Chapter 2: Contract of Employment
Areas of Focus:
Why the contract of employment continues to be important (despite legislation).
•
• The definition, conclusion and content of a contract of employment.
• The naturalia of an employment contract
◦ Especially the duties on an employee and especially the duty to act in good faith.
• Vicarious liability as one of the consequences of an employment contract.
• Breach and termination of an employment contract and its relationship with unfair
dismissal.
Background:
Origin of Contract of Employment:
•
◦ Roman law times where there was a distinction between the letting and hiring of some
physical object or thing and two other forms of letting or hiring.
• The contract of employment remains the foundation of the relationship between an
employee and their employer.
◦ Links the employer and the employee in an employment relationship.
◦ The existence of an employment relationship is the starting point for the application
for all the rules of labour law
▪ The rules of labour law do not apply where there is no employment relationship.
Importance of Contract of Employment:
If a contract of employment exists, the person who renders a service to the
•
employer in terms of that agreement will be an employee contractually, and for the
purposes of the application of labour law.
◦ The converse is not true, where a lack of an employment contract does not
automatically disqualify one as an employee.
◦ Contractual principles also apply such as the performance of such a contract being
lawful.
◦ Focus may be on the employment relationship less than the contract itself.
◦ The employment of a foreigner without a work permit may lead to dispute
▪ Section 23(1) of the Constitution says that everyone has the right to fair labour
terms.
• It remains an important source of the terms and conditions of employment of any
employee such as their remuneration, leave and other benefits
, ◦ But always remember that minimum standards legislation limits freedom of contract
around terms and conditions of employment
▪ There is Section 23(3) of the LRA which allows for collective agreement to vary the
individual contract of employment.
▪ Collective agreement overrides the individual agreement with the employer.
▪ Nothing prohibiting an employer and employee to negotiate better than the
minimum standards, these terms will be enforced
• In cases where a statutory right coincides with an employee's contractual right, the
employee will usually be entitled to elect to enforce either their statutory right or
the contractual right
◦ Employees get a lot of rights in legislation, but it does not mean legislation takes away
rights in terms of the contract of employment
▪ Same set of facts may give rise to different causes of action.
Potential 5 Mark Question = On the issues regulated in the Basic Conditions of Employment
Act on the slides
-> Approach Chapter 2, paying attention to specific issues and not in isolation.
Case Discussion:
Baloyi v Public Protector & Others 2021
• Facts:
◦ The COO of the Public Protector's office employed on five year fixed term contract,
subject to six months' probation.
◦ After probation, employee was informed that the appointment will not be confirmed.
▪ Employee challenges dismissal not on basis of unfairness in terms of labour
legislation but rather on the basis of unlawfulness in terms of breach of contract.
▪ Temporary employees are also afforded protection in terms of legislation.
▪ High Court declines jurisdiction and says that the matter is essentially a labour law
matter and only the Labour Court has jurisdiction to deal with such a matter.
• Court:
◦ The matter was taken to the Constitutional Court.
▪ Para 33: in the event of the Court's jurisdiction being challenged, the applicant's
pleadings are the determining factor.
• They contain the legal basis of the claim under which the applicant seeks to
invoke the court's competence.
▪ Para 34: Part of the applicant's case is clearly based on breach of contract.
• The contract was allegedly terminated out of time, well after her probation
period ended and in conflict with the terms relating to termination.
▪ Para 38: In the labour context, where more than one potential cause of action
arises asa result of dismissal dispute, a litigant must choose the cause of action
they wish to pursue and prepare her pleadings accordingly.
▪ Para 40: It remains the choice of the applicant.
• As they have multiple options before them, a litigant is free to choose which one
to pursue.
2
, ▪ Para 42: It is important not to conflate the question of whether a court has
jurisdiction to hear a pleaded cause of actions with the prospects of success of
that cause of action.
• These views expressed by the court are irrelevant to court's competence.
▪ Para 45: The mere fat that a dispute is located in the realm of labour and
employment does not exclude the jurisdiction of the High Court.
▪ Para 46: Contractual rights exist independently of the LRA
• Section 23 of the Constitution does not deprive employees of a common law
right to enforce the terms of a fixed-term contract of employment and the LRA
does not confine employees to the remedies of unfair dismissal provided for in
the Act.
▪ Para 47: Matters concerning a contract of employment, irrespective of whether any
basic condition of employment constitutes a term of that contract are expressly
noted in Section 77(3) of the Employment Act
• Falling within the concurrent jurisdiction of the High Court and the Labour
Court.
Old Mutual Ltd & Others v Moyo & Another 2020
• Facts:
◦ CEO of Old Mutual, in terms of his contract of his employment, is paid R35 million a
year.
◦ He is also a director and shareholder of another company owing Old Mutual money.
▪ Company sources funding and Moyo is part of the process to decide what happens
to the money owed.
▪ Company decides to declare a dividend
▪ Moyo gets another R28 million in the process
▪ Old Mutual gives notice for termination, paying for six months pay but asking for
Moyo to leave effectively.
◦ Moyo goes to court alleging a breach of the employment contract.
• Court:
◦ Confirms that an employee is entitled to claim a breach
◦ In order to bring a claim based on breach of contract is to be able to show a right in
the contract that was breached
◦ The law allows for a choice between a specific performance or cancellation of the
contract
◦ One can also claim for damages.
▪ Moyo was employed on a fixed term contract
• Both parties are held responsible for the fixed term
• Entitled to be put in position you would be in if the contract was properly
performed.
▪ Unfair dismissal:
• The primary remedy being reinstatement or reemployment and another being
compensation which is usually calculated in terms of months but this has a
general limit which is twelve months compensation
3
Areas of Focus:
Why the contract of employment continues to be important (despite legislation).
