TAKEN TO THE CLEANERS

Judge addresses ‘offensive’ provisions in an employment contract that stripped away basic legal rights while not properly informing the employee

More than 20 years after SA’S constitution became the highest law in the country, some employers still demand that their staff agree to contracts that are blatantly illegal and infringe on their fundamental rights.

A fortnight ago I wrote about Pharmaco, the company that made its staff sign contracts agreeing to be medically tested at the behest of the business’s bosses.

The labour court called this disgraceful and unlawful.

This week another illegal contract is under the spotlight.

In the case of Lead Laundry & Catering against Peragalathen Chetty, Judge Brian Spilg was so outraged by the contract the company had made Chetty and other staff sign that he had the agreements referred to the Law Society of the Northern Provinces.

He wants the society to decide whether the professional integrity of the drafter, presumably an attorney, was compromised.

Lead Laundry’s staff had to agree to a package structured in a way that amounted to “indenturing”, said the judge.

Part of the monthly salary was cast as a kind of compensation paid to the employee for agreeing to be bound by a restraint of trade.

It was “oppressive”, said the judge, because it was linked to a provision in terms of which, if the staffer breached the restraint of trade agreement, the money had to be repaid.

In his view, the provision was intended to help the company in any dispute by bolstering evidence that the restraint clause should be upheld. It would also apply as an “in terrorem” threat to staff, since it provided that an employee was obliged to pay back this money if there was a breach of the restraint.

“Accordingly, the longer an employee remains with [the company] the more beholden and indentured the person becomes.”

The judge said he was concerned that these clauses were drawn up by attorneys who appeared to believe that their duty to act in the best interest of their clients overrode their greater duty to act professionally and not bring the profession into disrepute.

“I believe the issue of the threshold beyond which an attorney may go when drafting a contract requires consideration by . . . the professional body where it is evident that there is unequal bargaining power, abuse and overreaching to a degree that overtly and unconscionably impacts on the constitutional rights of individuals.”

He spoke of the “offensive” provisions in the Lead Laundry contract that stripped away basic legal rights while not properly informing the employee, with more than 20% per month of the employee’s net aftertax salary, through the entire period of employment, at stake.

Penalty without proof

The fact that a portion of a salary was actually “compensation” for a restraint agreement that would have to be repaid if the agreement were breached meant that the employee’s “actual salary was not as identified in the signed permanent contract of employment agreement”.

Rather, the agreement included a “restraint payment” portion on the basis that “a breach of the restraint agreement, whether during the course of employment or after, will result in the forfeiture of about 20% of the salary in the main employment agreement . . . [This] amounts to a penalty without proof of damage or loss, irrespective of the nature of the breach, and which requires its provisions to remain confidential”.

While the law society investigates the propriety of the contract, Chetty is free from its clutches. By agreement with Chetty the court has ordered that, until March 2018, he may not solicit clients from

Lead Laundry.

Chetty said he was undergoing a year-long training programme and did not deal with clients anyway.

Attorneys appeared to believe their duty to act in the best interest of their clients overrode their duty to act professionally