Author: Michelle Posemann
Publication Date: Aug 5, 2025
1. Introduction
“At common law, the contract between the parties is no longer the exclusive (or virtually exclusive) determinant of the rights and obligations of the parties; that contract now takes the form of a social compact in which the parties acquire rights and assume obligations shaped, not exclusively by what the parties decide to include in the contract, but by principles of good faith and fairness that underpin the Constitution¹.
The analysis of the reciprocal duty of good faith begins with section 23 of the Constitution, guaranteeing everyone the right to fair labour practices.
Section 23 is then extended for the purpose of this discussion by:
- section 8(3) of the Bill of Rights, which provides that a court “in order to give effect to a right in the Bill, must apply, or if necessary, develop, the common law to the extent that legislation does not give effect to that right”;
- section 39(2) which adds that “when interpreting any legislation and when developing the common law or customary law, every court, tribunal or forum must promote the spirit, purport and objects of the Bill of Rights”; and
- section 173 which recognises the inherent powers of the courts “to develop the common law, taking into account the interests of justice”.
This framework forms the fundamental basis for the supplementation of the constitutional rights by the courts in expanding the common law of contract.
2. Analysis
The concept of the reciprocal duty of good faith, coupled with the notions of trust, confidence and fair dealing, in an employment relationship has evolved in the context of the above legislative framework in conjunction with the “judicial creativity” of the courts in developing the common law.
Recognising that the common law of contract borne out of an unequal bargaining relationship is restrictive, the courts have of necessity and in terms of public policy incorporated the principle of fairness into the relationship.
South African courts now “recognise the existence of an implied term of trust and confidence in the employment contract like that recognised in a number of other common-law jurisdictions.² The content of this duty was explained in the United Kingdom by Lord Nicholls³ as “imposing an obligation that an employer would not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee”.
The South African Appellate Court endorsed this common law duty as being part of South African law and an inherent part of the employment relationship in Council for Scientific & Industrial Research v Fijen 1996 17 ILJ 18 (A).
Furthermore, this contractual duty of good faith is a reciprocal one, as recognised by the Constitutional Court in Botha and Another v Rich NO and Others [2014] ZACC 11 at para 45:
“To the extent that the rigid application of the principle of reciprocity may in particular circumstances lead to injustice, our law of contract, based as it is on the principle of good faith, contains the necessary flexibility to ensure fairness. In Tuckers Land and Development Corporation it was pointed out that the concepts of justice, reasonableness and fairness historically constituted good faith in contract. The principle of reciprocity originated in these notions. This accords with the requirements of good faith”.
Differing views have since been expressed by commentators about this general reciprocal duty of fair dealing. Whereas Cohen⁴ and Bosch⁵ support the duty of good faith as an integral component of our labour relations, Du Toit⁶ and Benjamin⁷ suggest that it may undermine the specific protections outlined in labour legislation. Idensohn is further critical of ‘the conflation of fiduciary duties with a duty of good faith in our case law:
‘Much of this confusion is due to lose use of imprecise and ambiguous terminology. Terms such as “good faith”, “trust”, “confidence”, “faithfulness” and “loyalty” are used interchangeably in descriptions of employee duties without any recognition or acknowledgment that they have functionally different meanings in different contexts, and that those meanings have changed over time. Both fiduciary duties and duties of good faith, for example, require “loyalty”. For the purposes of fiduciary duties, “loyalty” has the specific meaning of acting solely and exclusively in the interests of another. In relation to duties of good faith on the other hand, “loyalty” generally has a narrower, less exacting meaning that merely requires the incumbent to have regard to or take the interests of another into account.⁸’”
The tension identified by the above commentators was explored more recently by the courts in two cases.
