Key changes to the labour laws in 2015 – part 7: FIXING THE FIXED TERM CONTRACT

Many people are employed on fixed term contracts which are renewed time and again with no promise of job security beyond the current term of the contract. After the third or sixth or twelfth renewal, the employer announces that the contract will not be renewed further, and the employee’s attention is drawn to the term of the contract stating that she agrees that she has no expectation of further renewal. After three or six or twelve continuous years of employment, the relationship has been terminated without any fault on the employee’s part, and in the employer’s view no due process is called for.

The LRA has long provided that a failure by an employer to renew a fixed term contract (or an offer to renew but on less favourable terms) is a dismissal IF the employee can establish that she reasonably expected renewal. This has assisted affected employees who have the stomach to contest their dismissal at the CCMA AND who are able to produce the necessary evidence to show that they had an expectation of renewal which was reasonable in the circumstances. Many more have walked away from their employment situations with a sense that injustice has prevailed.

As of 2015, the LRA has been amended to come to the assistance of employees earning less than the currently prescribed threshold of R205 433,30 per year. Higher earners do not benefit from the new law. Exempted from compliance are employers with fewer than 10 employees, as well as employers with fewer than 50 employees who are in the initial start-up phase of two years.

The new law allows fixed term contracts (including renewals) for periods up to three months only. Fixed term contracts (including renewals) may exceed three months in duration only if (1) the work is of limited or definite duration in nature or (2) the employer can show another justifiable reason. The latter might include:

  • replacing an employee temporarily absent from work (such as on maternity leave)
  • a temporary increase in work volume not expected to last beyond one year (such as a one-off large order)
  • the employee is a student or recent graduate being trained or gaining work experience to enter a job or profession (such as a candidate attorney)
  • the employment is for work on a specific project only, of limited duration
  • a non-citizen employee has a work permit for a limited period only
  • the work is seasonal (such as apple picking)
  • the work is part of an official public works scheme or other job creation scheme
  • the position is funded by an external source for a limited period (such as in the NGO sector)
  • the employee is post-retirement age

The Act goes on to state that a justifiable reason includes the application of a system that takes account of seniority or length of service, merit, the quality or quantity of work performed, or other criteria of a similar nature.

Where the fixed term employment exceeds three months and there is no valid justification, the employment is deemed to be indefinite (that is, permanent) employment.

The employer’s offer of fixed term employment must be in writing and must specify a valid reason for the fixed term nature of employment.

In any proceedings, the employer bears the burden to prove that there was a valid reason for fixed term employment, and that the term was agreed with the employee.

Absent a justifiable reason, fixed term employees performing the same work as permanent employees are entitled to no less favourable treatment. Permanent and fixed term employees are also to be provided with equal opportunity to apply for vacant positions.

Where an employee is employed for a fixed term to work exclusively on a specific project of limited duration, for a period of over twenty-four months, then on termination the employer must pay that employee severance pay equal to one week’s pay per completed year of the contract. This applies prospectively to any work subsequent to the amendment date (1 January 2015) even if the contract was concluded before the amendment. No severance pay is payable, however, if before expiry of the contract the employer offers the employee, or procures for the employee with another employer, employment commencing at expiry on the same or similar terms.

This amendment is one of the most welcome changes to our labour law from an employee perspective, with the scope to prevent a great deal of abuse of the fixed term contract. One waits to see how strictly or generously the CCMA and courts will interpret the requirement that an employer demonstrate a justifiable reason for fixing the term of a contract.

4 thoughts on “Key changes to the labour laws in 2015 – part 7: FIXING THE FIXED TERM CONTRACT

  1. Thanks for this tip, l have a question, if l had been employed under a fixed term contract for the past 4 years and got another 2 months extension in June 2015 to August. Am l entitled to severance for the past 4 years plus. I earn above threshold, but was employed on a fixed term contract before the amendment for a specific task on a specific projects. Please advice.

    1. Hi Collen

      Thanks for the question.

      Section 198B, which provides for payment of severance pay, only applies to employees earning below the threshold. Thus you do not qualify as the section will not apply to your fixed-term employment.

  2. Hi my fixed term contract is fromantic 01/09/15 to 31/12/16 , due to inreased volumes on a particular product line as stated on the contract. Now that the volumes have dropped on that line, my employer wants to prematurely end my contract withour any compensation . There is no provision for premature termination on my contract. What are my rights in this regard ?

    1. Hi Welcome

      In terms of the current case law, an employee on a fixed term contract cannot be retrenched unless the contract provides for early termination by reason of the employer’s operational requirements. Your employer is bound to pay you in accordance with your contract, and you can enforce that right through the Labour Court.

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