on the dominant impression test we need to have an inquiry that goes beyond
the terms of the contract and that the courts must have special regard to the realities
of the relationship and not regard itself as bound by what they have chosen to call it
 this insight gained momentum in the Denel Pty Ltd v Gerber case the court began to
rely on the reality test and concluded the following:
• The use of a legal entity such as a company or a closed corporation to provide
services does not prevent a court from concluding that a particular individual
employed by such a company or closed corporation is in fact an employee of the
company receiving such services.

The reality test: Pg 79

The labour appeal court relying on the Denel case and the factors listed in the presumption
of employment in terms of section 200 A of the LRA formulated a modified version of the
dominant impression test which agreed with the principles set out in Denel.
The court determines the question of an employment relationship based on three
criteria those are namely:
1. Employees rights to supervision and control
2. With the employee forms an integral part of the organisation with the employer
3. The extent to which the employees economically dependent on the employer
Legislative tools to assist the process of identifying an employee: pg 82

 The likes of the dominant impression test and reality test are useful to the courts the
legislature stepped in to assist in clarifying this muddy issue.
 The statutory presumption contained in section 200 A of the LRA is aimed at
protecting those who earn below the stipulated threshold found in the BCEA this
same presumption was inserted into the BCEA, but sadly not included in ever labour
legislation.
 Therefore, if one earns below the threshold, then the statutory presumption is
applicable to them however, if they do not and earn higher, they will use the common
law tests namely the dominant impression test and the reality test
*Remember! - The statutory presumption states that a person will be presumed to be
an employee unless the otherwise is proven.
What does section 200 A say : Pg 82
1. The manner 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 and direction of another
person
3. In the case of a person who works for an organisation the person forms part of that
organisation.
4. The person has worked for another person for an average of at least 40 hours per
month over the last three months
5. The person is economically dependent on the other person for whom he or she
works or renders services
 6. The person is provided with tools of the trade or work equipment by the other
person
7. The person only works for oranges services to one person.
No heading on slides but study this

1. The code of good practise, gives effect to the recommendations of the ILO and is
made-up of various parts that speak to different aspects of the labour law.
2. The code explains the factors in section 200A would trigger the presumption as to
who is an employee and adopt the approach that considers the dominant impression
ascertained from the contract as well as the realities of the relationship should be
examined which supports the idea that these tests should be looked at in tandem.
3. In other words, the nature of the relationship should be determined with reference to
the contract of employment as well as other evidence explaining the realities of the
relationship.
4. This approach what is confirmed in the Wyeth case where in the court held that the
definition of an employee includes a person who has concluded a contract of
employment but who has not yet commenced work.
Nature of the contract of employment pg 125
• Contract of Employment Agreement between two parties in terms of which one party
places labour potential at disposal and under control of other party, in exchange for
some form of remuneration.
• A mutual agreement in terms of which employee makes his services available for
determined period and remuneration under authority of employer.
• Employer Pay remuneration for services and exercises authority over employee.
Employee Receives remuneration for rendering of services (excluding independent
contractor) or assist in promotion of business (see sect 200A

Nature of the contract of employment- pg 125

• Locatio conductio operis: Compensation was paid for the result of services, as
per an independent contractor relationship.
The independent contractor, amongst other things:
• Is not subject to the control of the employer
• Decides when work will be done within the broad parameters of the contract
• Decides how the work will be done
• Sees the contract terminate once the work is done
A contract of mandate relates to the performance of professional services (attorney,
advocate, doctor, etc.)
• Here the mandatory (e.g. doctor) performs a mandate for the mandatory (e.g.
patient)
• The mandatory is not subject to the authority of the mandatory
Read pg 125 for the other 2, it’s not on slides.
Contract of employment- pg 126

The contract of employment being a contract, is also governed by general legal principles
regarding its validity, these being:
-consensus;
-contractual capacity;
-legality and
-physical possibility;
and the compliance with formalities if so required
Essentials of the employment contract: 126
The essentials of a contract of employment are:
-A reciprocal contract/agreement
-Services are rendered
-Under authority of employer
-Remuneration
-Term
-Fixed
-Open ended
Essentials of the employment contract- pg 16

Specified work Remuneration

The parties must agree the remuneration to

The parties must agree on the work the be paid at the conclusion of the contract
employee will be required to perform
Employees are expected to perform these Remuneration may be in the form of
duties and others, provided that they are cash and/or in kind
not unlawful or beyond the area of expertise
of the employee
Should an employee be required to perform
a task, which constitutes a reduction in his
status, he entitled to resile from the contract
and to claim damages

