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FIXED-TERM CONTRACTS: WHAT HAPPENS IF THE EMPLOYEE WORKS BEYOND THE EXPIRY DATE?
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 employer’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 info@labourwise.co.za.
Comments
I as a white male was employed on a fixed term contract for a specific position within a semi government parastatal. They where unable to find anyone who would sign a fixed term contract for the same positions subsequently. Now all new employees for this position are employed on a permanent basis which includes privident funds etc. is this not a violation of labour law. No reason has been given for the discrimination.
Reply to Clint: If you you are treated less favourably than employees that are permanently employed merely by virtue of the fact that you are on a fixed term contract, you should be able to succesfully challenge the employer. I propose that you approach an attorney who specialises in labour and employment law for appropriate advice an assistance.
hi I have signed a 3month contract then a 6month contract then a 1 year contract and another 1 year contract now the company tells me they will not be renewing my contract all I would like to know am I entitled to a severance package
Reply to Mark: The entitlement to severance pay for termination of a fixed term contract only applies to an employee who has been employed for more than 24 months and whose contract expires on 31 December 2106 or thereafter.
l have signed 6 month contract but now its ended.but the employer want to offer me another 3 months and i refused to sign .i want to know can i claim money for provident fund
Reply to Shumani: Not all industries have provident funds and provident funds do not all have the same rules. If you/your company have been making a contribution to a provident fund, you will have to find out what the provident fund rules state about the consequences of termination of employment in your case.
I have been contracted to a Parastatal for 3 years 8months through a labour broker and my contract has been renewed every six months from 2010. The position that I occupy has been vacant since I joined in 2010. I have been informed that my contract will not be renewed when it ends in 2months time… Please advise on what steps I need to take to secure this position
Reply to A Mutunga: As the law stands at present, your claim to continued employment depends on whether you are able to prove that the employer created a reasonable expectation of renewal.
I have been employed as Fixed term contract for 6 months.Now i need to resign from my job before end of contract.But employer is stating that its not possible to relieve until contract end point as per SA labor law.How to get relieve from this.
Reply to Rekha: If you have agreed to work a fixed term without a notice period, you may be contractually bound to work for the entire period. However, it could be matter of interpretation and I suggest that you speak to an expert in labour law.
I was employed under 3 fixed term contracts over the last 3 years. being renewed either early or as with the last one, about a month late. I am GM of a hotel and the contract required 3 month’s notice. My current contract expired 26 June. I emailed the owner about a week before 26 June who emailed me back, ensuring me that he will do my new contract upon return from his trip on 11 July.
On 15 July an emergency meeting was held with my Reservations Manager and Rooms Division manager. When I asked what was going on – the Res manager told me “I can’t say, but you should speak to the owner. Its not good.”
I tried to have a chat with him and he avoided me, telling me that he is going for lunch.
I wrote an email, expressing my unhappiness with the “secret meeting” and asking if I should resign, as it seems he is digging for a reason to let me go. He also requested my clocking hours from our Finance manager as I found out.
On the 16th I was called to a meeting with the owner and his brother. They informed me that my contract would not be renewed but that they would like things to go “amicably” and agree to pay my notice, outstanding bonus for June and any statutory payments due. It took my breath away and I couldn’t even say anything. I was escorted to collect my things like a criminal and told I can stay on the hotel premises for another month as per labour law.
Later that afternoon, I received a typed hand-delivered letter, where the owner writes “We hereby accept your resignation as per your email dates 15 July 2013”.
So they had decided to accept my email as my resignation.
Now I have also been told by the owner that they will only pay 1 month notice. When I questioned it, I was told that I must be confused.
What should I do in this case? Do I insist that my notice period intended by my resignation is 3 months, or do I take them on for unfair dismissal? I’m still in shock and don’t understand it as I’ve dedicated most of my professional and personal life to this business and its success – and I have done well because I even received over 70% of my performance bonus each period.
Help! I can’t afford to relocate and find a new place to live with just 1 month notice. I don’t have a new job yet and I’m stressing out.
Reply to Andre: According to the version given, it does not seem that you have resigned – you merely asked the question as to whether they wanted you to resign. You may be a case for unfair dismissal based on a reasonable expectation of renewal of you contract.
Hi,
some of our employees were appointed on fixed term basis 1 year rolling over 6 times. The last roll over was only for 1 month, what notice do we have to give – 1 week or 4 weeks?
Reply to Anneke: In the case of a fixed term contract you are not be required to give notice because the end date has been determined. However, after so many renewals you might have a problem with the employees arguing that they have a reasonable expectation of renewal.
