The use of fixed-term contracts has been greatly impacted by the amendments made to the Labour Relations Act (LRA) in 2015. The amendments were introduced in an attempt to protect vulnerable employees (those earning less than the prescribed earnings threshold) from exploitation. The earnings threshold is determined by the Minister of Employment and Labour and is currently R241 110.59 per annum (1 March 2023).
Section 198B of the LRA defines a fixed-term contract as a contract of employment that terminates on:
(a) the occurrence of a specific event;
(b) the completion of a specified task or project; or
(c) a fixed date, other than an employee’s normal or agreed retirement age.
The provisions of section 198B of the Act do not apply to employees employed on fixed-term contracts where:
The employer employs less than 10 employees;
The employer employs less than 50 employees and its business has been in operation for less than two years;
The employees earn above the earnings threshold as described above.
These exclusions also do not apply if the employer conducts more than one business or the business was formed by the division or dissolution for any reason of an existing business. An employer may engage an employee on a single fixed-term contract or successive fixed-term contracts for longer than three months of employment only if –
(a) the nature of the work for which the employee is engaged is of limited or definite duration; or
(b) the employer can demonstrate any other justifiable reason for fixing the term of the contract such as:
Replacing another employee who is temporarily absent from work;
Engaged on account of a temporary increase in the volume of work which is not expected to endure beyond 12 months;
A student or recent graduate who is employed for the purpose of being trained or gaining work experience in order to enter a job or profession;
Engaged to work exclusively on a genuine and specific project that has a limited or defined duration;
Is a non-citizen who has been granted a work permit for a defined period;
Is engaged in a position that is funded by an external source for a limited period;
Has reached the normal or agreed retirement age applicable in the employer’s business.
Employees who are appointed on fixed-term contracts exceeding 3 months will be deemed to have been appointed for an indefinite duration unless the conclusion of the fixed-term contract exceeding 3 months can be justified.
An employee employed on a fixed-term contract for longer than three months must be treated on the whole not less favourable than an employee employed permanently, performing the same or similar work, unless there is a justifiable reason for the differential treatment. An employer who engages an employee on a fixed-term contract for a specific project for a period exceeding 24 months must pay the employee on expiry of the contract one week’s remuneration for each completed year of the contract.
An offer to employ an employee on a fixed term contract or to renew or extend a fixed term contract, must be in writing and state the reasons for entering into a fixed term period of employment.
The right of expectation
It is generally believed that after a fixed-term contract or temporary contract of employment is rolled over or renewed, the employee may develop a right to expect that the employer will continue to renew the contract. The number of times that a fixed-term contract of employment has been rolled over may contribute towards an expectation of another similar contract after the natural expiry of the last contract.
Section 186(1)(b) of the LRA defines dismissal as, inter alia, an instance where a fixed term contract naturally expired, and the employer does not offer another contract where a reasonable expectation of another contract was created through the employer’s conduct. The aforementioned is also applicable where the employer offers another fixed-term contract but on less favourable terms, doing the same work, and the offer is declined by the employee.
The burden of proof shall however lie with the employee that refers to the natural expiration of a fixed term contract of employment to the CCMA or Bargaining Council (where applicable) as unfair dismissal.
The expectation of permanent employment
Very often employees claim that they are expected to be appointed permanently as a result of continuous “indefinite” fixed-term contracts or because the temporary position becomes permanent.
The expectation of permanent or indefinite employment is addressed in section 186(1)(b)(ii) of the LRA:
“Dismissal” means that –
(a) an employer has terminated employment with or without notice;
(b) an employee employed in terms of a fixed term contract of employment reasonably expected the employer –
(i) to renew a fixed term contract of employment on the same or similar terms but the employer offered to renew it on less favourable terms, or did not renew it; or
(ii) to retain the employee in employment on an indefinite basis but otherwise on the same or similar terms as the fixed term contract, but the employer offered to retain the employee on less favourable terms or did not offer to retain the employee.
It is possible for an employee, regardless of whether the employee earns above or below the earnings threshold to claim that a dismissal took place where a reasonable expectation of permanent employment was created by the employer and not offered. This will be applicable even where the employer offered to retain the employee on a fixed-term contract that is much more favourable than the last contract that naturally expired.
Termination of fixed-term contracts
Fixed-term contracts are often used in the labour field for different reasons. Sometimes employees are needed on a project for a specific period or where a position is only available as a result of the temporary absence of an employee of the employer.
These contracts typically come to a natural end on an agreed date or at the arrival of a specific event agreed to in the contract of employment. The common law rule, as confirmed by the courts, is that such a contract may not be terminated for any other reasons than a material breach or repudiation of the contract by the employee. In other words, the employee may opt to resign before the date of termination, or the employer may dismiss the employee based on misconduct or incapacity.
Employers are however reminded that employees appointed on fixed-term contracts may not be retrenched unless so agreed to. Therefore, fixed-term contracts should contain a clause that allows for termination due to the operational requirements of the employer.
An unjustified exclusion means unfair discrimination
By excluding temporary or fixed-term contract staff from consideration for vacant positions, the employer may discriminate against such employees. An employer must provide an employee employed in terms of a fixed term contract and an employee employed on a permanent basis with equal access to opportunities to apply for vacancies (LRA - Section 198B(9)).
A part-time employee is defined in section 198C of the LRA as an employee who is remunerated wholly or partly by reference to the time that the employee works and who works fewer hours than a comparable full-time employee.
Similar to sections 198A and 198B of the LRA, section 198C applies only to employees who earn on or below the threshold prescribed in terms of section 6(3) of the Basic Conditions of Employment Act (BCEA). It however does not apply to part-time employees who ordinarily work less than 24 hours a month, or during the first three (3) months of employment. In order to accommodate new and small businesses this section does not apply to:
(a) an employer that employs less than 10 employees; and
(b) an employer that employs less than 50 employees and whose business has been in operation for less than two (2) years unless the employer conducts more than one business or the business was formed by the division or dissolution for any reason of an existing business.
An additional requirement exists in order for section 198C to be applicable and that is that there must be a comparable full-time employee in the service of the employer. This employee is defined in section 198C:
A comparable full-time employee is an employee who is remunerated wholly or partly by the reference to the time that the employee works and who is identifiable as a full-time employee in terms of the custom and practice of the employer of that employee. This however does not include a full-time employee whose hours of work are temporarily reduced for operational requirements as a result of an agreement.
Section 198C seeks to define part-time and comparable full-time employees, and requires employers to:
(a) Treat part-time employees on the whole not less favourable than comparable full-time employees doing the same or similar work unless there is a justifiable reason for different treatment.
(b) Provide part-time employees with access to training and skills development that is on the whole not less favourable than the access applicable to comparable full-time employees.
(c) Provide part-time employees with the same access to opportunities to apply for vacancies as full-time employees.