Are suspensive conditions in employment contracts valid?

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In certain circumstances, it is permissible to incorporate suspensive or resolutive conditions into an employment agreement. Where a contract contains a suspensive condition, there is no employment agreement pending the fulfilment of that suspensive condition. Whereas a resolutive condition terminates a valid contract upon the fulfilment of that resolutive condition (in this case the negative outcome of the vetting and screening process) and the contract is regarded as never having come into existence.

In Nogcantsi v Mnquma Local Municipality and Others (2017), the employee argued that the court a quo ought to have distinguished between suspensive and resolutive conditions in employment agreements. The court found that it does not matter whether the condition is suspensive or resolutive, what matters is whether the condition prevents the employee from exercising any right conferred by the Labour Relations Act 66 of 1995 (LRA).

Case background

In this case, the employee was offered a position as a protection officer in terms of a fixed term contract, which contract was subject to the outcome of a positive vetting process. In this regard, the employment agreement contained a resolutive condition which provided that the offer was subject to a vetting process and that the employment agreement would automatically terminate should the employer become aware of any negative information pertaining to the employee.

The South African Police Service (SAPS), as the previous employer, informed the municipality that the employee had pending charges against him. The charges ranged from defeating the ends of justice to gross bodily harm and attempted murder. The municipality's letter of appointment clearly stated that the employment agreement would automatically terminate upon receiving negative results of the vetting process. The municipality wrote a second letter to the employee informing him that his employment had been terminated. In addition, the letter stated that it was regrettable that the employee did not disclose the negative information and that that alone, "displays dishonesty".

Dismissal vs contract termination

The employee sought reinstatement through the Bargaining Council where he contended that his termination was both substantively and procedurally unfair. He alleged that it was substantively unfair because he had disclosed all that was required during the interview and procedurally unfair because he was not given reasons for his dismissal, and it was with immediate effect. The Bargaining Council arbitrator ruled that the employee had not been dismissed, and the automatic termination of the contract was valid. The Labour Court upheld the ruling on review, where the employee contended that the arbitrator had erred by finding that his contract had terminated automatically, without constituting a dismissal, and argued that the termination clause was invalid or void for vagueness.

The employee took the Labour Court's decision on appeal. The LAC held that it was not the act of the municipality which produced a negative vetting result and consequently, caused the resolutive condition to be fulfilled, resulting in the automatic termination of the agreement. The negative result of the vetting came from the SAPS who provided the information to the municipality and it is not the third party (SAPS) who "made" the information negative, it was inherently and objectively negative. Therefore, there was no dismissal since the automatic termination was not caused by any decision or act of the municipality or the SAPS, which had as its objective the termination of the employee's employment agreement.

The LAC held further that it makes no difference whether the condition is suspensive or resolutive. The importance lies in whether the condition prevents the employee from exercising any right conferred by the LRA, as contemplated in section 5(2)(b) read with section 5(4) of the LRA.

Conclusion

Put differently, the enquiry into whether a condition is permissible or not is whether the condition prevents the employee from exercising any rights conferred by the LRA as envisaged above, and not whether the condition is suspensive or resolutive. The LAC stated that conditional employment agreements are a commercial reality and that the LRA is not opposed to such contracts.

Having the LAC's stamp of approval on automatic terminations arising from negative pre-screening should give comfort to employers to use suspensive and resolutive conditions of this nature more freely in their employment agreements.