UNDERSTANDING THE CONCEPT OF "BREAK IN SERVICES" IN THE CONTEXT OF EMPLOYMENT

Understanding the Concept

A "break in service" in South African labour law refers to the interruption or termination of the employment relationship between an employer and employee, which effects the continuity of service for purposes of calculating benefits, leave entitlements, and other employment-related rights. This concept is particularly important when determining severance pay, notice periods, and accumulated leave benefits.

The concept of break in service is primarily governed by the Basic Conditions of Employment Act (BCEA) and the Labour Relations Act (LRA). The courts have also developed jurisprudence around what constitutes a genuine break in service versus situations where continuity should be preserved.

What Constitutes a Break in Service?

A break in service occurs when:

1. Resignation followed by re-employment: An employee voluntarily terminates their employment and is later re-hired, with a clear gap between the two periods of employment.

2. Dismissal and subsequent re-employment: Where an employee is legitimately dismissed and later re-employed after a period of separation.

3. Expiry of fixed-term contracts: When a fixed-term contract expires and the employee is re-engaged after a break, though this area requires careful consideration given the legislative protection afforded to fixed term employees.

4. Retrenchment followed by re-employment: Where an employee is retrenched due to operational requirements and later re-employed.

5. Break in service of less than 12 months: The BCEA permits an employee who had a break in service for a period of less than 12 months with the same employer, to claim severance pay including the years of service before the break provided that the break was not longer than 12 months and provided the employee has not already received severance pay for the period of service before the break.

Situations that does not constitute a break in service, where continuity should be preserved:

1. Maternity leave: The time spent on maternity leave does not constitute a break in service. The employee remains in the service of the employer during this period and the employer is obligated to preserve the employee's position.

2. A temporary layoff or short-time work: Where the intention is to implement temporary measure to avoid job losses due to operational needs, like a downturn in business but the employer intends to reinstate employees when conditions improve, this is different from a permanent termination/ retrenchment.

3. Suspension: Suspension is typically a temporary measure while an investigation is ongoing, and the employment relationship continues without a break in service. While the employee is not actively working, they remain employed and are usually suspended on full pay.

4. Constructive dismissal: Where an employee resigns due to intolerable working conditions, the resignation may not constitute a genuine break in service.

5. Automatic re-engagement: Where there's an understanding or agreement that the employee will be immediately re-employed.

6. Transfer of business: Under section 197 of the LRA, employees' service typically continues when a business is transferred and the new employer takes over employees with their previous years of service.

7. Sham arrangements: Where an employer orchestrates a temporary "resignation" or "dismissal" purely to avoid paying benefits or to reset the employee's service record.

The courts have been vigilant about schemes designed to artificially break service continuity and employers should be aware that contracts that are specifically designed to avoid paying benefits tied to length of service may result in unfavourable judgements and costly repercussion.

The Labour Relations Amendment Act in particular introduced stricter regulations around fixed-term contracts and labour broking, which impacts how breaks in service are assessed. Employers must be particularly cautious about repeatedly employing someone on fixed-term contracts, as this may be deemed to create an indefinite employment relationship.

Legal Implications of a break in service:

For Employers

When a genuine break in service occurs, employers are typically required to:

• Pay out accumulated leave

• Provide appropriate notice or payment in lieu of notice

• Calculate severance pay based on the completed period of service in instances of retrenchment

• Issue required documentation such as certificates of service and a UI19.

For Employees

A break in service means:

• Accumulated leave that hasn't been taken is paid out

• Potential loss of certain benefits tied to length of service

• New calculation period for severance pay entitlements

In Conclusion

The concept of break in service remains an important aspect of South African labour law, balancing the legitimate business needs of employers with the protection of employee rights and benefits accumulated through continuous service.

Employers should ensure that any break in service is genuine and not a device to circumvent labour law protections. Documentation is crucial, and the circumstances surrounding the termination and re-employment must be transparent.