Fixed term contracts are often used in the labour field for different reasons.
Sometimes employees are needed on a project for a specific time period or a position is only available for a time, for instance where an employee is on maternity leave.

In the building industry fixed term contracts could be terminated at the arrival of a specific event, for instance a plasterer’s contract will terminate if that portion of the project is finalised.

These contracts come to a natural end at the time stipulated in the contract or at the arrival of a specific event, when the employee’s services will terminate. That is then the end of the relationship.

The question arose whether a fixed term contract may be terminated before the specified date of termination in the contract.

The common law rule is that such a contract may not be terminated for any other reason than material breach or repudiation of the contract by the employee. In other words the employee may resign before the date of termination, or if the employee is found guilty of serious misconduct and dismissed, which will mean the employee was in breach of the contract.

The employer may not terminate the contract before the time. The reason for this rule is that parties bind themselves in the contract for a specific time period and the commitment should be honoured.

Recently in two cases, the Labour court had to determine this issue again. In NKOPANE & OTHERS v INDEPENDENT ELECTORAL COMMISSION (2007) 28 ILJ 670 (LC) the IEC needed to retrench a number of employees as there were no work for them.

Their letters of appointment stated that they were employed on contract for “two to three years”. Later the parties agreed upon termination dates.

The court found that these were fixed term contracts and that the IEC could not terminate them before the end of the term. The court confirmed the common law rule.

In NATIONAL UNION OF METALWORKERS OF SA & OTHERS v SA FIVE ENGINEERING (PTY) LTD & OTHERS (2007) 28 ILJ 1290 (LC), employees were contracted to reconstruct and refit a ship. The project had specific stages and was by nature, of a limited duration.

The employees were employed for limited periods. The contracts of employment were vague as it had no specific dates of termination, but the time of termination was linked to a specific event. The employees argued that all their contracts should have been terminated at the completion of the project.

The employer argued that their tasks for which they were employed were completed and therefore they needed to be retrenched.

The court found that the termination of these fixed term contracts were not unfair because the tasks were completed and there was no further work for them.

The difference in findings of the court in these two cases is based on the facts of the matter. In the IEC case there were specific dates to which the parties committed themselves. If the employer had no further work for the employees it had only one option and that is to pay out the remainder of the contract. In the NUMSA case there was no commitment to a specific date but rather that the contracts would automatically terminate upon the completion of each employees task for which they were appointed.

The principal remains that fixed term contracts cannot be terminated prior to the date agreed upon unless there is material breach or repudiation of the contract. The wording of these contracts should be looked at carefully.