In the recent case of Mwelase & Others v Enforce Security Group (Case no. D358/12, 31 July 2015), the Labour Court was faced with a review application brought by 47 former employees who believed that the termination of their contracts of employment by their former employer, Enforce Security Group (“Enforce”), amounted to an unfair dismissal.

The employees were employed by Enforce, a security services provider, in terms of a written contract of employment. The terms of those contracts of employment provided for, inter alia, the automatic termination of their employment in circumstances where the contractual arrangement between Enforce and its client were terminated either through expiry of the commercial agreement or by the client, for whatever reason. The relevant clause also recorded specifically that such automatic terminations would not constitute retrenchments but rather the ‘completion of [the] contract’.

In executing its contractual obligation to provide security services to one of its clients, namely the Boardwalk Shopping Centre, Enforce placed the employees at the shopping centre as security guards. On or about 30 September 2011 the shopping centre gave notice of the cancellation of the commercial agreement with effect from 1 October 2011. On 4 October 2011, Enforce advised the 47 employees in writing that the shopping centre had cancelled the agreement and that, in accordance with their contracts of employment, their employment would terminate on 30 October 2011.

The employees then referred a dispute to the CCMA where the Commissioner found that the employees had been employed on indefinite contracts of employment and that those could be terminated by the employer by giving reasonable notice, such as that provided for in the contract of employment. The Commissioner also found that the cancellation of the commercial agreement between the shopping centre and Enforce resulted in the automatic termination of the employees’ contracts and accordingly the employees were not entitled to any form of compensation.

The Labour Court, on review, found that the central issue to be determined was whether the automatic termination clauses were in conflict with the provisions of the Labour Relations Act (“the LRA”). It found, with reference to the case of South African Post Office v Mampeule (2009) 30 ILJ 664 (LC), that automatic termination clauses were impermissible in terms of the LRA and, possibly, the Constitutional right to fair labour practices. The Court also held that such clauses were contrary to public policy. The Court noted that the South African Post Office judgment had been confirmed by the Labour Appeal Court as correct.

To that extent, the Court found that the automatic termination clauses were not valid and accordingly the Court found that the employees had been dismissed and that their dismissal was both substantially and procedurally unfair. The Court considered an appropriate remedy and awarded each employee six months’ compensation.

Employers should review their contracts of employment on a regular basis to ensure that they comply with the LRA and other statutes. The field of employment law has evolved dramatically over the last decade and several other statutes now have a bearing on clauses which usually form part of employment contracts. In particular, recent amendments to the LRA have regulated the use of fixed-term contracts and have imposed certain additional requirements on employers. Employers should therefore obtain legal advice on this issue, as a failure to do so may prove costly in the long run.

Written by Neil Coetzer, Senior Associate, Employment Law, Benefits & Industrial Relations, Cowan-Harper Attorneys