Exiting the exit agreement: a departing employee’s claims of coercion and duress

It happens with some regularity that an employee refers a dismissal dispute to the CCMA, and the employer arrives at the hearing bearing a termination agreement with the employee’s signature. In it, the employee agrees to resign from employment, often in return for some benefit such as an extra month or two’s pay, or the privilege of leaving honourably rather than being dismissed and incurring a disciplinary record for serious misconduct. The employee will usually concede that they signed the agreement, but argue that they were bullied into it. The CCMA commissioner will advise them that the agreement is binding until set aside by the Labour Court on solid grounds, such as duress, and close their file.

In the recent matter of Gbenga-Oluwatoye versus Reckitt Benckiser SA, an employee went as far as approaching the Labour Court and, thereafter, the Labour Appeal Court, in his quest to get out of a termination agreement he admitted signing with the employer.

The employee was approached by a headhunter while employed in a lucrative position with a large multinational. He later left his lucrative position, but actively concealed this from the headhunter, negotiating a generous sign-on bonus on the false basis that he was losing a handsome shareholding by leaving the large multinational to join the employer. In short, he deceived and defrauded the new employer.

Some months into his employment with the new employer, the employee’s misconduct came to light. He was suspended pending a disciplinary hearing,  and then summarily dismissed. On receipt of his termination letter, the employee approached the employer requesting a “softer exit”. He offered to repay the money over time, in exchange for the employer delaying action to revoke his work permit and housing allowance. The employer agreed, and the employer expressed his gratitude for the humanity shown him.

A termination agreement was then drawn up in draft form. The employee was unwilling to sign the first draft, but agreed to sign a second draft. The agreement recorded that it was in full and final settlement of any claims between the parties, and that it was entered into voluntarily without any coercion or pressure. The employee agreed, in the agreement, that he waived any right to approach the CCMA and Labour Court arising in any way from his employment and the termination agreement.

A week later, however, the employee brought an urgent application to the Labour Court, for an order setting aside the termination agreement and reinstating him into his employment. He argued that the agreement was against public policy and that he had been coerced into signing it through fear of losing his work permit and housing and other allowances.

The Labour Court was unsympathetic. It had regard to the fact that the employer had a legal entitlement to dismiss the employee summarily on account of his serious misconduct, and also the fact that the agreement had been further negotiated after the employee had been dissatisfied with the first draft. There were no facts to indicate that he signed the agreement only as a result of duress by the employer.

The employee was unrelenting, and took the matter further to the Labour Appeal Court, on appeal.

The Labour Appeal Court pointed out that, in order to get out of an agreement on the basis of duress, intimidation or improper pressure had to be proven of such magnitude that the purported consent of the signatory was no true consent. There had to be actual violence or a fear caused by the threat of a considerable evil. The threat had to be unlawful or against the morals of the community.

Although the Court did not point this out, it goes without saying that the loss of a work permit and of allowances due to termination of employment by resignation or by summary dismissal for gross misconduct, are lawful and reasonable consequences. They cannot be construed to be unlawful or against the morals of the community.

The Court did point out that, while everyone has the constitutional right to seek redress through the courts, this right could be limited in reasonable circumstances. Parties were free to limit this right in their free contractual dealings. The Court found that the employee was an experienced, senior managerial employee, who would understand the import of what he was agreeing to. Clauses limiting the right of redress were standard in termination agreements, and of practical value.

Finally, the Court point out that it had no power to set aside agreements simply because they appeared to be unfair.

The Court accordingly upheld the termination agreement, and dismissed the employee’s application with costs.

Caveat subscriptor – “signer, beware!” – is a well-worn legal maxim for good reason. All parties should be slow to sign any agreement unless they are completely satisfied with the terms, and should be aware that by signing an agreement they trigger important legal consequences which cannot be easily evaded. In the absence of compelling evidence of significant unlawful pressure, a party who foolishly signs an unfair or prejudicial agreement, will be held to its terms.

 

 

 

A paper shield? The email and social media disclaimer

“On this date, in response to the new guidelines of Facebook, pursuant to articles L.111, 112 and 113 of the code of intellectual property, I declare that my rights are attached to all my personal data drawings, paintings, photos, video, texts etc. published on my profile and my page. For commercial use of the foregoing my written consent is required at all times. The content of my profile contains private information. The violation of my privacy is punishable by law (UCC 1-308 1-308 1-103 and the Rome Statute)…”

What a feeling of empowerment, that small post on social media that instantly and indefinitely protects your rights from the predatory acts of big corporations! Except that it doesn’t. As pointed out by legendary internet myth-buster snopes.com, “Before you can use Facebook, you must indicate your acceptance of that social network’s legal terms, which includes its privacy policy and its terms and policies. You can neither alter your acceptance of that agreement nor restrict the rights of entities who are not parties to that agreement simply by posting a notice to your Facebook account.”

