Labour Law

Common Law Contract of

Employment
Chapter 2
Introduction

 Contract of employment a sub-species of the common

law contract of lease.
 Roman Law distinguishes between 3 types of lease
agreements:
– Locatio conductio rei;
– Locatio conductio operarum;
– Locatio conductio operis.
 Locatio conductio operarum is the foundation of the
‘modern’ employment contract
 Rendering of labour or services by the employee to his
employer for remuneration, while the employee subjects
himself to the supervision and control of the employer.
Nature of locatio conductio operarum

 Definitionof Locatio conductio operarum: “A

contract of employment is a reciprocal contract
in terms of which an employee places his
services at the disposal of another person or
organisation, as employer, at a determined or
determinable remuneration in such a way that
the employer is clothed with authority over the
employee and exercise supervision regarding
the rendering of the employee’s services”.
Nature of locatio conductio operarum

Definition of locatio conductio operis: “ Contract

of letting and hiring of work is a reciprocal
contract between an employer and an
independent contractor in terms of which the
latter undertakes to build, manufacture,
repair or alter a corporeal thing within a
certain period and the employer underakes
to pay the contractor a reward in return
therefor.”
Nature of locatio conductio operarum

 Contract of mandate: “ The person who is

rendering the services is not subjecting himself
to the authority of the other person and he is
performing professional services, whereas the
ordinary employee normally performs tasks of a
more general nature”.
 Def: “ A contract in terms of which the
mandatory undertakes to perform a mandate for
the mandator”.
 Services rendered by an attorney, advocate,
auditor or doctor.
Nature of locatio conductio operarum

 Control test – an important feature of the ordinary

contract of employment.
 Employee subject to the authority and supervision of the
employer.
 Distinction between employer and independent
contractor is that the employer has some degree of
control over employee.
 Test is inadequate.
Nature of locatio conductio operarum

 ‘dominant impression’ or mixed test.

 Following factors indicate existence of
an employment relationship:
– Render services personally;
– Keep fixed hours, paid a regular wage;
– Subject to employer’s disciplinary code;
– Entitled to benefits (pension fund, medical aid); and
– Subject to a degree of control by the employer.
 These factors not conclusive on there own but
collectively they assist in determining who is an
employee.
Nature of locatio conductio
operarum

 Leon-Cachet v De Jager:
– Employee did not receive salary.
– Paid only for specific task done.
– Therefore independent contractor
 Borchards v Pearce & Sheward t/a Lubrite Distributors:
– Offered position as independent agent to promote products.
– Required to produce specific result.
– Court considered following factors:
 Earned commission only;
 Remunerated only when produced result;
 Not registered as an employee with the Department of Labour;
 No deduction for tax perposes;
 Control was minimal .
– Therefore independent contractor.
Nature of locatio conductio operarum

 Even if person is described as independent contractor in contract,

true nature of relationship still needs to be determined.
 BCEA s 83A & LRA s 200A introduced a rebuttable presumption of
who and employee is:
• subject to the control or direction of another person;
• Hours of work are subject to control or direction of another person;
• Person part of organisation;
• Person has worked for an average of at least 40 hours per month over
last 3 months;
• Economically dependent on the other person;
• Provided with tools of trade or work equipment by other person; or
• The person only works for or renders services to one person.
 Above does apply to person who earns less than the
‘ceiling amount’.
Nature of locatio conductio
operarum

 Codeof Good Practice: Who is an

Employee?
– Control test;
– Dominant impression test;
– Section 83A presumption &
– Case law
Nature of locatio conductio
operarum

 Summary:
– The definition of “employee” in statute;
– The dominant impression test;
– The Code of Good Practice; and
– Section 83A of the BCEA (earns below threshold)
Nature of locatio conductio
operarum

 Valid contract of employment

– Lawfulness a requirement
 This came under scrutiny because of
– Constitutional prerequisites,
– Definition of ‘employee’ in LRA &
– Concept of fairness
Nature of locatio conductio
operarum

 Kylie v Van Zyl t/a Brigittes

 Can a sex worker (prostitute) be a
employee?
 Kylie v CCMA & Others
– LC
– LAC
 Discovery Health Ltd v CCMA & Others
– Illegal immigrants
Conclusion of the
contract

