chapter 11 variation, breach and termination of the contract of employment

CHAPTER 11

Variation, breach and termination of the

contract of employment

Variation, breach and termination of the contract of employment

Overview

The common-law approach to variation raises several issues in respect of the variation or ending of a contract of employment.

The consequences of unilateral variation of the contract by the employer will usually be a breach of contract, and that has particular consequences.

The options open when a breach of contract takes place must be examined by studying:

• firstly, the innocent party’s choice to accept the breach or not, and

• secondly, the principal remedies for a breach.


Issues arising from frustration of the contract and summary dismissal will then be considered.


Finally, we look at the consequences of termination without notice and the remedies for wrongful dismissal.

Theoretically, neither employer nor employee can unilaterally alter the terms and conditions of employment because these can only be varied by mutual agreement.

VARIATION, BREACH AND TERMINATION

An employer cannot lawfully vary a contract simply by giving ‘notice to vary’.

Such a notice will have legal effect only if it terminates the existing contract and offers a new one on revised terms.


Consent to change may be obtained through individual or collective negotiation or may be implied from the conduct of the parties.


An innocent party to a breach may choose to continue the contract, sue for damages or, in serious cases, accept the repudiation and regard the contract as being at an end.


A unilateral variation that is not accepted will constitute a breach and, if serious, could amount to a repudiation of the contract.

This may not bring the contract to an end automatically . . .

The principal remedies for breach of contract are:

• an injunction or interdict (an order restraining a particular type of action)

• a declaration of the rights of the parties

• damages.


Frustration of a contract occurs when it is physically impossible or unlawful for the contract to continue to be performed.


Once a contract has come to an end by reason of frustration, it cannot be treated by the parties as still subsisting.

If the parties come to an arrangement to continue the employment relationship, this may constitute a new contract or some other arrangement. It will not be a continuation of the original frustrated contract.


A contract that is still capable of being performed but becomes subject to an unforeseen risk is not frustrated.

In order to justify summary dismissal by an employer, the employee must be in breach of an important express or implied term of the contract – that is, the breach must be sufficiently serious to constitute gross misconduct.


Certain terms are always regarded as important – not to steal or damage property, the duty to obey lawful orders, and not to engage in unlawful industrial action.

The significance of other terms will depend on the nature of the business and the employee’s position in it.


If an employer feels that a particular act or omission would warrant summary dismissal, this fact should be communicated clearly to all employees.

Once notice to terminate has been given, it cannot be unilaterally withdrawn.


For notice of termination to be effective, it must be possible to ascertain the date of termination.

Employees have confused an advanced warning of closure with notice of dismissal.

The length of the notice depends on the terms of the contract and, if no such length can be identified, both parties are required to give a reasonable period of notice.


What is reasonable will depend on the circumstances of the relationship – for example, the employee’s position and length of service.

Wrongful dismissal is a dismissal without notice or with inadequate notice in circumstances where proper notice should have been given or where the dismissal has been in breach of an agreed procedure.


chapter 11 variation, breach and termination of the contract of employment

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