It is not only social media users who issue unilateral disclaimers, however. Receive an email from a large company or law firm, and in many cases the final words will be along the lines of “The information contained in this transmission is confidential and is intended solely for the nominated addressee. The information is private in nature and is subject to legal privilege. If you are not the intended recipient, you may not peruse, use or disseminate this transmission or any file attached thereto. Such actions are prohibited and may be unlawful. If you have received this transmission in error, please notify us immediately and delete same and all copies from your system.” Heavy stuff, but how enforceable is it, really?

In her recent feature in the attorneys’ journal, De Rebus (available in full at http://www.derebus.org.za/reading-the-small-print-are-e-mail-disclaimers-really-important), local attorney Jesicca Rajpal cited a US domestic violence case in which a man emailed his estranged wife, amongst other things, that “pay-back is really a b****… you and your others still have a gigantic debt to pay to me, which will be paid no matter what. I spend every second of every day contemplating an appropriate method of payment… Your most determined, unstoppable, and visceral enemy”. The email ended with a disclaimer: “Not one word herein should be construed by anyone as meaning violent or threatening intentions, and instead the entire contents is to be taken by the strict literary meaning. There have not been, and will be any elucidated threats of violence or intent, either expressed or implied, within the entirety of this document.”

The above disclaimer seems ludicrous and did not eventually protect the sender from the censure of the courts. But is it any more or less meaningful than any of the fancier disclaimers added to commercial and legal emails every day, with the intention of protecting parties’ critical legal and financial information?

Rajpal points out the weaknesses of the disclaimers so many of us use without a thought:

  1. We use them indiscriminately – not only when their use is appropriate but also when clearly non-confidential and trivial communications are sent.
  2. The disclaimer can be completely contradicted by the content of the email itself.
  3. There is no guarantee that the recipient will see or read the disclaimer.
  4. The disclaimer is usually only read after the confidential information, if at all.
  5. The sender cannot control the recipient’s response to the disclaimer.
  6. Most importantly, the disclaimer is issued unilaterally, without the recipient’s agreement to its terms. You cannot unilaterally impose obligations on another person. A disclaimer is not a contract and does not have the effect of binding another person without their consent.

Rajpal concludes her article with advice gleaned from the Minnesota Law Review. Do not place confidentiality disclaimers at the foot of your email – by the time a recipient sees it (if at all) they will have read the confidential information. Place them at the top of your email, if you must. If a communication is privileged, this can be marked in the subject line to bring it to the attention of a recipient even before they click on a message and see its content. For further protection, confidential information can be placed in an attachment and the email body can consist only of a disclaimer.

Even if the above advice is heeded, however, the sender cannot prevent an unintended recipient from ignoring the warnings in the subject line and email body, and accessing information the sender had hoped to keep confidential, without there being some sort of encryption in place. Mere disclaimers rely upon the attentiveness, goodwill and co-operation of an unintended recipient. Where confidentiality is critical, password protection is a better option, although also not fail-safe.

 

Decoding Legalese: Part 1 SEVERABILITY

Most written agreements end off with a number of “boilerplate” clauses, being the small print that is usually glossed over. These are standardised clauses which deal with general matters and appear in most contracts, regardless of whether the specific agreement concerns a simple sale of apples or the manufacture of jet planes worth billions of rands.

Examples include clauses about severability, the whole agreement, variation, disputes, jurisdiction and so on.
These clauses are often clumsily drafted in high legalese. For the sake of covering all bases, they may go on much longer than is strictly necessary.
This series of updates seeks to decode the legalese in some of the most common boilerplate clauses.
Towards the end of most agreements, one comes across words to the following effect under the heading “SEVERABILITY“:

Except as expressly provided to the contrary herein, each paragraph, clause, term, and provision of this AGREEMENT, and any portion thereof, shall be considered severable. If for any reason, any provision of this AGREEMENT is held to be invalid, contrary to, or in conflict with any applicable present or future law or regulation by any Court in any proceeding between the parties, that ruling shall not impair the operation of, or have any effect upon, such other portions of this AGREEMENT as may remain otherwise intelligible, which shall continue to be given full force and effect and bind the parties hereto.

The effect of this clause is, in a nutshell, that if any part of the agreement is found to be invalid, it will not result in the entire agreement being invalid. Instead, the invalid part will be ignored as if removed from the agreement, and the rest of the agreement will stand.

For example, we might agree:1. I shall purchase ten apples from you every week for a year.

2. I shall pay you R3,00 per apple.

3. If I fail to pay for any single apple, then you may cause the words “bad debtor” to be tattooed in large black capital letters across my forehead.

