Terminating the employment contract

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The peculiarity of the employment contract is that, at the point of negotiating the contract during the employment interview, the contract parties i.e., prospective employee and prospective employer enjoy equal “contractual” status, but that this equal status situation is bound to change.

The moment that the employment contract is signed by the parties, the contract assumes the status of a subordinate contract, meaning that the employee is in the service of the employer and is no longer on equal status with the employer, but subordinate to the employer.

The subordinate nature of the employment contract places common law obligations on the employee, such as that of obedience to the employer, always acting in the best interest of the employer and never competing with the employer.

In order to take cognisance of, and somehow address this “inequality” in status, labour law and more particularly the Labour Relations Act (LRA) built in certain “safeguards” or “checks and balances” favouring the employee above the employer, which “checks and balances” we find, for instance, in the various ways in which the employment contract can legally and fairly be terminated.

There are basically 3 ways in which the employment contract can be terminated, initiated by and on the instance of the employer, namely:

  • Termination on the basis of proven misconduct on the employee’s part, provided that the prescribed fair procedure is followed, and substantive fairness requirements are adhered to. Termination within this category can be with or without contractual notice, depending on the seriousness associated with the offence committed; or
  • Termination on the basis of the employer’s operational requirements, known as “retrenchment”, provided that the provisions of Section 189 or Section 189A of the LRA are adhered to. Termination within this category will be with the required contractual notice; or
  • Termination on the basis of the employee’s persistent inability to perform in terms of the employment contract, as result of under-performance or medical incapacity (which includes death). Termination within this category will be with contractual notice and with due observance of the relevant guidelines in Schedule 8, annexed to the LRA. It excludes wilful under-performance, which is classified as misconduct.

The employment contract can also be terminated by mutual agreement, as indicated in the following instances:

  • By resignation in accordance with the relevant provisions of the employment contract. The employee is the only party who can out of his/her own volition exercise this termination provision and he or she is not obliged to provide any reason for terminating the employment contract in this way. No permission or approval from the employer’s side is needed because the approval of the employer is implicit in the terms of the employment contract.

While the employment contract may provide that “either party may terminate the contract by giving the required contractual notice”, the employer cannot merely give contractual notice to terminate the contract, as in the case of the employee resigning – the employer has to have a valid reason and must follow due process, as discussed in the former section; or

  • By the parties negotiating and concluding a “negotiated departure” or “mutual separation agreement”. Usually, the employee will officially resign in consequence of the agreed terms of the agreement, while some form of financial “incentive” is usually offered by the employer to smooth over the deal; or
  • On occasion of the expiry of a fixed term contract or when the employee reached the normal retirement age practiced within the workplace or as provided for in the rules of the pension or retirement fund to which the employee belongs as a member.

As is evident from the above, it is (administratively, at least) much easier and less onerous for the employee to terminate the employment contract than for the employer to do so, and with good reason.

The employee is, arguably, usually more dependent on his/her employment than the extent to which the employer may be in dire need to have the employee on its books. This “stronger” position of the employer is due to the current job market situation, where the employer has the advantage of being able to more easily replacing employees, as demand exceeds supply.

From the employee’s point of view, unless he/she possesses a rare skill, there usually are not an abundance of employers waiting in line to offer the employee a position, when he/she lost his/her job.

With the passage of time, an employee acquires “a right” to his/her job or at least to his/her employment. As a rule of thumb, this normally happens after successful completion of any probationary period and/or performing relatively well in the position for 12 consecutive months. Then it becomes more onerous for the employer to terminate employment, and in terms of our labour law requirements, it is expected of the employer to do whatever is reasonable to preserve employment.

Tongue in cheek, this brings to mind the analogy with dentistry: In the past dentists were quite prepared to extract a patient’s troublesome teeth, while nowadays, dentists are much more inclined and determined to save teeth wherever possible.

J J (Koos) van der Merwe, Chartered HR Professional registered with the SABPP – May 2021

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