It often happens that an employee who has been appointed on a fixed-term contract is allowed to continue working beyond the expiry date. What is the employee's status after that date? Is the employee regarded as being temporary?
A fixed-term contract is one that commences on a particular date and ends on a particular date stipulated in the contract. There is normally a good reason for this, for example the employee is standing in for someone on maternity leave or the employee has been appointed to complete a task that is of a temporary nature. A fixed-term contract is not a substitute for probation and an employee whose services have been terminated without a hearing at the end of a fixed term in this context would be justified in challenging the employer for unfair dismissal. Where an employer fails to renew a fixed-term contract or renews it on less favourable terms, an employee may have a case for unfair dismissal against the employer if the employee can prove that the employer has created a reasonable expectation that the contract would be renewed. Then there is the interesting situation where the employer allows the employee to continue working beyond the expiry date and the effect this has on the status of the employee.
In the case of SACTWU & another v Cadema Industries (Pty) Ltd a person had been employed on several consecutive fixed-term contracts for a period of more than four years. She was then informed that her contract would not be renewed. After pleas to management the contract was renewed for a further fixed period of several months. Seven days after the final expiry date the employee's services were terminated. In this case the court found that the employee had a reasonable expectation of renewal on the grounds of:
- the repeated renewals without discussion;
- the fact that her contract had previously been extended after her pleas to management; and
- the evidence that there was plenty of work in her section.
Although the court dealt with the matter on the basis of "reasonable expectation" it would have been equally valid to find that by allowing the employee to work beyond the expiry date of her contract her status s an employee had changed. She was no longer an employee on a fixed-term contract, but rather an employee on an indefinite contract. The court found that the employee had been unfairly dismissed and awarded compensation to the value of six months' salary.
There are several lessons to be learnt from this case:
- Do not enter into a fixed-term contract unless there is a good operational reason for doing so.
- Try to match the duration of the agreement to the operational purpose of the fixed-term contract. If the period is uncertain because the employee is required to complete a task of a temporary nature, it might be better to link the duration to the completion of the task rather than to stipulate a termination date.
- Do not renew or extend a fixed-term contract without a good operational reason.
- Communicate with the employee the reason for any renewal.
- Do not allow employment to continue beyond a fixed term without first having recorded the agreement regarding the renewal or extension in writing.
In order not to be contractually obligated for the full contractual period of a fixed-term contract or its extension, it is also prudent for the employer to include a provision for the premature termination of the contract for reasons of misconduct, incapacity or the employerâ€™s operational requirements.
Jan Truter of www.labourwise.co.za
www.labourwise.co.za is an on-line labour relations service aimed at assisting employers with the implementation of effective labour relations. They can be contacted via the website or email@example.com.