Financial Data
Updated 29 Feb 2020

Become a legal eagle

It is important to stay on the right side of the law when running a business – especially when it comes to labour. Ignorance could cost you everything you have. Here’s what you need to know to toe the legal line.

27 April 2012  Share  0 comments  Print

All the answers to your unique business lifestage questions

Many business owners are unaware of the laws that govern conditions of employment in South Africa. This could easily open up your business to employee unhappiness and even legal action.

Protect yourself

The Basic Conditions of Employment Act applies to all employers and workers and regulates employment conditions such as leave, working hours, employment contracts, deductions, payslips, overtime and termination.

If you do not abide by these policies the Department of Labour may fine you or sentence you to prison.

Trouble in paradise?

Labour law is such that many employers feel it is virtually impossible to fire an employee without incurring the wrath of the Commission for Conciliation, Mediation and Arbitration (CCMA). However, this is not necessarily the case.

The Labour Relations Act states that you may dismiss an employee for the following reasons:

  • Misconduct (the employee has done something seriously wrong).
  • Unacceptable performance (the employee does not do the job properly).
  • Incapacity (the employee cannot do the job properly due to illness or disability).
  • Retrenchment (the employer is cutting down on staff).

Whatever the reason, if you dismiss an employee, the law states that it must be fair.

Fairness is decided in two ways:

  1. Substantive fairness weighs up whether the punishment fits the crime. It examines whether the rule that was broken was valid and necessary; whether the employee knew the rule; whether you consistently applied it; and whether there were mitigating factors.
  2. Procedural fairness means that you must follow due process before dismissing an employee. This includes the following:
  • You must warn the employee that his or her work or behaviour is unacceptable, and that he or she will be dismissed if it continues.
  • The employee must understand the charges and be given time to prepare a defence.
  • You must give the employee a chance to present his or her side of the story.
  • The employee is allowed to ask a colleague to represent him/her, and must be given an opportunity to cross-examine any evidence.

An employee can take you to the CCMA if they feel that they have been unfairly dismissed, or to resolve other disputes under the Labour Relations Act.

The CCMA appoints a commissioner who will try to help you reach an agreement through conciliation (mediation). If you and your employee cannot agree, there will be a CCMA hearing (arbitration) or the matter will be referred to the Labour Court.

Make compensation work for you

As a business owner, it is up to you to have workers compensation insurance. This ensures that you are covered for claims from employees who are injured at work.

Lawyers for your insurance company will help you to check that any claim is legitimate and that fair compensation is paid. In some industries it is extremely risky not to have this type of insurance.

Regardless of how careful you are, injuries are almost inevitable. Ensure you are properly protected.

Need to crack the whip?

If you feel you need to discipline an employee, make sure that you follow these guidelines:

  • Provide for a full investigation, which allows the individual to state their case.
  • Remember the employee's right to be accompanied by a colleague.
  • Don't dismiss for a first offence unless it is for gross misconduct.
  • Explain why the disciplinary action is being taken and how the employee can appeal.

Most employers use a mix of "hard" and "soft" disciplinary actions. Hard actions are punitive (such as suspension without pay or the option to resign instead of being dismissed without benefits) and soft are corrective (such as counselling, additional training or other support).

Bear in mind that you do not have the right to make deductions from pay without specific agreement. Often, corrective action is enough and the better you know the employee, the more able you will be to address the problem.

The usual process for the dismissal of an employee is as follows:

  • Issue a verbal warning promptly and specify a time frame for improvement. Even though this is called "verbal" it is important that both you and the employee have a record of what happened and was agreed upon.
  • Issue a first written warning, again with specified actions and time frames.
  • Issue a final written warning.
  • Suspend or dismiss the employee with a notice period as per the employment contract.

For summary or instant dismissals allow one week's notice for employees who have worked for you for up to two years, plus an extra week per additional year served, up to a maximum of 12 weeks.

Remember that even summary or instant dismissals should allow time for investigation, right of reply, or appeal.

Two steps to dispute resolution

The Labour Relations Act aims to resolve disputes as quickly as possible. It provides a basic two-step procedure that applies in any situation where a collective agreement or private resolution cannot be reached.

STEP 1: The disputing parties must attempt to reach an agreement by meeting with a third, neutral party - a conciliator. The conciliator does not decide who is right or wrong, but merely helps the parties to reach agreement through mediation, fact-finding or a recommendation. A conciliator is usually a CCMA commissioner, a statutory or bargaining council, or a private agency.

Unfair dismissal disputes must be referred for conciliation within 30 days of the dismissal. Any later, and the employer's final decision to dismiss will hold firm. Unfair labour practice disputes must be referred for conciliation within 90 days of the practice occurring or of the employee becoming aware of it.

STEP 2: If conciliation fails, parties can proceed to step two - arbitration, Labour Court adjudication or industrial action. In arbitration the dispute is referred to a conciliator who listens to both sides of the dispute and decides who is right. This decision is binding on the parties.

Some disputes go directly to the Labour Court. These must be referred to Court within 90 days of the conciliator certifying that the dispute remains unresolved. Parties can embark on industrial action - strikes or lockouts - if, in terms of the Act, the dispute is not clearly referred for arbitration or adjudication.

The Act also allows parties to follow their own dispute resolution process, provided that the dispute is finalised.

For more info, visit

Common oversights

While many corporates have entire legal departments to keep them on the straight and narrow, SMEs make legal mistakes all the time - some of which can be disastrous. Knowing what pitfalls to watch out for can make all the difference. Here are some of the most common:

Not having good written agreements:

  • All important business agreements must be in writing. Oral agreements are hard to enforce and leave you with little recourse for compensation or legal action.
  • Unclear expectations and rules for employees: 
  • Make sure they acknowledge that they are "at will" employees, which means they can resign or be dismissed at any time without exposing your business to liability.
  • Not getting an experienced corporate attorney: 
  • When in doubt, ask a corporate lawyer with SME experience. Although they charge more than general attorneys do, it will save you time, aggravation and possibly even money in the long run.

Ignorance of the law: 

Just because laws are numerous and complex doesn't mean that you can afford to ignore them. Familiarising yourself with the basics can keep you out of legal hot water.

How serious is "serious" misconduct?

Every employer should clearly set out the acceptable standards of conduct within the business and use this as a basis for disciplinary procedures.

According to the Labour Protect website ( serious offences could include:

  • Gross dishonesty
  • Wilful damage to property
  • Wilfully endangering the safety of others
  • Assault and fighting
  • Gross insubordination
  • Insolence
  • Sexual harassment
  • Abusive language
  • Intoxication on duty
  • Time-related offences
  • Collective absenteeism

For more information on labour law, general procedures and unfair labour practices, visit

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