When does an employment relationship come into existence?

Questions are frequently raised regarding the employment relationship, specifically ‘when the employment relationship comes into existence.

Based on the recent matter of Tsoaeli v Workerslife Management Services (Pty) Ltd (2020) 41 ILJ 2939 (CCMA), it is from the moment the offer of employment is made.

In this case, the employee had been appointed as COO by the company’s CEO. The CEO, however, resigned before the employee’s start date, and the employee had been denied entry into the premises when he presented himself for work. He referred an unfair dismissal dispute to the CCMA, where the company challenged the CEO’s authority to employ the employee. 

The commissioner found that s20(7) and (8) of the Companies Act 71 of 2008 expressly provided that an outsider dealing with a company was entitled to presume that the company, in making any decision in the exercise of its powers, had complied with all formal and procedural requirements in terms of Act, its memorandum of incorporation and any rules of the company.

The commissioner found further that the employee had acted in good faith when accepting employment and had no reason to doubt the authority of the CEO. The Commission had proved the employment relationship, and the employee was awarded compensation for his unfair dismissal.

Similarly, in Wyeth SA (Pty) Ltd v Manqele and Others (JA 50/03) [2005] ZALAC 1 (23 March 2005), the Court upheld the Commissioner’s finding that Manqele was in fact, an employee of the company despite never having performed any work for the company.  They recorded that Manqele had received and signed an employment contract on 15 March 2000. Still, the offer was terminated before the start date of 1 April 2000 because “the parties had been unable to reach consensus…” on the matter relating to the employee’s company vehicle.

The Court in Wyeth SA found that in such matters, two central questions need to be considered when making such a determination, namely:

  1. Whether or not the contract of employment was concluded between the appellant and Manqele when it was cancelled by the former before the date of commencement; and
  2. Whether the provisions of the LRA are available to a person whose contract of employment is terminated prior to the commencement of employment and specifically whether the definition of “employee” includes persons in the position of Manqele.

In the LAC’s consideration of these two pertinent questions, it found that an employment agreement had indeed been concluded and further that section 213 of the LRA referring to the definition of employee, is indeed applicable to persons in Mr. Manqele’s situation and therefore the LAC found that Mr. Manqele was indeed unfairly dismissed.

To safeguard your company against any unfair dismissal claims related to this, make sure the following procedures are in place:

  1. Implement a hiring policy that limits the risk by providing strict guidelines for any vacancy that may arise and stipulations regarding the powers and limitations of those employees conducting interviews.  
  2. Ensure all due diligence in the hiring process is done before a job offer is extended to a person. This includes criminal checks, qualification verifications and references.  While there are other measures to take if something undesirable emerges later (such as disciplinary charges for misrepresentation), it would be far easier to avoid the situation entirely and ensure that all information provided is accurate before the person is an employee of the company.  
  3. Sign the employment contract on the same day the offer of employment is made.  This will ensure that both parties are sufficiently covered in a dispute. Your contracts should also include a clause relating to a declaration that all information provided to the company is true and accurate so that the company may be protected in cases of misrepresentation.

Contact us at 0861 737 263 should you have any queries regarding the existence of an employment relationship or for assistance and guidance in drafting an effective hiring policy.