Terms implied by operation : 127

1. Custom and practice/ tacit terms of a contract of employment?

2. Ulterior motives of employers to appoint persons as independent contractors- how is
such curbed?
3. Parol evidence rule?
The parol evidence rule is a substantive common law rule in contract cases that
prevents a party to a written contract from presenting extrinsic evidence that
discloses an ambiguity and clarifies it or adds to the written terms of the contract that
appears to be whole
4. How do you establish whether a person is an employee or an independent
contractor?
5. Conditions of employment:
Vacation leave and sick leave
6. Rule of collective bargaining on the individual contract of employment

Continuation…
The contract of employment, like any other contract, must comply with the basic
requirements of a valid contract.
The contract need not be reduced to writing in order to be valid.
The BCEA requires the employer to provide written particulars of employment.
A tacit contract is one where a person can tacitly deduce from the conduct of the parties
that they intended to conclude a contract.
Custom and practice can give rise to tacit terms in the contract.
The court will accept tacit terms if:
They are the inevitable consequence of the agreement between the parties
They are not in conflict with other terms in the contract or with existing law
There is acceptable evidence for the existence of the custom
Both parties were aware of the custom or if it was common practice in the industry and area
Conclusion of the contract
The contract of employment being a contract, is also governed by general legal
principles regarding its validity, these being:
Consensus, which may be affected by:
Misrepresentation
Mistakes
Undue influence
Duress
Contractual capacity, which may be affected by:
Age
Insanity
The influence of drugs and alcohol
Legality
Must be for a legal purpose
Physical possibility
The compliance with formalities if so required

The employee’s common law duties

One of the distinctive features of an employment relationship is that common law imposes a
number of duties on both the employer and the employee. In relation to the employee:
These duties are as follows:
1. To report for duty and remain in service
2. To be reasonably proficient
3. To be respectful and obedient
4. To follow lawful and reasonable instructions
 5. To comply with any reasonable restraint of trade agreement
6. To act in good faith and further the employer's interests.
Common law duties of the employer: 130

To accept the employee into service To provide the employee with work
• As the rendering of services is a • As long as the employer pays the
prerequisite for the payment of employee it may not be necessary
remuneration, the employer would to provide the employee with work.
be committing a material breach of • In the following instances the
contract should he fail to take the employer is obligated to provide
employee into service. work:
• The employee will be allowed to Where the amount of remuneration is
claim damages, equal to his/her based on the amount of work done
actual loss, if not accepted into Where a failure to provide work brings
service. about a reduction in status of the employee
Where the employer has undertaken to
train the employee in a certain profession or
trade
Where a person’s earning capacity is linked
to the publicity he/she receives (e.g. an
actor)

Duties of employer continued

To the remuneration agreed upon:
Where there is no agreement regarding the time of payments, common law prescribes
that payment will take place at the end of the period of service.
Where the employee works for an undetermined period, payment will be based on trade
usage in the particular industry.
An employee will first render services before receiving payment.
In the case of absence due to illness common law prescribes that the employee is only
due payment for the period worked.
Generally, an employee is paid in the case of suspension pending an investigation for a
disciplinary hearing.
To comply with statutory duties
LRA, BCEA, OHASA, COIDA, UIF.
Statutory duties include:
Fair labour practices – specific fundamental rights
Rights to organise and associate – may join a trade union
Provide job and subsistence security – personal security
Avoid discrimination – race, gender, culture etc.
Protection against discrimination – When?
  When applying for a job

 When in the employment of an employer and rendering

services

 When his services are terminated

Permissible discrimination:

 Inherent requirements

 Affirmative action
Contract of employment and similar contracts
Criteria to distinguish the contract of employment from related contracts
Contract of Mandate – Applies where a person undertakes to render personal
services to another for example an advocate or attorney
Agency –A person is endowed with authority to represent a principal in executing any
legal transactions for the principal (Note: An employee can also represent his
employer)
Contract of work –A contractor who accepts work as a result of such a contract is
under an obligation to make an article, build or repair – without direct supervision for
example road construction contractors.
Partnership agreement – Partners contribute towards the partnership – this could be
in the form of a service, but the partner will not be under the authority of his co-
partners.
Contract of Lease –Note differences - lease is the “hiring of objects”. Employment
“hiring of services”
The employee’s remedies (in relation to a breach of contract: 137
Cancellation Specific performance

