Unemployment rates in South Africa is still very high, perhaps this is the reason why most employees on fixed term contracts often become aggrieved when employers fail to renew their contracts. Such aggrieved employees turn to quickly refer an unfair dismissal claim to the CCMA under Section 186 (1)(a) of the LRA, but does the non-renewal of a fixed term contract constitute a dismissal?
One must first understand what a fixed-term or limited duration contract of employment is. Section 198(B) of the LRA help us to understand, as the name suggests, that a fixed term contract is entered into for a fixed, determinable, period of time only and is generally a once-off agreement with a limited duration. Fixed-term contracts terminate automatically at the end of the agreed period, or upon the occurrence of a clearly specified date or event, or the completion of a specified task or project. And importantly, the contract must specify or indicate a justifiable reason for fixing the term.
To whom does Section 198(B) apply?
This section is applicable to employees earning below the threshold as prescribed by the Minister of Labour, which is currently R211 596 per annum.
This section excludes businesses that employ less than 10 employees, or with less than 50 employees whose business has been in operation for less than 2 years, unless the employer conducts more than 1 business, or the business was formed as a result a division or dissolution of an existing business.
It further does not apply to employees whom are allowed in terms of a collective agreement, statute or sectoral determination to be employed on a fixed term contract.
In the matter of National Union of Public Service and Allied Workers (NUPSAW) v Mfingwana and Others – (2020) 29 LC the employee was employed on a 6 months fixed term contract which was extended for 5 more months, after which it was not renewed. The employee claimed dismissal at the CCMA. The Commissioner held that a dismissal had occurred, and such dismissal was both procedurally and substantively unfair. The employer appealed to the Labour Court, however, the Labour Court agreed with the CCMA and noted that the position was not of a limited duration and the employer failed to give a justifiable reason for fixing the term of the contract. Therefore, the employee’s employment was deemed to be of an indefinite duration after he had served three months.
Conclusion:
The onus rests on the employer to prove why the contract was fixed, failure to do so would deem the employee to be employed indefinitely. Should the employer however terminate the services of that employee as if the contract was a valid fixed-term contract when it was not, could be seen as an alleged unfair dismissal.
Furthermore, in circumstances where the fixed term contract is valid, but the employer created a legitimate expectation of renewal on same or similar terms, or alternatively of permanency, and being found that such expectation was indeed created may result in a valid claim for unfair dismissal.
It must however be kept in mind that the employee is required to prove such expectation and that it is not an easy task. Therefore, employers must ensure that the fixed term contracts reflect the requirements of section 198 B, where applicable. Furthermore it is perhaps even more critical that proper advice is sought prior to appointing staff on fixed term contracts so that a proper assessment can be made in order to ensure legal compliance thus avoiding the mentioned risks.