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Worklaw subscribers receive a monthly newsletter containing commentary on the latest labour law cases and trends. This month’s newsletter looks at the potential of wage arbitration. We also look at three new decisions, all dealing with the issue of when does an applicant for a job become an employee, giving rise to the potential of dismissal. This public newsletter is a free edited version of the subscriber newsletter, and does not contain all the information contained in the subscriber newsletter.
LATEST CASE REPORTS
When does an employee become an employee?
Three recent cases illustrate that this is not as obvious as it first seems. Part of the problem is the way an employee is defined in s 213 of the LRA - "any person...who works for another person or for the State and who receives, or is entitled to receive, any remuneration". This seems to suggest that you become an employee once you start work. But what about the three situations in the cases outlined below? First, where a concluded employment contract is cancelled before the employee starts work; second where a manager, without authority, concludes a contract of employment; and third, where, after the employees start there is no agreement on the terms of employment. In Wyeth SA (Pty) Ltd v Manqele & others  6 BLLR 523 (LAC); (2005) 26 ILJ 749 (LAC) the company terminated the contract on the ground that they had been unable to reach agreement on the condition relating to the motor vehicle. When M reported for duty, he was instructed to leave the premises. He referred a dispute to the CCMA, claiming that he had been unfairly dismissed. The company argued that M had not been dismissed because it had not entered into an employment relationship with him.
As to whether M was an employee at the time the company withdrew from the contract, the Labour Appeal Court held that, as it stands, the statutory definition of "employee" creates confusion. The definition of "employee" is cast in the present tense, thus suggesting that it includes only employees who are currently working for the employer. However, a literal interpretation would be contrary to the letter and spirit of the LRA and the Constitution. The court said the view that employees must actually have commenced employment before falling within the scope of the LRA, is untenable. The court held that the statutory definition of "employee" includes persons who have concluded contracts of employment where the commencement of employment is deferred to a future date.
In Naidoo and Bonitas Medical Fund (2005) 26 ILJ 805 (CCMA) Naidoo had been previously employed by the company but had been retrenched. When she heard that the company was again looking for staff, she sent her CV to the credit control manager who told her she was employed and when she should commence. When she arrived at work another applicant for the job also arrived and both were called in by the general manager and told that both had to be interviewed and the correct procedures followed. N was unsuccessful and then claimed that she had been unfairly dismissed. The employer denied that the credit control manager had the authority to appoint staff and denied that N was an employee and therefore could not have been dismissed.
The CCMA found that the credit control manager had offered N employment which she had accepted. Using the doctrine of vicarious liability, the CCMA held that the employer was liable for the acts of the credit control manager which were committed in the course and scope of his employment. The CCMA also held that a person who had concluded a contract of employment but had not yet commenced work was an employee for the purposes of the LRA, even though the contract was not in writing. As N was an employee, she had been dismissed in a procedurally and substantively unfair manner. She was awarded 3 month’s compensation.
In FCEWU on behalf of Gruza & others and West Side Trading (Pty) Ltd t/a Labour Link (2005) 26 ILJ 794 (CCMA) the employees had been employed by a company which supplied staff to Kerbside Parking (KP), the entity responsible for managing street parking in Cape Town. When this contract terminated the employees were advised to apply for employment with the new contractor, and they were advised by KP that their applications had been accepted. When they started, they were presented with written contracts that differed substantially from those of their previous employment and they refused to sign. When they persisted in this refusal they were locked out and their employment terminated. They alleged unfair dismissal.
The CCMA did not accept that the employees had been employed on a temporary basis pending the signing of the contracts. The employer should have ensured that the contracts were in place prior to agreeing to employ the employees. There was no condition that their employment was conditional on the signing of the contracts. The oral contract was in force and even though there was a dispute on remuneration, it did not mean that employment had not commenced. The employees had therefore been unfairly dismissed and were reinstated.
What are the lessons from these three cases?
Our view is that employers must take every precaution to finalise the offer of employment and to get agreement on terms and conditions before agreeing to employ an applicant. The cases are clear: once an employer agrees to hire an applicant, a contract of employment comes into being and any cancellation of that contract - even before the starting date - will be treated as unfair dismissal. Employers need to caution managerial staff not to make promises of employment without authority and without following the correct appointment procedures.
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