4. The clauses of this agreement are severable, one from the other.

Clause 3 would be found to be against public policy (that is, morally repugnant and socially undesirable) and thus unenforceable. However as the clauses are expressly severable one from the other, you could still enforce your right to payment against me. The failure of clause 3 would not mean that the agreement fell away in its entirety and you were left out of pocket.

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Decoding legalese – part 2: “entire agreement” clauses

This series of updates seeks to decode the legalese in some of the most common “boilerplate” clauses commonly found at the end of contracts.

Another very common clause is the “ENTIRE AGREEMENT” clause, which is generally along the following lines:

This agreement constitutes the entire agreement between the parties, and supercedes all agreements and arrangements between the parties, whether written or oral, express or implied, relating to the subject-matter of this agreement. Each party accepts that it is relying entirely on the terms set out in this agreement and not on any pre-contract statement, representation or misrepresentation made by or on behalf of the other party except to the extent, if at all, specifically set out in this agreement. 

When selling a product or marketing a service, a good many grandiose claims may be made regarding quality and results. These are seldom later incorporated into the contract as terms. With a standard “whole agreement” clause in a contract, the buyer is generally deprived of the right to require that those claims be lived up to. The clause has the result that anything the parties may actually have agreed upon, but which is not written down in the contract, is null and void.

For example, before I buy a lawnmower, the salesperson tells me that “this machine is so fast and effective, it will cut your garden maintenance time in half!” I am thrilled, sign the paperwork (including a “whole agreement” clause) and rush home to try out my new purchase. While I find that the lawnmower does in fact work just fine, it works the same as any other mower and does not, in fact, cut my garden maintenance time in half. Nowhere in the agreement with the salesperson did we record the salesperson’s promise, and so in general it is excluded from the agreement and unenforceable. I must live with my purchase.

There will be some exceptions under the Consumer Protection Act, which forbids misleading statements by suppliers and enables consumers to cancel transactions in some cases where they have been misled, but this Act only applies to certain transactions. Even where the Act applies, proof of the misleading statement will be very difficult if it was not recorded in writing.

In general, therefore, it is essential to ensure that any important promises made, are written into the contract. On a pre-printed standard form, additional clauses written in by hand and initialled by both parties are perfectly valid and binding. If a supplier makes a promise, they ought not to have any difficulty in formalising the promise. If they are reluctant, it is probably worth questioning their sincerity and therefore weighing up the transaction very carefully before committing.

Bosch-Rotak-34--Rotary-Lawn-Mower

Making sense of Contracts – Presumptions in the Interpretation of Contracts

Presumptions are aids for obtaining clarity when reading and applying the terms of written contracts. They originate from what is known to happen in the ordinary course, and generally promote outcomes that are fair and reasonable. As contracts often leave things unsaid, presumptions help to close gaps. Presumptions apply in the absence of compelling considerations indicating that they should  not apply in a specific case.

These are the six most important presumptions relied upon when contracts are interpreted. They underline the importance of clear, careful and thoughtful drafting whenever an agreement is reduced to writing.

1. Words used in contracts, are used in their normal, ordinary sense

This includes a presumption that, where the parties are involved in a specific business or trade, the words used in their contract are used in the sense usually understood in that business or trade.

The exceptions will be when the context makes it clear that the parties intended a different meaning, or where applying the ordinary meaning would have absurd results.

2. The parties have chosen the words used in their contract carefully, and those words express their intention precisely and exactly

3. Where a particular word or expression is used more than once in a contract, that word or expression has the identical meaning throughout the contract

The exception will be where the context clearly indicates otherwise, or where applying a consistent meaning would lead to absurd or unjust results.

For example, where “the house” refers to 1 Quality Street in clause 1 of a lease agreement, the term “the house” should not be used in clause 5 to refer to a different property, unless clause 5 clearly specifies that the term has a different meaning in that clause, and specifies that meaning.

4. Different words and expressions used in a contract indicate different meanings (this is the corollary of the presumption above)

For example, one should not use different terms such as “the house”, “the property” and “the premises” in different clauses all to indicate the same thing, such as 1 Quality Street. In interpreting the contract one must assume that “the house” means something different to “the property”, which in turn means something different to “the premises”, or otherwise the drafters would have used the same term.

5. The contract contains no superfluous words and no purposeless terms

It is assumed that everything to be found in a contract, is there for a reason and with a specific purpose. For that reason, every word and expression in a contract must be taken account of and given effect to, unless no sensible meaning can be extracted from the word or expression used.

6. There are no omissions

The parties are assumed to not have left out of the contract any words which should have been inserted, that is the contract is assumed to be complete and comprehensive.

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