Fixed-term contracts sound appealing in theory but can be very complicated. As such, the Labour Relations Act was amended in 2014 in an attempt to provide guidance on fixed-term contracts. Section 198B of the Labour Relations Amendment Act deals with fixed-term term contracts and defines a fixed term contract as a contract of employment that terminates either:
- on a fixed date;
- on a specified event; or
- once a particular project or task has been completed.
This section does not apply to employees earning over the current earning threshold of R205 433.30 per annum. The section also does not apply to an employer who:
- Employs less than ten employees; or
- Employs less than 50 employees and whose business has been in operation for less than two years, unless the employer has more than one business or if the employer’s business was formed by division or dissolution by another business.
Implications
Fixed-term falling away
Perhaps the most important thing to note about fixed-term contracts is that if the agreement is for a period longer than 3 (three) months, the nature of the work required by the employer is not of a limited or definite duration. In this case the employer cannot provide a justifiable reason for the employee to be put on a fixed-term contract, then that contract becomes one that is for an indefinite period or in other words, a permanent contract. In Owen and Others v Department of Health, KwaZulu-Natal (2009) 30 ILJ 2461 (LC), it was held that where an employee is allowed to keep working beyond the end date of the fixed-term contract, the contract is viewed to have been renewed on the same terms, with no new period. This means that the employee who concluded the contract becomes a permanent employee and enjoys the same benefits and treatment as the permanent employees that are engaged in the same or similar type of work unless there is a justifiable reason for the less favourable treatment.
Unfair Dismissal claim
The question arises as to what happens if a fixed-term contract that has been renewed in the past is no longer renewed. Often, employers tend to employ an employee on a fixed-term contract to see if they “make the cut” and then continuously renew the contract to safeguard themselves in the event that they need to terminate that employee. The risk involved in this scenario is that the employee can refer to a matter of unfair dismissal if that contract had been renewed in the past but is not being renewed again. The employee would have to prove that he reasonably expected the contract to be renewed on the same terms, or that the employer offered to renew it on less favourable terms. The Constitutional Court has confirmed this in Zungu v Premier of the Province of KwaZulu Natal and Others [2018] ZACC 1, where the court extended the definition of s186(1)(b) of the LRA to include a scenario where an employee reasonably expects an employment contract to be renewed and there is a non-renewal of said contract.
In conclusion, it is evident that the main requirement for fixed-term contracts is that an employer needs to be able to provide a justifiable reason for opting to enter into fixed-term employment as opposed to a permanent employment relationship with an employee.
Contact your SEESA Labour Legal Advisor to assist your business with any Fixed-term Contract queries you might have. Alternatively, SMS the word “SEESA” to 45776 for an expert legal advisor to contact you.
About the author
Nontuthuko Zuma is an admitted attorney of the High Court. She attained her LLB degree in 2015 and her LLM (cum laude) in 2016 from the University of KwaZulu-Natal (PMB). Prior to joining SEESA in 2019, Nontuthuko practised as a commercial and litigation associate attorney.
Resources
- Labour Relations Amendment Act 6 of 2014
- Labour Relations Act 66 of 1995