I have worked at an institution for four years on the fixed-term contract that has been renewed over those years. The last contract ended on the 30th April 2013 but I was allowed to continue with work as it has always been the norm at the institution to renew contracts of employment late. To my surprise on the 16th May 2013 I received a letter from the CEO of the institution notifying me that my contract of employment has not been renewed and there were no reasons cited. This came as a shock to me as the two directors I report to assured me they had submitted motivations for my contract of employment renewal. Can I have a case to argue on this matter as I feel that this is an unfair labour practise?
Reply to Abel: Based on the facts provided you seem to have good case for an unfair dismissal claim. Just bear in mind that you only have 30 days to refer an unfair dismissal dispute to the CCMA.
Hi,
I was employed on a fix term contract in 2010. The company I’m working for renewed my contract every six months.Last month I got a letter informing me that my contract will not be renewed and my contract will terminate end of this month. Please note the position I’m currently holding was advertise last year and no one was appointed. I wasnt even short-listed. The person who originally held the position return to work last year. After being boarded from work. What can I do?
Reply to Sam: To succeed with an unfair dismissal claim you would have to prove that you had a reasonable expectation of further renewal of your contract. It is not clear form your enquiry what facts you have to support a reasonable expectation.
Hi. I’m currently employed with the Dept of health under a 6 mth contract which is coming to an end on June 30. My employer has assured me of an extension of contract. What happens if this gets done only later in June? Will I get paid in July if I continue to work or will I no longer be on the payroll. And also will a late contract extension affect my salary in July? Many thanks
Reply to Jane: If the contract is not renewed, that is the end of the matter – your contract comes to an end on 30 June. Leave pay would be due, but not notice pay. If it is not extended, you may have a claim for unfair dismissal based on a reasonable expectation of extension having been created. If the contact is extended in respect of the same job, your remuneration should remain unchanged
I have been employed for 8years as a fulltime part time now my employee wants me to sign a flexible time contract is that valid in terms of the law
Reply to Sello: The employer may not change your terms and conditions of employment without your agreement. However, if the employer is able to prove that it operationally justifiable to change conditions of employment, and there are no other reasonable alternatives, the employer may (subject to proper consultation) retrench employees who are not willing to go along with the change.
Hi, my husband is working for an engineering company for about 8 years (contract gets renewed every 6 months or year at different intervals). Last year he secured a permanent position elsewhere, his manager convinced him to stay with a lot of promises (nothing in writing). He was sent to work on site in Mozambique for 6 months on site. when he returned this month, he found out that people in the same position have been made permanent, they started way after him. It’s grossly unfair. On his return from Mozambique, he received yet another contract extension letter, expiring June 2013. What can he do?
Reply to Meredith: I suggest that he raises this with the employer, either informally or as a formal written grievance (depending on his relationship with management). The point would be to get on record the reason for treating him differently and hopefully a correction of the situation. If they terminate employment after 30 June 2013, their responses will be relevant in determining his course of action.
I was employed on a temporary contract, the end date of which has now expired, and the went stated verbally, with nothing in writing, that there is definite iwork for me until September. Is this classed as an extension of my temporary contract, or can I now be classed as permanent/indefinitely employed as no new contract was signed?
Reply to Lizzie: If you were told by your employer verbally before the expiry of your contract that there will be work for you until September, it means that your contract has been extended to September (even though it was verbal). It does not mean that you are employed indefinitely.
Hi,
If they renew the fixed term contract am i aload to ask for a better salary that the first fixed term contract
Response to Lizelle: Yes you may negotiate for a better salary, but the employer may not agree and may decide not to renew the contract.
I have been employment for sevem months on three months fixed terms,my second fixed term expired at texpired last month,but I didn’t renew it but I continued working,two weeks into the expired employment,I am told my employment is no longer required without a hearing,do I have any recourse.
Reply to Bongani: You should have recourse based on the argument that you worked beyond the the termination date and that termination of employment thereafter amounts to a dismissal.
I was on a temp contract for a period of 6 months. When the contract ended I was told to continue working on the basis of the old contract whilst waiting for HR to draw up a new contract. The new contract was only available at the end of the month,(I had been working for 3 weeks with no contract) close to pay day, and I was told I need to sign it backdated to the 1st of the month, in order to get paid. The new contract was a fixed term contract for 4 months. Now the fixed term contract is ending and I am told they will not continue with me; although my work has not ended. They say that they will restructure to fill my post. I do feel this is related to conflict that recently arose between management and myself and not due to not being able to extend. Other employees are being extended for a further 7 months.
What are my options?
