THE IMPORTANCE OF A WRITTEN CONTRACT OF EMPLOYMENT
By Stephen Khola, ECA(SA) National Labour Relations & HR Director
As an Industrial Relations (IR) practitioner, I come across many instances where both employers and employees tend to undermine the importance of concluding written contracts of employment. In fact, many a time when receiving a briefing from an employer in preparation for a case in which I have to represent the employer at a dispute resolution forum, I often hear the words, “… there is no written contract of employment, therefore he cannot prove that he was my employee…” This is a serious fallacy that can only end badly for an employer at the CCMA.
Admittedly, there are no prescribed formalities for an employment contract to be in writing, save in instances where a person is employed on a fixed term contract and earns below the earnings threshold, and a contract of apprenticeship or learnership. Where an employment contract is not in writing, one cannot simply conclude that for that one reason, the contract does not exist or is invalid. It should be noted that contracts can also be concluded tacitly. This means that in the absence of a written contract, the behaviour of the parties, amongst other things, will indicate whether a contract of employment exists between two parties.
Statutory definition
In Rumbles vs Kwabat Marketing (Pty) Ltd (D1055/2001) [2003] ZALC 57 (21 May 2003), the learned van Niekerk, AJ, said “It should be recalled though that a contract of employment may be in writing or oral, and its terms may be express or tacit. There are no formalities required for the formation of a contract of employment. Section 29 of the Basic Conditions of Employment Act 75 of 1997 requires ‘written particulars of employment’, to be given to an employee, it does not require a written contract. What is required therefore is a conspectus of all the relevant facts including any relevant contractual terms, and a determination whether these holistically viewed establish a relationship of employment as contemplated by the statutory definition.”
The learned Judge in the above-mentioned labour court case reinforced two important principles, the first being that a contract of employment does not have to be in writing. The second and most important, is that if the contract of employment is not in writing, the courts will look at several factors, which it deems relevant to establish whether an employment relationship exists or existed between the parties. In such instances, for example, the courts will look at, amongst others, whether the person worked only for the employer, whether he was paid for the work done, whether he was under the control of the employer, whether he tendered work only for that employer, etc.
Legislative requirement
The sooner we forget that “because the contract of employment is not in writing, it does not exist”, the better. Although the is no legal requirement to conclude a written contract of employment, there is a legislative requirement for employers to provide employees with written particulars of employment. Section 29 (1) of the Basic Conditions of Employment Act no.75, 1997, as amended, provides that an employer must supply an employee, when the employee commences employment, with the following particulars in writing:
(a) the full name and address of the employer;
(b) the name and occupation of the employee, or a brief description of the work for which the employee is employed;
(c) the place of work, and, where the employee is required or permitted to work at various places, an indication of this;
(d) the date on which the employment began;
(e) the employee’s ordinary hours of work and days of work;
(f) the employee’s wage or the rate and method of calculating wages;
(g) the rate of pay for overtime work;
(h) any other cash payments that the employee is entitled to;
(i) any payment in kind that the employee is entitled to and the value of the payment in kind;
(j) how frequently remuneration will be paid;
(k) any deductions to be made from the employee’s remuneration;
(l) the leave to which the employee is entitled;
(m) the period of notice required to terminate employment, or if employment is for a specified period, the date when employment is to terminate;
(n) a description of any council or sectoral determination which covers the employer’s business;
(o) any period of employment with a previous employer that counts towards the employee’s period of employment;
(p) a list of any other documents that form part of the contract of employment, indicating a place that is reasonably accessible to the employee where a copy of each may be obtained.
In addition, section 29(2) provides that when any of the matters list in (a) – (p) above change(s), the said change(s) must be reflected in writing and the employee must be supplied with the document reflecting the change. Legislation enjoins employers to provide written particulars of employment. My experience has shown that many employers fail to provide employees with written particulars of employment or where these had been given, often fail to adhere to accommodating any changes in the terms and conditions of employment in writing.
In writing
Section 198B(6)(a) of the Labour Relations Act, 66 of 1995, as Amended, prescribes that an offer to an employee on a fixed term contract or to renew or extend a fixed-term contract must be and writing. However, this requirement applies only to those employees who earn below the earnings threshold, currently R205 433.30 per annum or R17 119.44 per month. It is important to remember that the biggest danger to the employer when it comes to an employee on a fixed term contract without a written contract of employment, such employee may easily be deemed to be permanent as the peremptory requirement to prove the existence of a temporary employment relationship is a written contract of employment detailing, amongst others, the duration of the employment relationship.
I strongly recommend that these prescribed written particulars of employment be included in an employee’s written contract of employment. The critical reason for the recommendation is that the contract of employment should stipulate the terms and conditions of employment, leaving both parties in no doubt what their contractual rights and obligations are. It is often very difficult to prove the terms and conditions of a verbal contract where it is the employee’s word against the employer’s. This difficulty can simply be overcome by ensuring that employers and employees conclude written contracts of employment which regulate their employment relationship.
Ts and Cs
It is also important to note that the words “terms and conditions of employment” should not be interpreted in the narrow sense that they only refer to benefits to be provided to an employee. Their interpretation is much wider and includes, amongst others, things such as the nature of the employment relationship as well as its duration. This means that upfront, the parties are clear that the nature of their contractual arrangement is of a temporary, fixed term or indefinite period.
I have been involved in disputes at the CCMA where employers have had to agree to pay out a financial settlement to an ex-employee because the employee had alleged permanent employment whereas the employer had argued limited duration employment. Had proper contracts of employment been in place, such unnecessary costs to the business would have been averted. Sadly, sometimes even when such contracts exist, the employer’s laziness to update them results in costly consequences. For example, an employer and employee agree on the three (3) months fixed term contract of employment. At the end of the three (3) months period, the employer continues to employ the employee without extending the fixed term contract. Some months down the line, the employer wants to terminate the employment contract and the employee argues that his interpretation is that he is now permanent. In Seforo and Brinant Services 2006 ILJ 855 (CCMA), it was held that in an instance where the employee continued working after the expiration of the fixed term, this would be taken to constitute a tacit renewal on a permanent basis.
From the above, the importance of having a contract of employment with your employees can never be over-emphasised.
Stephen Khola
National Labour Relations & HR Director
Electrical Contractors’ Association
Email: stephen@ecasa.co.za
