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Conditional employment is a commercial reality

16 July 2018
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Ideally, employers prefer to make appointments after doing all the necessary background checks. There may be times, however, when a position has to be filled urgently and an offer is made – before those important checks have run their course. The solution may be to include a condition in the employment contract to the effect that the contract will expire automatically if the background checks are negative. This approach held water in a recent Labour Appeal Court judgement.

That said, employers should be aware that the automatic termination of a conditional employment contract would depend on the nature of the unfulfilled condition, and whether or not the employer had an influence on the outcome.

The Labour Appeal Court matter that has clarified conditional appointments was that of Nogcantsi v Mnquma Local Municipality & others (2017) 38 ILJ 595 (LAC).

After applying for a vacancy at the Mnquma Local Municipality, Mr Nogcantsi was appointed as close protection officer to the municipal manager on a four-year fixed-term employment contract with effect from 3 February 2014. In terms of clause 1.1 of the contract, Mr Nogcantsi’s appointment was “subject to a vetting and screening process” and it provided that “should the revealed outcomes become negative [his] contract will be automatically terminated”.

One month into the contract, the Municipality received a letter from the South African Police Services (SAPS), where Mr Nogcantsi was previously employed, informing the Municipality that there were a number of pending charges, including attempted murder, against Mr Nogcantsi. As a result of a departmental case in connection with some of the charges, Mr Nogcantsi had been dismissed from the SAPS on 26 July 2012. None of this information had been disclosed to the Municipality.

The Municipality informed Mr Nogcantsi that the vetting and screening process had revealed negative information and that, consequently, his employment was terminated with immediate effect as contemplated in clause 1.1 of his contract.

Automatic termination came into play

Mr Nogcantsi alleged that this constituted a dismissal and challenged its fairness at the South African Local Government Bargaining Council. He argued that his dismissal was both substantively and procedurally unfair because he had disclosed all that he was obliged to during the interviews, and yet was dismissed with immediate effect. The arbitrator found that Mr Nogcantsi had not been dismissed as his employment had terminated automatically by operation of law as a result of the negative outcome of the vetting and screening process.

Unhappy with this outcome, Mr Nogcantsi took the award on review. He claimed, among other things, that the arbitrator had incorrectly found that parties can contract out of their right to a fair dismissal.  The Labour Court disagreed. It recognised the proposition, established in the case of SA Post Office v Mampuele and relying on sections 5(2)(b) and 5(4) of the LRA, that parties to an employment contract cannot contract out of the protection against unfair dismissal. However, it distinguished the circumstances in Mampuele, as well as those in Mahlamu v CCMA and Others, from the present facts.

In Mampuele, the contract contained an automatic termination clause in the event that the employee was removed, for any reason, as a director of the company. The employee’s removal was influenced by his employer; and in Mahlamu, the automatic termination clause applied when the client of a labour broker no longer required the labour broker-employee’s services for any reason. The important difference in the present case was that the vetting process was not in the hands or control of the employer – the letter listing the pending charges against Mr Nogcantsi and the underlying reason for the termination originated from the SAPS.

The court likened this with the case where a clause in an employment contract provides that a person engaged as an airline pilot must produce proof of a pilot’s licence, or where a chauffeur is required to submit proof of a driver’s licence, and it they do not, the contract will automatically come to an end. In addition, Mr Nogcantsi had agreed to the terms and conditions of his contract and understood that should he not be positively vetted, his employment contract would terminate.

Information – not the employer – was the catalyst

On appeal, the Labour Appeal Court endorsed the Labour Court’s approach. It held that there was indeed no dismissal of Mr Nogcantsi, since the automatic termination was not caused by any decision or act of the Municipality. It was the information itself that was inherently and objectively negative that caused the condition to be fulfilled and that brought the employment relationship to an end. The Labour Appeal Court held further that a conditional contract of employment is a commercial reality and it made no difference whether the condition was suspensive or resolutive.

Employers should be aware that the automatic termination of an employment contract would depend on the nature of the condition that has not been fulfilled. If the condition is capable of being determined or influenced by the employer, then the employer should tread carefully. When it comes to criminal checks and qualification checks, for example, or the requirement to obtain and maintain a valid work permit or driver’s licence, the non-fulfilment of the condition may support the automatic termination of the contract. Influence on the part of the employer would not be a factor. However, in the case of reference checking, which is by its very nature fairly subjective, the same would arguably not apply, and the employer would probably need to comply with the requirements of a fair dismissal in bringing the contract to an end in such circumstances.

Please contact your usual employment law contact at Bowmans if you require further information or advice in this regard.