In National Union of Metalworkers of SA obo Nganezi & others v Dunlop Mixing & Technical Services (Pty) Ltd & others [2019] ZACC 25 the court explored the link between the concept of derivative misconduct and the duty of good faith and more specifically the duty to disclose information about misconduct committed by fellow-employees. The court found that a failure to do so can amount to a breach of the duty, which could justify dismissal. Froneman J stated in this regard as follows:
“[62] In our law, fiduciary duties are not implied by law into all employment relationships. They may be inferred as a matter of fact from employment contracts and moral notions of trust, confidence, loyalty and good faith. But the contractual duty of good faith as a legal precept does not as a matter of law imply the imposition of a unilateral fiduciary obligation on employees to disclose known information of misconduct of their co-employees to their employers.
[63] That is because the legal contractual obligation of good faith is a contested one and must, at the very least, be of a reciprocal nature.
[64] It is contested in different spheres and for different reasons. In ‘purely’ private law contracts, the imposition of a good faith contractual obligation on parties as a free-standing norm capable of ex lege (from or by the law) enforcement is disputed as an unnecessary and unsound intrusion on personal freedom and autonomy. Some judges have curially and extra-curially resisted importing good faith as a free-standing contractual obligation. In our labour law context, the argument does not have the same traction.
[66] …The whole point of the employment relationship is that it generally entails hierarchical relationships, subordinating workers in submission to lines of authority. This court’s development of good faith and ubuntu in contractual relationships is intended to infuse good faith into unequal contractual relationships, or more equality into hierarchical relationships precisely where the hierarchy leads to the exertion of unfair power over the subordinated party. This is especially so in commercial contracts where the power of one party enables hierarchical exertions over the subordinated other.”
He concluded by emphasising the importance of the duty of disclosure being reciprocated by the employer in protecting the employee’s individual rights inter alia to safety.
In Old Mutual Ltd & others v Moyo & another (2020) 41 ILJ 1085 (GJ) the High Court considered the fiduciary duty of a chief executive officer and recognised that the prioritisation of his own interests above those of the board amounted to a breach of this duty, leading to a breakdown of trust and confidence, which justified a contractual termination of the contract of employment. In assessing the argument of a right to fair dealing in the holding of a disciplinary hearing or pre-dismissal arbitration instead of simply invoking a contractual termination, the court held at para 93:
“Mr Moyo’s position as chief executive of Old Mutual requires that a special relationship of trust and confidence exists between him, the chairperson and the board, that they are able to work together as an effective and integrated team, and that interpersonal compatibility forms an inherent requirement of his appointment as the chief executive. These requirements were expressly recorded in the contract of employment…The requisite relationship of trust and confidence, objectively, no longer exists between the Old Mutual board and Mr Moyo, to which he was required to report, irrespective of who is to blame for its breakdown. That is but one of the issues for the trial court to decide in the fullness of time.”
3. Conclusion
The courts continue to navigate the balancing act between the need for good faith, fairness and reasonableness on the one hand and the need for contractual autonomy interpreted within the legislative framework on the other, emphasising the imperative for reciprocity in order to get that balance right.
This requirement balances the duty of loyalty and good faith of employees with the corresponding obligation on employers to treat employees fairly and in a manner that instils trust and confidence. This, in turn, creates greater equity in the employment relationship, aligning with the constitutional right to fair labour practices.
¹ Cohen, Implying Fairness Into the Employment Contract (2009) 30 ILJ 2271 at 2286 with reference to Grogan October 2008 vol 24(5) Employment Law 13.
² AM LOUW PART 1 PER / PELJ 2018 (21) at 12.
³ Malik v Bank of Credit and Commerce International SA 1998 AC 20 (HL).
⁴ Cohen 2009 ILJ 2271.
⁵ Bosch 2006 ILJ 28.
⁶ Du Toit 2010 ILJ 41.
⁷ Benjamin 2009 ILJ 760.
⁸ Idensohn ‘The Nature and Scope of Employees’ Fiduciary Duties’ (2012) 33 ILJ 1539 at 1550 referred to in National Union of Metalworkers of SA obo Nganezi & others v Dunlop Mixing & Technical Services (Pty) Ltd & others [2019] ZACC 25 at para 53.
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