The Contractual Foundation: What Makes It Legally Binding
Labour Appeal Court (LAC) and Constitutional Court judgments have established clear principles for enforceable mutual separation agreements. In Gbenga-Oluwatoye v Reckitt Benckiser South Africa (Pty) Limited and Another [2017] 1 BLLR 1 (CC) (15 September 2016),the Constitutional Court confirmed that separation agreements can validly waive even constitutional rights when entered into voluntarily and with informed consent. HR managers should ensure:
- Genuine Consensus: Both parties must truly intend to be legally bound. It is advisable to have a clause which stipulates that the agreement is entered into freely and voluntarily after being given an opportunity to take advice.
- Clear Terms: The agreement must explicitly state what rights are being waived and what compensation is being offered. It is important to note that employers cannot simply offer employees monies that are legally due to them in exchange for terminating the employment relationship. In other words, an employee cannot simply be offered their salary up until date, outstanding leave days and notice pay – there must be something extra (an ex gratia amount).
- Informed Consent: Employees must understand the implications of what they’re signing and its therefore advisable to have an introductory paragraph that captures the basis for the separation agreement. The clauses that stipulate in terms of which claims the agreement is in settlement of should be highlighted to the employee and they should ideally initial next to same.
Essential Elements: Your Checklist
✓ Financial Terms
- Clearly specify the total settlement amount
- Break down components (notice pay, severance, leave pay, ex gratia amount etc.)
- Detail payment timing and method
- Address tax implications
✓ Legal Waivers
- Include a “full and final settlement” clause
- Specify which claims are being waived (citing relevant sections of LRA/BCEA)
✓ Post-Employment Obligations
- Confidentiality provisions
- Return of company property
- Restraint of trade (if applicable)
- Non-disparagement clauses
✓ Procedural Safeguards
- Allow reasonable time for consideration
- Recommend independent legal advice
- Include cooling-off period where appropriate
Common Pitfalls to Avoid
❌ Misrepresentation: Don’t mischaracterize the employment relationship or reason for separation
❌ Coercion: agreements signed under duress may be reclassified as unfair dismissals
❌ Excessive Restraints: Courts will invalidate unreasonable post-employment restrictions
❌ Ambiguity: Vague terms invite disputes about what was actually agreed upon
Best Practices from Recent Jurisprudence
- Document the Process: Keep records of negotiations and decision-making
- Proportionate Packages: The LAC suggests packages should reflect length of service and circumstances of separation
- Acknowledge Rights: Clarity on which statutory rights are settled
- Separate Signing: Have a witness present (and set out their full names and capacity) for added validity
Remember: South African courts consistently view substance over form. Even well-drafted agreements can be invalidated if they attempt to disguise dismissals as mutual separations or contain terms that unfairly prejudice employees.
Need help with legal compliance or training on this topic? Contact us at Kirchmanns Incorporated.