Employment contracts are essential documents that set the foundation for the working relationship between employers and employees. However, not all contracts are created equal and some may contain clauses that could disadvantage employees or lead to disputes. Here are key red flags to watch out for in your employment contracts.
1. Restraint of Trade Clauses
A restraint of trade clause seeks to prevent employees from working for competitors or starting a similar business within a certain time frame and geographic area after leaving employment. While these clauses are enforceable under South African law, they must be reasonable and justifiable. Courts typically assess factors such as:
- The duration and geographic scope of the restraint.
- The nature of the employer's business and the role of the employee.
- Whether the restraint protects legitimate business interests.
If the clause is too broad or overly restrictive, it may be challenged as unenforceable.
2. Unreasonably Long Notice Periods
Notice periods should align with the requirements of the Basic Conditions of Employment Act (BCEA):
- One week's notice for employment less than six months.
- Two weeks' notice for employment between six months and one year.
- Four weeks' notice for employment longer than one year.
Contracts stipulating excessively long notice periods may create barriers for employees seeking better opportunities. It is reasonable for an employer to impose a longer notice period such as 2 to 3 months. However, this should align with your position within the Company. Always ensure the notice period is reasonable and in line with legal norms.
3. Vague or Flexible Work Location Clauses
Given the rise of remote and hybrid work models, it is crucial for employment contracts to clearly state the primary work location. Beware of vague terms like “any location as required by the employer” which may compel employees to relocate without proper notice or compensation.
Employees should seek clarity on:
- Remote work policies.
- Travel requirements.
- Potential relocation conditions.
4. Unfair Terms and Conditions
Contracts should not contain terms that violate employee rights under South African labour laws. Examples of unfair terms include:
- Excessive working hours without overtime compensation.
- Waivers of statutory rights such as annual leave.
- Requirements to perform unlawful tasks or roles outside the agreed job description.
Ensure that the contract complies with the BCEA, Labour Relations Act (LRA) and Employment Equity Act (EEA).
5. Ambiguous Remuneration and Benefits Clauses
The contract should clearly outline:
- Basic salary and any variable components (e.g. commission or bonuses).
- Payment frequency and method.
- Fringe benefits such as medical aid, retirement contributions and allowances.
Ambiguity regarding these terms can lead to misunderstandings and disputes that could arise later on during your employment.
6. Dispute Resolution Clauses
Some contracts may require disputes to be resolved through private arbitration rather than the Commission for Conciliation, Mediation, and Arbitration (CCMA). While arbitration can be faster, it may also be costly for employees, as the arbitration cost is usually split equally between the Employee and Employer. These dispute resolution clauses should be reserved for high-ranking officials of the Company such as you Executives and other Senior Management and Executive Leadership of the Company. Understand the implications of such clauses before signing.
7. Termination and Dismissal Provisions
Watch out for clauses that allow for immediate termination without due process or those that deviate from fair dismissal procedures as outlined in the LRA. Employees have the right to:
- Procedural and substantive fairness.
- Reasons for dismissal.
- A fair hearing before termination.
Conclusion
Employment contracts are legally binding agreements that significantly impact an employee's rights and obligations. Understanding potential red flags empowers employees to negotiate better terms or seek legal advice before signing. By being vigilant and informed, employees can protect their interests and foster healthier working relationships.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
