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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This month's subscriber newsletter contains an article on When does conduct become 'gross' in the context of negligence, dishonesty or other forms of misconduct. We also look at three new cases: the first lrevisits the issue of when an employer is bound by the representations made by its employee. The second deals with terminating a fixed-term contract before the term is completed. The third is an important Constitutional Court decision delivered on 13 June about the liability of a trade union for damages caused by its members during protests/ gatherings.

This public newsletter is a free edited version of the subscriber newsletter.


When is an employer bound by contracts entered into by an employee?

A superintendent in a security services department of a municipality signed an agreement, purportedly on behalf of the municipality, to rent a photocopying machine at a monthly rental of R12 009.90 over a period of 60 months. Two further rental agreements were signed by the superintendent, purportedly on behalf of the municipality, to rent radio phones and radio stations respectively, at a rental of R77 520 per month for each over a period of 60 months.

A resolution - which purportedly authorised the superintendent to conclude the rental agreements on behalf of the municipality - was signed by the Head Manager: Services on an official letterhead of the municipality. This Manager had no authority or permission to sign this resolution.

The equipment was delivered to the municipality's security services section, but then the municipality's Strategic Executive: Corporate Services, wrote a letter to the supplier advising that the municipality was unaware of the three agreements, that it had at no stage authorised the relevant transactions and that they were accordingly null and void. He also demanded repayment of three payments made so far.

The supplier subsequently issued summons against the municipality and the supervisor. The municipality denied liability and specifically denied that the superintendent was authorised by it to sign the rental agreements. The counter-argument was that the municipality had represented that the superintendent had authority and that it was therefore estopped from denying his authority.

Long then received a notice advising him that his current position had become redundant and that his services would be terminated because of the Company's operational requirements.

The only issue to be decided by the SCA in Northern Metropolitan Local Council v Company Unique Finance (Pty) Ltd & others SCA (Case 36/11 Judgment 21 May 2012) was whether the municipality had created the impression that the superintendent was authorised to conclude the agreements on its behalf, thus clothing him with 'ostensible authority'.

This case turned on a complicated set of facts. But what is important is that the court held that in order to hold the employer liable on the basis of ostensible authority, the suppliers had to prove the following:
  1. a representation by words or conduct;

  2. made by the employer, and not merely by the supervisor or manager that they had authority to act as they did;

  3. a representation in a form such that the employer should reasonably have expected that outsiders would act on the strength of it;

  4. reliance by the suppliers on the representation;

  5. the reasonableness of such reliance;

  6. consequent prejudice to the suppliers.

The court placed emphasis in this case on the fact that the supervisor and manager were lowly ranked officials in an elaborate administrative structure, where authority below the full Council was exercised in terms of delegation. It is true that they were given offices, but these were not in the main building - they were in a smaller side-building. There was no evidence that they were provided with secretaries, nor with letterheads or stamps. But the fact that the two officials were given offices and might even have had letterheads and stamps, does not mean they were clothed with authority to bind the municipality. The court said that what matters is their seniority in the overall structure of the employer and what ordinarily goes with the senior positions they would have held. The court concluded that the supplier's officials dealt very casually and superficially with the question of the supervisor's authority, and that their acceptance of the resolution was unreasonable.

This case can be contrasted with Solidarity and Others v Eskom Holdings Ltd (2012) 33 ILJ 464 (LC) - discussed in Worklaw's April 2012 newsletter, where the seniority of the employee did result in a finding that the employer was bound by his representations.

Terminating a fixed term contract before the completion of the project

The employees were employed as painters on fixed-term contracts which provided that the contracts would be for a period of 24 weeks, ending on 12 December 2008, alternatively 'until the completion of the construction' on a particular site.

For financial reasons the employer decided to put the construction project on hold and the employees were notified that, as operations had ceased at the site, the employee's contracts would end on 17 October 2008.

The employees in Thabethe & others v Lamprecht Properties CC (2012) 33 ILJ 986 (LC)) claimed that they had been unfairly retrenched, as the employer had failed to consult with them before their contracts were terminated. The employer relied on the contracts of employment, which stipulated that the contracts would 'automatically terminate' on completion of construction and would not be construed as a retrenchment, to support its contention that the contracts had terminated in terms of their provisions.

