Fixed term Contracts – Case Law And More

Fixed term contracts of employment are appealing to employers, some of which are legitimate, and others?seen as not justifiable by the Commission for Conciliation, Mediation and Arbitration (“the CCMA”) and the Labour Court.

The question then arises, will an employee’s refusal to accept the renewal of a fixed term contract on the basis of an expectation of permanent employment result in dismissal??Case Law gives some guidance in this regard. The following case is one of them.

In the case Transnet t/a Transnet Freight Rail versus National Union of Metalworkers of South Africa obo Manku and others - (2021) 30 LAC 1.11.47:

Two employees’ contracts were renewed several times (one nine and the other four times). In the course of their contractual employment, a collective agreement resulted in 1 500 contract employees becoming permanent. However, these two employees were not included in the collective and were offered further fixed-term contracts, which they refused to sign since they deemed themselves permanent

The two employees’ contracts ended as a result of their refusal to sign the further fixed-term contracts and claimed unfair dismissal. They argued that they had reasonable expectations that their contracts would be renewed.

The Bargaining Council found the dismissals unfair, and the employer then took the outcome to the Labour Court (LC):

• The LC noted that the collective agreement had not been disclosed to the Arbitrator.
• On appeal to the Labour Appeal Court (LAC), the employer argued there was no dismissal as they were offered contracts.
• The two employees did not expect a renewal of their fixed-term contract on their own version. This was fatal to their case.
• The LAC held that the Arbitrator erred in finding that there was a dismissal in terms of section 186(1)(b).
• The appeal was upheld.

The case reviewed above serves as a warning to employers to ensure that there is always a justifiable reason to enter into a fixed term agreement, before concluding this form of contract, and that during the employment relationship, employers act in an appropriate manner so that they do not create any unreasonable expectations of permanent employment or renewals.

Fixed-term contracts’ earning threshold

The new Basic Conditions Employment Act (BCEA) earnings threshold since 1 March 2022 is R224,080.48 per year (approximately R18,673 per month). The onus is on the employee during the first three months, and thereafter the onus is on the employer.

Employees who earn below the threshold and are employed for a period exceeding three months may be regarded as permanently/indefinitely employed if there is not a justifiable reason for the limited duration of the contract (Section 198B of the LRA). Those earning above the threshold do not enjoy the same protection.

Labour Relations Act (LRA) Section 198B.

Fixed-term contracts with employees earning below the earnings threshold

1.??????An employer may employ an employee on a fixed-term contract or successive fixed-term contracts for longer than three months of employment only if -

a)??????the nature of the work for which the employee is employed is of a limited or definite duration; or

b)?????the employer can demonstrate any other justifiable reason for fixing the term of the contract.

2.??????Without limiting the generality of subsection (3), the conclusion of a fixed term contract will be justified if the employee –

a)??????is replacing another employee who is temporarily absent from work;

b)?????is employed on account of a temporary increase in the volume of work which is not expected to endure beyond 12 months;

c)??????is a student or recent graduate who is employed for the purpose of being trained or gaining work experience in order to enter a job or profession;

d)?????is employed to work exclusively on a specific project that has a limited or defined duration;

e)?????is a noncitizen who has been granted a work permit for a defined period;

f)???????is employed to perform seasonal work;

g)??????is employed for the purpose of an official public works scheme or similar public job creation scheme;

h)?????is employed in a position that is funded by an external source for a limited period, or has reached the normal or agreed retirement age applicable in the employer’s business.

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