•
• The definition, conclusion and content of a contract of employment.
• The naturalia of an employment contract
◦ Especially the duties on an employee and especially the duty to act in good faith.
• Vicarious liability as one of the consequences of an employment contract.
• Breach and termination of an employment contract and its relationship with unfair
dismissal.
Background:
Origin of Contract of Employment:
•
◦ Roman law times where there was a distinction between the letting and hiring of some
physical object or thing and two other forms of letting or hiring.
• The contract of employment remains the foundation of the relationship between an
employee and their employer.
◦ Links the employer and the employee in an employment relationship.
◦ The existence of an employment relationship is the starting point for the application
for all the rules of labour law
▪ The rules of labour law do not apply where there is no employment relationship.
Importance of Contract of Employment:
If a contract of employment exists, the person who renders a service to the
•
employer in terms of that agreement will be an employee contractually, and for the
purposes of the application of labour law.
◦ The converse is not true, where a lack of an employment contract does not
automatically disqualify one as an employee.
◦ Contractual principles also apply such as the performance of such a contract being
lawful.
◦ Focus may be on the employment relationship less than the contract itself.
◦ The employment of a foreigner without a work permit may lead to dispute
▪ Section 23(1) of the Constitution says that everyone has the right to fair labour
terms.
• It remains an important source of the terms and conditions of employment of any
employee such as their remuneration, leave and other benefits
, ◦ But always remember that minimum standards legislation limits freedom of contract
around terms and conditions of employment
▪ There is Section 23(3) of the LRA which allows for collective agreement to vary the
individual contract of employment.
▪ Collective agreement overrides the individual agreement with the employer.
▪ Nothing prohibiting an employer and employee to negotiate better than the
minimum standards, these terms will be enforced
• In cases where a statutory right coincides with an employee's contractual right, the
employee will usually be entitled to elect to enforce either their statutory right or
the contractual right
◦ Employees get a lot of rights in legislation, but it does not mean legislation takes away
rights in terms of the contract of employment
▪ Same set of facts may give rise to different causes of action.
Potential 5 Mark Question = On the issues regulated in the Basic Conditions of Employment
Act on the slides
-> Approach Chapter 2, paying attention to specific issues and not in isolation.
Case Discussion:
Baloyi v Public Protector & Others 2021
• Facts:
◦ The COO of the Public Protector's office employed on five year fixed term contract,
subject to six months' probation.
◦ After probation, employee was informed that the appointment will not be confirmed.
▪ Employee challenges dismissal not on basis of unfairness in terms of labour
legislation but rather on the basis of unlawfulness in terms of breach of contract.
▪ Temporary employees are also afforded protection in terms of legislation.
▪ High Court declines jurisdiction and says that the matter is essentially a labour law
matter and only the Labour Court has jurisdiction to deal with such a matter.
• Court:
◦ The matter was taken to the Constitutional Court.
▪ Para 33: in the event of the Court's jurisdiction being challenged, the applicant's
pleadings are the determining factor.
• They contain the legal basis of the claim under which the applicant seeks to
invoke the court's competence.
▪ Para 34: Part of the applicant's case is clearly based on breach of contract.
• The contract was allegedly terminated out of time, well after her probation
period ended and in conflict with the terms relating to termination.
▪ Para 38: In the labour context, where more than one potential cause of action
arises asa result of dismissal dispute, a litigant must choose the cause of action
they wish to pursue and prepare her pleadings accordingly.
▪ Para 40: It remains the choice of the applicant.
• As they have multiple options before them, a litigant is free to choose which one
to pursue.
2
, ▪ Para 42: It is important not to conflate the question of whether a court has
jurisdiction to hear a pleaded cause of actions with the prospects of success of
that cause of action.
• These views expressed by the court are irrelevant to court's competence.
▪ Para 45: The mere fat that a dispute is located in the realm of labour and
employment does not exclude the jurisdiction of the High Court.
▪ Para 46: Contractual rights exist independently of the LRA
• Section 23 of the Constitution does not deprive employees of a common law
right to enforce the terms of a fixed-term contract of employment and the LRA
does not confine employees to the remedies of unfair dismissal provided for in
the Act.
▪ Para 47: Matters concerning a contract of employment, irrespective of whether any
basic condition of employment constitutes a term of that contract are expressly
noted in Section 77(3) of the Employment Act
• Falling within the concurrent jurisdiction of the High Court and the Labour
Court.
Old Mutual Ltd & Others v Moyo & Another 2020
• Facts:
◦ CEO of Old Mutual, in terms of his contract of his employment, is paid R35 million a
year.
◦ He is also a director and shareholder of another company owing Old Mutual money.
▪ Company sources funding and Moyo is part of the process to decide what happens
to the money owed.
▪ Company decides to declare a dividend
▪ Moyo gets another R28 million in the process
▪ Old Mutual gives notice for termination, paying for six months pay but asking for
Moyo to leave effectively.
◦ Moyo goes to court alleging a breach of the employment contract.
• Court:
◦ Confirms that an employee is entitled to claim a breach
◦ In order to bring a claim based on breach of contract is to be able to show a right in
the contract that was breached
◦ The law allows for a choice between a specific performance or cancellation of the
contract
◦ One can also claim for damages.
▪ Moyo was employed on a fixed term contract
• Both parties are held responsible for the fixed term
• Entitled to be put in position you would be in if the contract was properly
performed.
▪ Unfair dismissal:
• The primary remedy being reinstatement or reemployment and another being
compensation which is usually calculated in terms of months but this has a
general limit which is twelve months compensation
3
