Are automatic termination clauses enforceable?

Due to public interest considerations, the Constitutional right to fair labour practices is entrenched in the framework of the Labour Relations Act, No 66 of 1995 (Act). The court in Mwelase and Others v Enforce Security Group and Others [2015] LC 46 dealt with whether it is permissible to contract out of the right not to be unfairly dismissed.

The employer was a private security service provider who entered into contracts with different clients and employed security officers on a temporary basis. A clause in the contracts of employment required each employee to agree that the termination of a contract between the employer and the client would automatically terminate the employee’s employment contract and most importantly, such termination would not be construed as a retrenchment but as a completion of contact.

When the client terminated the contract with the employer, the above clause was enforced by the employer but this was challenged by employee’s trade union which relied on s189 of the Act. It was the trade union’s view that the employer was under an obligation to retrench the employees and the employees were entitled to severance pay.

The court found that the above clause has the effect of denying employees the right to challenge the fairness of the employer’s conduct and enforce their rights in terms of s189 which, among other things, includes consultation and severance pay.

The court discussed the case of Mahlamu v CCMA & Others (2011) 4 BLLR 381 (LC) where the court had to decide a similar question. The court held that the test is whether the subject of the right was intended to be the sole beneficiary. It found that the public interest rests with preventing exploitation and the waiver of their rights and in this regard individuals cannot waive the right not to be unfairly dismissed. Further, in South African Post Office v Mampeule [2009] 8 BLLR 792 (LC) the court decided the validity of automatic termination clauses. It held that such provisions are impermissible in their truncation of the unfair dismissal protections afforded by the Act and are contrary to public policy.

The court relied on the above cases and held that even though an employee might be deemed to have waived their rights conferred by the Act and the Constitution, such waiver is not enforceable as the Act not only caters for individual interest but also public interest. Accordingly, the court found the employees’ dismissal to be both procedurally and substantively unfair, and ordered compensation and severance pay.

Although the principle is clear that, when abused, automatic termination clauses are unenforceable in our law, it must be borne in mind that the facts of this case are unique in that the employer was a temporary employment service provider and the employees were lay persons. What one notes from this case is that employers should consider Chapter 8 of the Act (Unfair Dismissal) when drafting employment contracts especially termination clauses.