Just as we think that the law pertaining to fixed term contracts has settled, something changes. While the latest development regarding the expectation of renewal of a fixed term contract may be welcomed by employers, there is no reason to celebrate.
There are certain aspects pertaining to fixed term contracts that are well established: It is acceptable practice to appoint a person on a fixed term contract if there is a good operational reason to do so. A fixed term contract terminates on the expiry date without the obligation to give notice. We also know that one cannot use a fixed term contract as a substitute for probation – termination in these circumstances often leads to employers being held liable for unfair dismissal. Another principle that has become well established is where an employee works beyond the expiry of the contract without signing a new agreement; the employee would then be regarded as being indefinitely or permanently employed.
The latest development relates to the expectation of renewal of a fixed term contract. Section 186(1)(b) of the Labour Relations Act makes provision for a situation where an employee has a reasonable expectation of renewal of a fixed term contract “on the same or similar terms but the employer offered to renew it on less favourable terms or did not renew it”. If the employee can prove that he or she had such an expectation and that the expectation was reasonable, the non-renewal could be regarded as an unfair dismissal. But can an employee who has been employed on successive fixed term contracts (i.e. the “rolling over” of contracts) claim expectation of permanent employment?
The Labour Court has on occasion held that, where a contract has been rolled over several times, the interpretation of Section 186(1)(b) could be extended to an expectation of indefinite or permanent employment. However, in the recent case of University of Pretoria vs CCMA & others the Labour Appeal Court came to a different conclusion. The employee, Ms Geldenhuys, had been employed by the university on seven successive fixed term contracts. At the end of the last contract she was interviewed for a possible permanent position. She was not permanently appointed, but was instead offered another fixed term contract for a shorter period. Ms Geldenhuys declined the offer and claimed that after all these years she reasonably expected to be appointed on a permanent basis and that the university’s failure to so appoint her constituted a dismissal. The court found that Section 186(1)(b) did not contemplate an expectation of indefinite employment, but that it was limited to an expectation of renewal on same a similar terms (i.e. for another fixed term). This means that an employee has no remedy based on an expectation of indefinite or permanent employment.
While the outcome of this case may come as good news for employers, the effect is likely to be short lived. The proposed changes to the Labour Relations Act envisage that a failure to renew a fixed term contract for an indefinite period could also be regarded as a dismissal if the employee can prove that he or she had a reasonable expectation of indefinite employment.
The proposed amendments to labour legislation also envisage the protection of temporary employees in other respects, for example an employee will be deemed to be permanently employed unless the employer can show a justification for fixed term employment. Employers will also be required to contribute benefits of similar or equal value to employees employed on a fixed term contract. It is therefore important for employers to be mindful of the forthcoming changes when entering into temporary contracts of employment.
Jan Truter of www.labourwise.co.za