Working beyond expired fixed-term contract presumed indefinite.

It so often occurs that employers would legitimately employ workers on a fixed-term contract of employment for a defined period, however, fail to terminate the employment relationship once the fixed- term contract expired due to the effluxion of time. This could be due to various reasons. In certain instances, the skills set of the employee could be valued even beyond the expiry of the term. In other instances, an employer may have project renewals, but fails to renew the employee’s contract. Yet even in other instances an employer may be challenged by logistical constraints or bureaucracies in having contracts renewed or indefinite employment confirmed.

 Even though well intended, failure to terminate employees after reaching the natural expiry date of a fixed-term contract or having it renewed, could lead an employer into legal pains should such an employee be terminated at a later stage based on the expiry of a fixed- term contract not acted upon at the time of the conclusion of the term. In all probability the employee in such instances will be regarded as having his or her contract been tacitly novated, of indefinite nature and such a termination regarded as an unfair dismissal.

 In Department of Agriculture, Forestry and Fisheries (DAFF) vs Miselwa Teto & Others (2020), DAFF employed five employees on a one-year, fixed -term contract as from the 15th of July 2013 to 14 July 2014. The employees worked on the Working for Fisheries Programme (WFFP). When their fixed- term contracts expired they continued working in their positions, performing the same tasks until they were dismissed on the 26th of August 2016.

 After their dismissal, they referred an unfair dismissal dispute to the bargaining council for conciliation and arbitration. During arbitration, DAFF argued that the workers were not employees of the DAFF and that it was employed by a TES, named Management for Excellence (ME). As such, DAFF argued that the bargaining council lacked jurisdiction to arbitrate the dispute.

 The employer argued that one day before the expiry of their fixed term contracts the workers were called in for a meeting, whereby it was explained that they will continue working, but that their salaries would be paid via a temporary employment service. This was due to DAFF still being in need of utilizing their skill, but that they don’t have their positions authorized yet on the department’s organogram. Until such time, DAFF would utilize ME to channel payments to the workers and allocate budget to ME for this transaction. DAFF unilaterally terminated the employment of the workers on the 26th of August 2016.

 The Commissioner favored the employees and argued:

 ‘Since the respondent’s defence is that it was not the applicants’ employer, it is important to determine whether or not they were re-appointed by the respondent when their fixed term contracts terminated. The respondent’s argument is based on the fact that the applicants were not paid directly by the respondent and that they were not on respondent’s persal system. To my mind, that cannot be the only determining factor; the evidence suggests that the applicants continuously performed their work under the sole control of the respondent. Their workplan and performance agreements were signed for by the respondent. They were responsible to the respondent in their daily duties. The role of implementing agents like Managing for Excellence insofar as it relates to their employment relationship with the respondent was simply intended to administer their salaries….Evidence shows that Managing for Excellence or any implementing agent neither procured nor provided applicants to the respondent….The applicants had no employment contract with Managing for Excellence…I accordingly find that the respondent remained the applicants’ sole employer.’

 The Commissioner then referred to the established principle that if an employee is allowed to work beyond the end of a fixed term contract, the contract is tacitly converted into a permanent one of indefinite duration, terminable on reasonable notice. The Commissioner therefore held that the workers remained the employees of DAFF, that they were dismissed and that the bargaining council thus has the required jurisdiction to arbitrate the dismissal dispute. The employer bears the burden to prove that the dismissal was fair both procedurally and substantively.

 Considering the primary remedy requested by the employees was reinstatement, the Commissioner considered that reinstatement was reasonably practicable, that the continued employment relationship was not intolerable and thus ordered retrospective reinstatement.

In its review application before the Labour Court, DAFF contended that the Commissioner had erred in finding that the employees were employed by DAFF and in awarding reinstatement. The Court, however found that the terms and conditions of employment of the workers did not remain the same after the expiry of their fixed term contracts, however accepted that that an employment relationship existed between the employees and DAFF, but that it was not permanent. The Labour Court argued that the sudden manner of the dismissals justified some form of solatium. The Court declared the dismissals to be procedurally and substantively unfair and overturned reinstatement and replaced it with 12 months of compensation.

On appeal, the Labour Appeal Court found that DAFF’s view that the workers were not its employees were not sustainable for reasons accepted by the Commissioner. The workers were still under the control of DAFF and that their payment arrangements, by implementing agents was only a temporary expedient. In addition, there was no contracts concluded between the workers and the TES.

 The Labour Appeal Court reiterated:

‘If after the expiry of a fixed-term contract, an employee continues to render services to an employer and receives remuneration for the rendering of those services, the contract is deemed to be tacitly relocated or novated. The new contract may be on varied terms and its duration period must be determined in the light of the circumstances of each case. Unless a contrary intention can be inferred from the facts, it will generally be assumed that the parties intended the new contract to be of indefinite duration, terminable by reasonable notice given by either party.’

The Court ruled that there is no merit in the appeal and accordingly dismissed the appeal with cost.

 In addition, the Court confirmed that Section 193 (2) of the LRA provides that unless the employee does not seek reinstatement, or the circumstances surrounding the dismissal as such that a continued employment relationship would be intolerable, or it is not practicable for the employer to reinstate the employee, or the dismissal is only found to be procedurally unfair , the Commissioner must reinstate the employee. The employer thus bears the onus to prove that there are exceptional reasons not to afford the primary remedy of reinstatement. The Court ruled that there was no evidentiary reason why not to offer the primary remedy sought.

What we learn from this case is that should an employer fail to terminate employment upon the expiry of a fixed- term contract and allow the employee to continue working, that a novation of the contract would be presumed and of indefinite duration, unless a contrary intention can be inferred from the facts.

It is advisable for employers to ask for the assistance of a professional Labour Relations Specialist when facing employment law difficulties. Tobie Nel is the Managing Director for Effectus Harmony (Pty) Ltd and has over 15 years’ experience in Labour Law. You can contact him, by phone: 0824479512, by email: [email protected]

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