In our recent articles, the Consolidated Employers Organisation has focused on the legislative framework that constitutes Labour law in South Africa. The framework of legislation is in place, amongst others, to protect the rights of both employees and employers by providing a framework of basic Labour Laws that must be adhered to, such as the right not to be unfairly dismissed, the right to go on strike and the right to have a workplace that is free from all forms of discrimination.

Parties may choose to contract out of the legislative framework in terms of collective agreements that apply to unions, employees and employers, and individual contracts between employees and employers. This article focuses on the latter.

Whether the employer or employees can contract out of the legislative framework is a difficult question. Context and public policy surrounding the case will continuously be determining factors. The best answer to this question is found in the decisions of cases that have come before the courts. The decisions are not always consistent and point to the reality that each case must be determined on its own facts.

In the Constitutional Court matter of Gbenga-Oluwatoye v Reckitt Benckiser SA (Pty) Ltd & Another (2016) 37 ILJ 2723 (CC), the employee agreed to part ways by entering into a mutual separation agreement with the employer after a serious misrepresentation made by the employee came to light. The terms of the mutual separation agreement were that the employee would not have recourse to the CCMA or the Labour Courts. The employee challenged his termination, claiming that the mutual separation agreement violated his constitutional rights to access the courts and judicial redress. The court established that the purpose of the clause in the mutual separation agreement excluding recourse to the courts was to end the dispute between the employer and the employee.

Furthermore, and importantly, the court considered the relative positions between the employer and employee and found that the employee was engaged in a senior managerial position. The court also considered the bargaining power between the parties and the employer’s and employee’s knowledge of the mutual separation agreement. The court found that the employee entered into the agreement to escape the consequences of being dismissed for a severe misrepresentation and that public policy has an interest in enforcing agreements of this nature. The court found that contracting out of the legislative framework was permissible in this instance.

In the case of Vermooten v Department of Public Enterprises and Others (2017) 38 ILJ 607 (LAC), the parties entered into a consultancy agreement to structure the working relationship. The consultant would be given a twelve-month contract in terms of the consultancy agreement. The consultant ultimately approached the courts for relief when the contract was not renewed.

The Department of Public Enterprises claimed that the consultant was not an employee as the parties structured a consultancy agreement that was unique and catered for their relationship. The Labour Appeal Court carefully considered the agreement, and after looking at the comparative bargaining position between the parties as well as public policy considerations, they found that the consultant was of equal bargaining position with the Department of Public Enterprises and upheld the consultancy agreement.

In effect, the Department of Public Enterprises and the consultant bypassed the Basic Conditions of Employment Act and the Labour Relations Act as amended when structuring their relationship, and this was found to be permissible.

This article explored circumstances where parties choose to ‘contract out’ of the legislative framework. Although the cases highlighted above are insightful as to when it may be permissible to ‘contract out’ of the legislative framework, a cautionary note must be added that when choosing to structure an agreement outside the parameters of the legislation, it must be approached with the utmost caution. The courts, CCMA and Bargaining Councils, will examine the relative bargaining positions between employers and employees before approving such agreements.   Employers are urged to contact Consolidated Employers Organisation before entering into such agreements.

Article by: Shakti Jainarain
Senior Dispute Resolution Official – Durban