Reply to Natasha: As the law stands at present you would have to prove that you had reasonable expectation of the renewal or further extension of your contract. The matter is not al that straightforward and it is suggested that you consult with a specialist in Labour law for advice.
i was employed for 2 months but my contract ended on november last year..but the thing is the called me to help out in another field..ive been working there for 3 months now on the same salary as my previous title and still my agency hasnot given me a contract or chanced my job title
Reply to Vivian: If no termination date was agreed, you would probably be regarded as indefinitely employed.
Hi,
I was employed on a fixed term bases for three months, my employer now wants to backdate a new fixed term contract for me, is that legal?
Regards
Lee
Reply to Lee-Anne: Once oen is allowed to work beyond the termination date of a fixed term contract (without any further agreement having been reached, or anything else that indicates that the appointment was clearly for a temporary purpose), the conclusion is normally that such employment has become indefinite/permanent .
Is it right for the employer to keep renewing a fixed contract more than 4 times without an increasing salary?
Reply to Zuzekile: Unless regulated by law (Sectoral Determination or Bargaining Council) there is no obligation on an employer to give an increase. It remains a matter for negotiation.
Can an employee be dismissed before the expiry of his fixed term contract
It depends on the reason for the dismissal and the type of contract. Generally an employee on a fixed term contract may be dismissed for incapcity (poor work performance or medical incapacity) or misconduct given that you follow the correct procedure. An employee on a fixed term contract may only be dismissed for operational requirements if the contract specifically makes provision for it and you follow the correct procedure.
I’m on a 2 year fixed term contract, after 1 year (July 2012), the employer informs me that due to operational requirements they have to amend the contract and offer me a new position with less salary. My contract explicitly states that an amend must be agreed by both parties. What will happen if I refuse the new terms? Does the employer have a right to amend a fixed term contract?
Any change in conditions of employment has to be agreed mutually between the parties. The employer may not unilaterlly amend the contract. If you are unwilling to agree to a change in the agreement, the employer may have an argument to terminate your services based on operational requirement (retrench you) given that the contract makes provision for this.
I was employed on a fixed term contract at a golf club. The contract started 14/12/10 and was to terminate on 31/3/11. My employment with the company continued without a renewed contract and I am still at the club to this date. Whilst I do not want to cause any ill feelings, I feel that I have been unfairly treated. I do not receive any company benefits besides remuneration.If I insist on a permanent contract,would it be justified?
If you continued working beyond the termination date stated in the fixed term contract witnout a new termination date being agreed, you can consider yourself indefinitely/permanently employed.
I started a small business where I employed “contractors” i.e. they receive work if and when we receive work. Then our company grew and some contractors are now working solely for us. We provide them with a car, we regulate their hours etc. I now want to terminate their old contract, and employ them on a permanent basis, and would then need a new employment contract signed. What are the complications, if any? I am currently paying their UIF, provident fund etc, and they are thereby already treated as a permanent employee. If they refuse to sign our new contract, do we in any event cancel the old contract and work according to the basic conditions of employment Acts? It is not my intention to terminate their services, but the original contract in a lot of aspects no longer applies.
The “contractors” were indeed employees working on an occasional basis, but will now probably be regarded as permanent employees. If you wish to change their current terms and conditions of employment, it would have to be negotiated. I suggest that you enter into discussion with them reagrding the current needs of the business. If you reach agreement, you can draft and sign new contracts (with recognition of their service from the date they started working for you). If you cannot reach agreement, there is possibly more than one way to go about it. However, I would suggest that you obtain legal advice at that point. Jan Truter for Labourwise
Good day,
I work for a manufacturing company which also provides services as part of the “selling of the product” to certain large retail stores. One of these services is the merchandiser in store to pack shelves etc. A number of these merchandisers are employed based on a Fixed term contract, for three months at a time, then renewed in writing for a further two periods of three months each. All this is in a written contract between the company and the merchandiser. Is there a limit on how many times one can renew this contract and on the period of time they can work under this type of contract? Thank you
There is no specified limit on the number of times a fixed term contract may be renewed. The more it is renewed, the stronger an employee’s argument that there was a reasonable expectation of renewal. The important issue is whether there is a reason for employing a person for a fixed term contract rather than an indefinite period. If the job will still be there after expiry of the fixed term contract, the employee is likely to prove a reasonable expectation of renewal and termination would be regarded as an unfair dismissal. If the proposed changes in labour legislation are implemented, employers would have to prove that there good operational reason for a contract to be for a fixed term, failing which the contract will be deemed to be permanent. Jan Truter for Labourwise
Nazziema,
It would have been better if you adressed the matter before going over to the labour broker. SInce you have already gone over to the labour broker, it appears that the employer does not have any obligation to take you back.
regards
pieter