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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This newsletter contains an article on 'When is a restraint of trade agreement unreasonable?', and discusses two new LAC judgments on this topic. We also discuss three other new LAC judgments, which include two quite controversial decisions: The first case rules on when a political party will be held responsible for the actions of one of its officials. The second case revises the accepted law on agency shop agreements. The third case considers a claim for constructive dismissal based on psychiatric ill health.

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When is a political party responsible for the acts of an official?

'Ostensible authority' describes an agent's power to act on behalf of a principal. In Economic Freedom Fighters v Brightstone Trading 3 CC t/a Gordon Road Spar and Others - (JA129/2021) [2023] ZALAC 21 (17 August 2023) Spar claimed that an EFF branch official, in threatening to close the store over a demand to reinstate an employee, had ostensible authority to act on behalf of the EFF. The Labour Court granted Spar an interdict restraining the EFF from engaging in unlawful action which disrupted Spar's business operations, plus a costs order against the EFF.

On appeal the Labour Appeal Court disagreed and overturned the Labour Court interdict and costs order. The LAC said, based on the facts of this case, that the key requirements for ostensible authority had not been met. The LAC found that the EFF was not liable for the conduct of its branch official.

The LAC judgment sets out the key principles that have to be established to hold a principal liable for the actions of its agent, on the basis of ostensible authority.

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When is an agency shop fee unfair?

Section 25 of the LRA allows a majority union and an employer to agree an agency shop agreement that is enforceable against employees who are not members of that union. In Association of Mineworkers and Construction Union v UASA (Formerly named United Association of South Africa) and Others (DA13/2022) [2023] ZALAC 16 (17 August 2023) the Labour Court enforced an agency shop agreement against a minority union that was party to the bargaining council in question.

The Labour Court judgment was overturned on appeal by the Labour Appeal Court. The LAC said that an agency fee in terms of s 25 is paid because the minority union's members receive a service from the majority union(s). But when no service is rendered or it is rendered by the minority union itself, there is no justification for the majority union to receive agency fees from the minority union's members.

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Constructive dismissal based on psychiatric ill health

In Sanlam Life Insurance Limited v Mogomatsi and Others (CA12/2022) [2023] ZALAC 15 (17 August 2023) the employee claimed he suffered psychiatric ill health and that the employer's failure to consider an incapacity/ill health process rather than a disciplinary process in the run up to his resignation led to the employment relationship becoming intolerable. On this basis he claimed constructive dismissal. The employer said it was unaware of his psychiatric ill health at the time of his resignation.

The Labour Court found that he had been constructively dismissed and awarded him four month's salary as compensation. This judgment was taken on appeal to the Labour Appeal Court. The LAC overturned the LC decision, saying that for claims of constructive dismissal based on an employee's psychiatric ill health, the employer must have been aware of the employee's ill health.

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ARTICLE: : When is a restraint of trade agreement unreasonable?

by Prof Alan Rycroft

A restraint of trade agreement, usually part of a contract of employment, is an undertaking by the employee not to compete with the employer after leaving the job. If an ex-employee spreads trade secrets, client lists, business methods, and so on, a employer's profitability and reputation can be threatened.

Because restraint of trade agreements usually limit where an ex-employee can work and place a time limit for not working in the same industry as the employer, two competing principles have to be reconciled. The first principle is that parties should comply with their contractual obligations (referred to by the Latin maxim 'pacta servanda sunt' - agreements must be complied with). The second principle is contained in Section 22 of the Constitution, which guarantees that every citizen has the right to choose his or her trade or occupation or profession freely.

In his article Prof Rycroft discusses two recent Labour Appeal Court decisions - Beedle v Slo-Jo Innovations Hub (Pty) Ltd (JA21/23) [2023] ZALAC 24 (17 August 2023) and Sadan and Another v Workforce Staffing (Pty) Ltd (JA38/23; JA39/23) [2023] ZALAC 23 (17 August 2023) - that wrestle with reconciling these two competing principles.

Read more (note - only available to Worklaw subscribers)

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Bruce Robertson
October 2023
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