• A material breach of contract by the • In common law, due to the personal

employer (e.g. reduction in status, nature of the employment contract,
non-payment of agreed the courts will not grant specific
remuneration) allows the employee performance.
to resile from the contract. • In certain instances of
When an employee claims cancellation of reinstatement, specific performance
the contract, it amounts to summary is not excluded.
termination. However, reinstatement, will not be ordered
• In the case of a less serious breach if it is against public interest, i.e. when the
the employee may cancel the employment relationship has irretrievably
contract by giving the required broken down.
notice.
The employee’s remedies (in relation to a breach of contract) – 23 tb

Damages Refusal to work Statutory remedies

• An employee who • If a breach such as • For example, the
suffers damages as an employer refusing unfair dismissal
a result of the breach to pay employees provisions as per the
can claim in their wages occurs, LRA.
 accordance with the employees may
remuneration which refuse to work.
he/she would have The concept of ‘no pay, no
received if the work’ applies, which in this
breach had not taken instance doesn’t constitute a
place. strike, but rather a legitimate
The employee must, exercise of contractual
however take reasonable rights.
steps to mitigate his/her
losses.

Vicarious liability : 135

If an employee, either intentionally or negligently causes harm to any other person who
is injured as a result of that harm they may claim damages from an employer in terms of
the doctrine of vicarious liability.
This doctrine imposes a strict liability on the employer for a deal inked committed by an
employee the rationale underlying this form of liability was captured in the seminal case
of Feldman Pty Ltd V Mall, we're in the AD stated that the master who uses servants
creates a risk of harm to others if the servant proves to be negligent in efficient or
untrustworthy furthermore that if the servant acts in doing his masters work or his
activities are incidental or connected with it are carried out in a negligent or improper
fashion as to cause harm to third parties then the master must take responsibility.
Requirements : pg 136
• For the injured party, to impose vicarious liability, and recover damages, fair are
three essential requirements that need to be satisfied:
1. The negligent party must be an employee of the employer or a contractual
relationship of employment must exist;
2. The conduct must amount to a delict
3. The employee must have been acting in the course and scope of employment at
the time that the delictual act was committed

Restraint of trade
Restraint of trade is an agreement that prevents an employee from performing similar
work in competition with the employer or with its direct competition.
The main aim is to protect the employer's proprietary interests.
This is not a blanket restraint, and the court will look at enforcing it within the defined
area or for a prescribed period of time.
To be enforceable a restraint of trade must be valid and it must be reasonable. The
constitutionality of a restraint of trade was questioned however the constitutional
 court decided that should the restraint be reasonable and valid vin it does not infringe
any constitutional principles.
The concept of restraint of trade was discussed in the seminal case of Magna alloys.
A restraint of trade:

A restraint of trade (commonly found in a contract of employment) prevents an employee

from starting his/her own business in competition with his/her employer or from working for
the employer’s competitors for a specified period in a specified geographical area after
leaving the employ of his/her employer.
For a restraint of trade to be considered fair it is necessary to balance the interests of the
employee (public policy) and the employer (trade secrets, client lists, etc.)
The following is considered when determining whether a restraint is reasonable:
The area and period
Whether the restraint in fact protects the employer’s interests of
whether it merely prevents healthy competition
The nature of the business
Whether the restraint prevents the employee from utilising his/her own
skills, expertise and experience
Magna Alloys case:
In this case the court looked closely at what is reasonable
The court specifically looked at the following questions in considering what is
reasonable or not?
Is there an interest deserving of protection at the termination of the agreement?
How is that interest being prejudiced
How does that weigh- up against the interest of the other party
Is there another facet of public policy that requires the restraint to be upheld or not
Is the restraint wider than necessary

Termination of an employment contract: 139

In terms of the common law either the employer or the employee may terminate
employment by giving agreed notice or if a period of agreed notice has not been
reached then reasonable notice can be given.
In terms of the BCEA minimum notice periods are specified although contractual
provisions may vary such as notice periods provided that statutory notice periods are
not reduced and all the same for both parties.
 However, notice is not required in the instance of a material breach of contract in
which case many employers and employees are entitled to terminate the contract
without notice.
In terms of the LRA employees are entitled to a fair dismissal which entails both
substantive and procedural fairness the unfair dismissal provisions of the LRA will not
apply if the termination of employment contract does not amount to a dismissal.
Other forms of terminating the contract of employment
There are many ways other than a mutual agreement and dismissal to terminate a
contract.
1. Resignation
2. Mutual separation
3. Death
4. Dismissal
5. Termination of contract –if it was a fixed term contract
6. Operational requirements such as a retrenchment.

END