The court found that, on an ordinary interpretation of the relevant clause, the contract did not support the employer's version that the contract terminated automatically when the employer decided not to complete the painting work. The employer could not simply decide not to continue with the work and thereby bring the contract to an end. The termination of the employees' services was consequently a dismissal and not a termination by agreement. The court held that it was clearly a dismissal for operational reasons, and it was common cause that no consultation procedures were followed.

Although the employer had a genuine operational reason for ending the employees' employment, that did not relieve it of the duty to attempt to mitigate the consequences nor did it relieve it of its duty to consult. The court found that the employees had been retrenched and their retrenchment was procedurally unfair. Taking into account the limited scope of the employment relationship, the court believed that an award of six weeks' remuneration was appropriate.

This case follows previous cases which have held that, in the case of a fixed-term contract, each party is entitled to expect that the other has carefully looked into the future and has satisfied itself that it can meet its obligations for the entire term in the absence of any material breach. Accordingly, no party is entitled later to seek to escape its obligations in terms of the contract because its assessment of the future had been erroneous or it had overlooked certain things. In support of this, see Buthelezi v Municipal Demarcation Board (2004) 25 ILJ 2317 (LAC) discussed in Worklaw's April 2011 newsletter.

Trade union liability for damages caused during union gatherings

On 13 June 2012, the Constitutional Court handed down judgment about the constitutionality of a law which makes organisers of gatherings liable for damages caused by the gathering unless they took all reasonable steps to avoid the damage and they did not reasonably foresee that damage. The Supreme Court of Appeal had previously upheld a decision of the Western Cape High Court saying that the law was valid, and this was referred on appeal to the Constitutional Court.

The South African Transport and Allied Workers Union (SATAWU) had organised a gathering of thousands of people through the City of Cape Town to register employment-related concerns. Some 50 people had lost their lives in the course of SATAWU's protracted strike action before the gathering. During the gathering, much property was damaged. Eight parties (various individuals, including street vendors, shop owners and motor vehicle owners) whose property had been damaged, instituted damages claims in the Western Cape High Court against SATAWU. They alleged that their property was damaged during the march organised by the Union.

In response to the damages claims, SATAWU challenged the constitutional validity of the Regulation of Gatherings Act that imposed liability on organisers. The Union contended that the defence allowed by the law is non-existent and unjustifiably limits the right to freedom of assembly in the Constitution.

The Regulation of Gatherings Act allows a claim for what is referred to as "riot damage" against an organisation on whose behalf or under whose auspices the gathering was held. An organisation would not be liable if it proved that it did not commit or connive at the conduct causing the damage, the conduct in question does not fall within the objectives of the gathering or demonstration concerned, was not reasonably foreseeable, and that the organiser took all reasonable steps within its power to prevent the conduct in question.

SATAWU contended in the High Court that the requirement that the conduct was not reasonably foreseeable by it was unconstitutional because it infringed the constitutional right to freedom of assembly and fair labour practice. The first eight respondents, together with the Minister of Safety and Security, the ninth respondent, contended that the provisions were constitutional. The High Court held that the requirement was not inconsistent with the Constitution and the Supreme Court of Appeal confirmed this order.

In a majority judgment in SATAWU v Garvas (case number CCT112-11 dated 13 June 2012), Mogoeng CJ held that the law aims to afford victims effective recourse where a gathering becomes destructive and results in injury, loss of property or life. The majority held that the defence provided for by the law is viable and that the limitation on the right to freedom of assembly in section 17 of the Constitution is reasonable and justifiable, because it serves an important purpose and reasonably balances the conflicting rights of organizers, potential participants and often vulnerable and helpless victims of a gathering or demonstration which degenerates into violence.

Mogoeng CJ emphasised that the 'reasonable steps' taken on the one hand and 'reasonable foreseeability' on the other hand, were inter-related. Organisers are obliged at all times to take reasonable steps to prevent all reasonably foreseeable conduct that causes damage and the reasonable steps must be of the kind that render the conduct causing damage unforeseeable. For these reasons, the Constitutional Court dismissed SATAWU's appeal.


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Bruce Robertson
June 2012
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