There is much uncertainty on when the appointment of employees on fixed-term contracts is unfair and what rights are available to such employees since the coming into operation of the Labour Relations Amendment Act, No. 6 of 2014. This is why we will now be looking at the fairness of appointing employees on a fixed-term contract basis for longer than three months.
One of the most important amendments to the Labour Relations Act was in respect of fixed-term contracts. The amendment concerned came into effect on 1 January 2015 and is contained in section 198B of the Act. However, this section applies only to employees earning below the income threshold (currently R205 433,30 per year).
In terms of section 198B, an employer may appoint an employee on a fixed-term contract for longer than three months only if –
- the nature of the work for which the employee is employed is of a limited or definite duration; or
- the employer can demonstrate any other justifiable reason for fixing the term of the contract.
If the employer does not produce a justifiable reason, the employee shall be deemed to be appointed on a permanent basis. The problem usually arises on termination of service, and it could then be argued that the employee’s services have been terminated unfairly by the employer. Such a dispute may eventually be referred to the CCMA to determine what is fair.
What is a justifiable reason in terms of the Act? Justifiable reasons, in terms of section 198B, are when the employee –
- is replacing another employee who is temporarily absent from work;
- is employed on account of a temporary increase in the volume of work;
- is a student employed for the purpose of being trained or gaining work experience to enter a profession;
- is employed to work exclusively on a specific project which has a limited or defined duration;
- is a non-citizen who has been granted a work permit for a defined period;
- is employed to perform seasonal work;
- is employed for the purposes of an official public works scheme;
- is employed in a position funded by an external source for a limited period;
- has reached the normal or agreed-upon retirement age.
Legislation also provides additional protection for employees appointed on a fixed-term contract.
Firstly, employees employed on fixed-term contracts for longer than three months must not be treated less favourably than employees employed on a permanent basis and who perform the same work, unless there is a justifiable reason for the different treatment.
Secondly, these employees must be provided equal access to opportunities to apply for vacancies.
Thirdly, any employee appointed on a fixed-term contract for longer than 24 months is entitled to a severance package.
If an employee’s earnings exceed the income threshold, section 198B does not apply and one has to look at the employers’ intention.
When an employee’s fixed-term contract has expired, the employee is not automatically entitled to continued employment. If the employer has indeed created a reasonable expectation that the contract would be renewed, this could lead to a dispute for unfair dismissal being referred to the CCMA. The reasonable expectation, however, will depend on several factors. For example, the fact that a contract has been renewed repeatedly is only one such factor. It could be argued that when a contract has been renewed three or four times a reasonable expectation has been created in the employee that the contract will be renewed again. The onus of proof is on the employee, and this is an objective test to be applied by the court, where all applicable circumstances have to be considered to determine whether a reasonable expectation has been created and whether it eventually amounts to unfair dismissal.
Since the coming into operation of the Labour Relations Amendment Act of 2014, employers therefore have to approach the appointment of employees on fixed-term contracts very carefully and they now cannot appoint employees on a fixed-term contract with the intention of simply ‘trying them out’ first. This will, however, result in a considerable increase in referrals to the CCMA.
Author: Melissa Erasmus