Twenty-eight female guards were unfairly dismissed by a security company because the client‚ Metrora.
A dispute over land between the Thulamela municipality and a headman in rural Lukunde-Maniini, near Thohoyandou, has left hundreds of families homeless.
Villagers and people from other areas bought stands from the headman, but on Thursday municipal workers, protected by police, demolished their houses.
Residents said they were not told that the demolitions would take place. Several families who have no relatives living nearby are now sleeping under trees. They said they have no food, clothes or blankets.
They lost all their belongings because they were not at home when the bulldozers came.
The municipality said that people had occupied the sites without the council's permission.
A family of seven, including a seven-month-old baby, are among the homeless.
The baby's mother, Pinky Khurumedzha, said that her baby had contracted flu because they had been forced to sleep in the open.
Headman Enos Ratshilumela Mmabi said that he had given the land to the people to build homes.
"I got permission from Chief Gole Mphaphuli. The municipality does not own this land. Our lawyers are dealing with the matter," said Mmabi.
Mmabi charged residents R1500 for each stand.
Thulamela spokesman, Nndwamato Tshila, said: "We warned the headman to stop selling the sites because the land belongs to the municipality.
"He did not listen so we got a court order to clear the site."