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What to consider when drafting a termination clause into your employee's employment contract

by , 27 June 2013
John Plumtree has left the Sharks with immediate effect following a meeting on Tuesday to resolve the termination of his contract. According to iAfrica.com, the Sharks confirmed that discussions were held between representatives of Plumtree and the union and that it was mutually and amicably agreed to part ways with immediate effect. While Plumtree and the Sharks may have resolved their issues harmoniously, you might not be so lucky with your employee if his contract doesn't have a termination clause. Here's what you need to keep in mind when drafting a termination clause into your employee's employment contract to avoid ugly disputes.

In terms of the Basic Conditions of Employment Act (BCEA), you must give your employee the terms and conditions of his employment in writing.

According to The Labour Law for Managers Loose Leaf Service, this document can take the form of a letter of employment, or you can create a more formal contract of employment – the form it takes doesn't matter, it's the content that's important. You must do this when your employee starts employment and must retain the document for at least three years after termination of the employment.

A contract of employment should also include a termination clause. In drafting this clause, you must consider the following factors to avoid legal disputes later on:

Drafting a termination clause into your employee's employment contract? Consider these points…

  • Consider what the BCEA, bargaining council agreement and the sectoral determination says about notice periods.
  • Take into account separate summary dismissal on the grounds of misconduct from termination on notice.

SAMPLE CLAUSE#1: Write this sample clause into your contract:

Notwithstanding any of the notice provisions contained in this contract, the Employer is entitled to terminate your employment without notice on any ground recognised as sufficient in law and equity.

  • If you decide to list the grounds of summary dismissal, keep the descriptions general and add a catch-all clause.

SAMPLE CLAUSE#2: Write this sample clause into your contract:

The grounds on which the Employee may be dismissed without notice include but are not limited to the following:[List the grounds using general descriptions]

The minimum BCEA notice periods are:

  • Within the first six months of service, one week's written notice
  • Thereafter, but before 12 months of employment has expired, two weeks' written notice
  • From one year of service onwards, four weeks' written notice.

Remember, you must explain a notice of termination to your employee in a language he understands.

What about senior managers and directors?

In contracts for senior managers who are also directors, you should include a clause providing for the termination of directorships when their employment ends or where an employee is disqualified from becoming a director or from being involved in the management of a company under the Companies Act.

SAMPLE CLAUSE#3: Write this clause into your directors' contracts:

Upon termination of the Employee's contract of employment, any directorship that the Employee may hold with the company will automatically terminate.

Taking these points into account when drafting a termination clause into your employee's contract of employment will ensure you avoid contractual disputes later on.



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