Fixed term contracts: The risk

Fixed term contracts: The risk

A fixed term contract is one where the duration of the contract is agreed in advance between the employer and the employee. The fixed term element can also not be a specified date but can be specified upon the completion of a specific project.

Many employers utilize fixed term contracts as a means of evading their statutory obligations in terms of the Basic Conditions of Employment Act (BCEA) and the Labour Relations Act (LRA), and also save money by denying the employee the opportunity of pension/provident fund benefits and also medical aid benefits. The risk factor in fixed term contracts arises when the employer continues to renew the contract every time it expires. The reason for this is that the employee will now have the right of expectation which means that due to the employer continuously renewing the contract the employee expects this to continue and has the hope of permanent employment.

If the employer after a history of renewing the contract fails to do so and terminates the employee’s services, this will constitute an unfair dismissal and the CCMA will most likely find in favour of the applicant.

In McInnes v Technikon Natal (2000) 21 ILJ 1138 (LC) the labour Court found that an employee had an expectation of permanent employment which was created by her employer and the court ordered reinstatement. The facts of the case involved a lecturer who had been on a fixed term contract and was told by the head of department that her post was being made permanent and that the job was hers provided that she does not mess up. She applied, however, due to the university’s equity policy the position was given to a black candidate who resigned shortly thereafter. The Labour Court ruled in the applicant’s favour and ordered reinstatement based on the fact that the expectation of permanent employment had already been created.

Fixed term contracts that are longer than a period of 3 months may only be enforceable when there are 3 main requirements that are met. Firstly, the nature of the work must be for a limited duration, or there must be some other justifiable reason for fixing the term of the contract. Secondly, the fixed term contract must be in writing. Thirdly, the contract must specify the ‘justifiable reason’. Should the employer fail to prove that the above requirements have been met; the employee will be regarded as being employed on an indefinite basis.

There are employers who are not directly affected by these provisions. Employers who employ less than 10 employees, or employers who employ less than 50 employees and whose business has been in operation for less than two years, are excluded, but there ar certain exceptions fpr example an employer who conducts more than one business, or where a business dissolves and it results in the formation of more than one business.

Employers can use a fixed term contract by all means but must importantly ensure that they use it for its intended purpose. If the employer continues to roll over such contracts then the employee will have every right to expect that the relationship is now permanent. Again this does not mean that the employer cannot renew a fixed term contract- it does mean that it becomes more likely, with each continued roll over that the employment relationship has become more permanent. This is a highly dangerous practice and section 200A of the LRA makes it clear that this practice is off-limits.


Risha Singh is currently a SEESA Labour Legal Advisor. She completed her articles with Legal Aid South Africa and was admitted as an Attorney in 2012. She has been in the legal fraternity for over 6 years.


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