 Must comply with basic requirements for valid

contract – general principles of the Law of Contract.
 Generally contract does not need to be in writing.
 An employment contract may be concluded verbally
in writing or concluded tacitly.
 Custom and practice can give rise to tacit terms in
the contract.
 Contract concluded electronically by SMS or e-mail a
valid contract?
Essentialia of the employment contract

 Specified work:
• Agree on the work to be done.
• Employee obliged to do the agreed work and any
unspecified tasks related to main work.
• May not be unlawful or beyond area of expertise of
employee.
• If employee is required to perform tasks which constitute
a reduction in status, he is entitled to resile from contract.
• Smith v Cycle and Motor Trade
• Groenewald v Cradock Munisipaliteit en ‘n Ander
Essentialia of the employment contract

 Remuneration:
– Remuneration may be payable in cash and/or in
kind ( in natura).
– In kind means providing food, clothing or
accommodation as part of remuneration.
– Remuneration paid in cash needs to be
reasonably ascertainable.
– May agree on payment of remuneration to be
done daily, weekly or monthly
– Common law does not prescribe minimum wages.
Conditions of employment

 Vacation leave:
– Vacation leave in terms of common law is a
privilege.
– Employee therefore not entitled to paid vacation
leave.
– Parties may agree to vacation leave in the
contract of employment.
– This leave will then be taken after completion of
a certain prescribed period.
Conditions of employment

 Sick leave:
– Employee only paid for the period actually worked
Duties of employer

 Accept the employee into his service;

 Provide the employee with work;
 Pay the agreed remuneration;
 To pay a reasonable remuneration;
 To provide save working conditions; and
 Comply with statutory conditions.
Employees remedies

 Cancellation of contract;
 Claiming specific performance;
 Claiming damages;
 Refusal to work; and
 Statutory remedies.
Employee’s duties

 To make his personal services available;

 To ‘warrant’ his competence and reasonable
efficiency;
 To obey the employer;
 To be subordinate to the employer;
 To maintain good faith;
 To exercise reasonable care when using the
employer’s property and
 To refrain from misconduct
Employer’s remedies

 Summary termination (cancellation);

 Specific performance;
 Damages; and
 Statutory remedies
Termination of the contract
 By notice;
 By effluxion of time;
 By agreement;
 By the death of the parties;
 By the insolvency of the parties;
 By the illness of the employee;
 By the impossibility of performance;
 By cancellation;
 Redundancy of the post and
 Completing a specific task.
The employer’s delictual liability

 Also known as vicarious liability.

 Following requirements must be proved:
– There must be an employer/employee
relationship and
– The delict must have been committed by the
employee in the course of the performance of his
duties, that is, ‘in the scope of employment’.
The employer’s delictual liability:
Employer/ Employee relationship

 Existence of the contract of employment

must be proved.
 Person who committed the delict must be
‘employee’
The employer’s delictual liability:
‘scope of employment’

 While obeying the orders of his employer.

 Whether during or after working hours.
 Employee committed an illegal act.
 Employee performed an act which was prohibited by
the employer.
 Employee promoting partially the interests of the
employer, partially his own interests.
 Employee totally abandoned his work in order to
promote his own interests.
The employer’s delictual liability:
The employer’s liability for the delicts of
and independent contractor

 Employer not liable unless:

– Employer gave incomplete instructions;
– Employer gave instructions to do something the
employer himself was not authorised to do;
– Employer gave an unlawful instruction or ratified
the unlawful act;
– Employer instructed the contractor to perform acts
which are potentially dangerous and employer
neglected to take precautionary steps.
Restraint of trade

 An employee is prevented from starting his own

business in competition with his employer for
specific period in specific geographical area.
 Restrict the employee to conduct commercial
activities.
 According to common law it is against public police
therefore unlawful and void.
 Courts confirmed that reasonable restraint of trade
clause not unlawful.
Restraint of trade

 Factors which will be considered to determine

whether restraint of trade is reasonable:
– The are and period of the restraint;
– Whether a restraint agreement has been concluded to
genuinely protect the employer’s interests;
– The nature of the business; and
– Whether employee has been prevented from utilising his
own skills expertise and experience
Employer and third parties

 Employer will be bound to a contract if his

agent or representative acts on his behalf.
 Contract of employment may provide that
employee can act as employers
representative or agent.
 Doctrine of estoppel.