FIXED TERM CONTRACTS - UNDER THE NEW AMENDMENTS (Part 1)
by, 11-Nov-13 at 08:29 AM (53225 Views)
Fixed term contracts, (also referred to as limited duration contracts), are contracts that allow an employer to have a measure of flexibility within the workplace. The contract, unlike a permanent employment contract, comes to an automatic end on a specific date or at the end of a specific project. This flexibility would allow an employer to employ a person for a limited duration of time in order to satisfy a particular operational requirement. *
As an example, if a permanent employee were to go on maternity leave, the employer could ‘replace' that employee by filling the position with a fixed term contract appointment. The appointee would be contracted for four months and their employment would come to an end on the date specified. In this manner the employer is able to operate their business with minimum disruption whilst simultaneously not finding himself or herself committed to a new employee in terms of a continued relationship. *
Historically employees found themselves disadvantaged when employers utilized the fixed term contracts as a means to be able to terminate an employment relationship without observing the labour legislation by not renewing the contract. Consequently employee's had no security of continued employment and in conjunction therewith often found themselves excluded from benefits and conditions that permanent employees enjoyed. *
Government stepped in and enacted an amendment whereby an employee who had ‘a reasonable expectation of renewal' of the contract was deemed to be dismissed.
"Even in bona fide appointments on a fixed-term contract of employment, does not mean that an employer has the legal right to simply terminate the employment relationship at will. Our Legislator has specifically introduced section 186(1)(b) of the LRA to govern these situations." *
Biggs v Rand Water (2003) 24 ILJ 1957 (LC)
See also: SACTWU v Mediterranean Woolen Mills (Pty) Ltd (1995) 4 ILJ 889 at 291 (LAC)
Whilst the amendment afforded the employee a measure of protection it failed to address the inequality with regards to employment benefits. In particular, fixed term employees often received lower pay rates, were excluded from pension and medical aid benefits and often had no recourse to annual increases by nature of the contractual provisions.
The amendment also had a negative impact in certain instances. Employers, wary of the expectation of renewal defence, side stepped the provision by not renewing a contract and then ‘employing' a new employee. *
The fixed term contracts, along with labour broking, remained a bone of contention amongst organized labour movements and government, a consequence of which, inter alia, is the new amendment. Whilst the amendment brings about a number of substantial changes and whilst those changes seek to render the renewal concept redundant, the ‘expectation of renewal' will remain an element that an employer must be aware of and the principles established in law in relation thereto will provide guidance to the new concept of ‘justifiability'. Consequently an explanation of this concept remains relevant and follows below. *
Reasonable Expectation of Renewal
In a dispute regarding a dismissal based on an expectation of renewal, the employee bears the burden of proof to show that such an expectation existed. It is common to find a clause such as: *[I]"the employee acknowledges that he/she has no right of expectation in this contract and has no expectation that the contract will be renewed on expiry"[I] embedded in the contract. These clauses do not remove*employee's right to claim dismissal and each case must be adjudicated on its merits and the facts that will support a reasonable expectation.
Common factors that point to raising an expectation of renewal may be: *
a)*Continuous rolling over or renewal of contracts. There is no set amount of renewals that triggers the expectation*but continuous renewals, which cannot be supported by a rational reasoning, will in all probability be considered a factor that created an expectation. The approach involves evaluating all the surrounding circumstances, the significance, or otherwise of the contractual stipulation, agreements, undertakings by the employer, or practice or custom in regard to renewal or re-employment, the availability of the post, the purpose of or reason for concluding the fixed-term contract, inconsistent conduct, failure to give reasonable notice, and the nature of employer's business.
b)*A prior promise, actual or even tacitly. This may occur where a performance evaluation or manager says words to the effect that the company cannot do without the employee or that they may get promoted.
c)*The terms of the contract. The contract, read as a whole, must be a true fixed-term contract. Terms providing for a period of probation, annual salary reviews and annual bonuses, will suggest that the true form of the contract is one of a permanent nature. ** *
A reasonable expectation is determined by an objective test whereby the employee must prove the existence of facts that would lead a reasonable person to expect the renewal of the contract. *
An important issue is that once the expiry date or event comes about, the employer must*either enter into a new contract or terminate the employment. Entering into a new contract requires that contractual principles be followed in that the parties meet, discuss and reach consensus whereupon they enter into a new contract.*** *
In Feni v SA Five Engineering (Pty) Ltd  6 BALR 516 (MEIBC) the applicant had worked for the employer for six months on eight different monthly fixed term contracts between 8 August 2005 and 15 August 2006. These contracts were continually renewed upon expiry of the previous contract. The employee had been sent to work on a different site on a five-month contract, which was not renewed. The applicant maintained that he had been unfairly dismissed because he had not been given notice that his contract would terminate, and because there was still work for him at the time. The applicant also disputed the employer's right to continually roll over repeated fixed term contracts. *
It appears that the employer in this matter had, each time the contract was renewed, merely placed an endorsement in the employees file to that effect - in other words the contract was "rolled over." * *
The arbitrator found that a permanent employee is differentiated from a fixed term employee by the very nature of signing a new contract on each occasion. At the end of each contract the contract terminates and the employment relationship ends unless the company offers fresh employment under a new contract. *
The ‘expectation' dismissal definition has been expanded in the new amendment to include where an employee had a reasonable expectation to be offered full-time employment and applies to all*fixed term contracts. It is also a requirement that fixed term employees must be notified of vacancies and be allowed to apply for them. *
The New Amendments
The Labour Relations Amendment Bill, 2012 introduced a new section 198B dealing with fixed term contracts. The amendments are as follows:
* i.*An employer may engage an employee on a fixed term contract that exceeds*six months*only if the work for which the contract is used is of a limited duration*or the employer can provide a justifiable reason. The justifiable reason must be written*and recorded in the contract.
ii.*An employee, justifiably employed on a fixed term contract for longer than six months, must be treated no less favourably than a permanent employee.
iii.*Employment in terms of a fixed term contract that is concluded or renewed without justifiable reason is deemed to be of indefinite duration (permanent).
iv.*The employer must prove that there was a justifiable reason for fixing the term of the contract and that the term was agreed. *
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