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Employment contracts can start before employees begin work

Ivan Israelstam

Employment contracts can start before employees begin work

You must beware of concluding employment contracts on behalf of your employer because as soon as a job applicant becomes an employee, your employer’s extremely onerous obligations in labour law come into effect.

At first glance, it seems easy to determine when a job applicant becomes an employee as, according to section 213 of the Labour Relations Act (LRA), an employee is:

  • Anyone (excluding an independent contractor) who:

-    Works for another person or the state,
-    Assists in carrying out, or conducting, an employer’s business, and
-    Receives, or is entitled to receive, any remuneration.

This definition seems to make it clear that a person only becomes an employee when he begins working for an employer. In other words, the definition strongly implies that the employer’s legal obligations begin on the day that the employee physically begins work.

This is not necessarily the case

There are circumstances in which the employer’s labour law obligations come into effect well before the employee begins work. For example:

  • Under the Employment Equity Act (EEA), an employer is prohibited from unfairly discriminating against an applicant for employment.
  • There is a dominant school of thought that a job applicant attains labour law rights as soon as the parties have concluded an employment agreement even if this occurs long before the individual’s first day in service.

In Wyeth SA (Pty) Ltd vs Manqele (People Dynamics, September 2003 page 39):

  • Manqele was offered a position by the employer, Wyeth, as a sales rep.
  • Wyeth and Manqele concluded a written contract of employment in terms of which he was to commence work on 1 April.
  • Before Manqele began work, he was advised that Wyeth was no longer prepared to employ him because the employer believed Manqele had made a misrepresentation about the status of the company car he had chosen.
  • Manqele took the matter to the CCMA where, according to the report, the arbitrator ruled that Manqele had become an employee the moment he accepted Wyeth’s offer of employment.
  • Wyeth took the arbitrator on review at the Labour Court on the grounds that the arbitrator had arrived at an “unjustifiable conclusion in ruling on the definition of an employee”. In other words, Wyeth argued in the Labour Court that Manqele did not become an employee merely because of the employment contract.
  • However, the court supported the CCMA arbitrator’s decision and found that, as a party to a valid and binding contract of employment, Manqele was an employee for the purposes of the LRA.
  • The employer took the matter further to the Labour Appeal Court but lost again: The court upheld the CCMA and Labour Court’s earlier decisions by the CCMA and Labour Court that Manqele had achieved legal employee status the moment his employment contract was signed.

This decision poses a number of concerns for employers

As two different Labour Court judges made two such diametrically opposite decisions on a matter as fundamental as this one dents out faith in the legal system’s ability to clarify the law. This means employers are now clueless about if they are entitled to cancel employment contracts before employees begin work.

Where the employer and applicant have agreed, in principle, that the employee will get the job it is now not clear if a disagreement on the terms of the employment does or does not delay the legal validity of the employment contract.

In the light of this uncertainty, you should:

  • Avoid entering into written (or unwritten) employment agreements until all the terms and conditions have been dealt with thoroughly,
  • Make it clear that the discussion of the terms and conditions of a contract in no way constitutes an offer of employment. For example:

-    If a manager asks an employee whether a R10 000-per-month salary would be acceptable to him, the employee’s answer of ‘yes’ would not constitute an agreement.
-    However, if the manager tells the employee “We are offering you the job if you will accept R10 000 a month”, then the employee’s acceptance will constitute a finalised employment agreement.

  • Never employ, contract with or cancel the employment contract of any person without involving a labour law expert experienced in dealing with these tricky issues.