Important facts about fixed-term and limited-duration employment contracts

Important facts about fixed-term and limited-duration employment contracts

Important facts about fixed-term and limited-duration employment contracts

The use of fixed term contracts of employment appeals to employers for various reasons, one of them being when the contractually agreed fixed term expiry date or event that has been agreed up-front by the parties arrives, the contract expires by effluxion of time. 

Employers in the cleaning, security or general maintenance industries often have many employees on fixed-term or limited-duration employment contracts which are generally linked to the commercial contract or arrangement between the employer and the client. For example, if the client had provided the employer with a commercial contract for a three-year period, the employees would invariably be provided with a fixed-term contract for three years or linked to the said commercial contract.

The Labour Appeal Court (LAC) had to grapple with the legality of such a contractual arrangement in the case of Piet Wes Civils CC v AMCU, (LAC) (Unreported JA37/2017). The court issued its ruling on 10 March 2019, citing the fixed-term contractual provision as per the employee’s contract of employment that read as follows:

‘…2. Duration of agreement:

 The duration of the agreement is subject to the following terms and conditions:

  • As long as the EMPLOYER is supplied with work contracts by his clients, the EMPLOYER has no alternative employment at his disposal for the EMPLOYEE should the work contract with his client expire.

The LAC had to rely on section 198B of the Labour Relations Act (LRA) which applies to fixed-term contracts in which employees earn below a prescribed earnings threshold. The current earnings threshold stands at R204 533, 33 per annum.

In terms of section 198B (1), a fixed-term contract means a contract of employment that terminates on–

  • the occurrence of a specified event;
  • the completion of a specified task or project; or
  • a fixed date, other than an employee’s normal or agreed retirement age.

Section 198B(3):

(3) An employer may employ an employee on a fixed-term contract or successive fixed-term contracts for longer than three months of employment 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.

Section 198B(4)(d):

(4) The conclusion of a fixed-term contract will be justified if the employee–

  • is employed to work exclusively on a specific project that has a limited or defined duration…

Section 198B(5):

A fixed-term contract which has been concluded or renewed in contravention of subsection (3) is deemed to be of indefinite duration.

Section 198B(6):

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 contemplated.

 In conclusion

  • In interpreting section 198B, the LAC held that a contract duration linked to the supply of work contracts by clients cannot be construed to equate to the occurrence of a “specified event”, “the completion of a specified task or project” or “a fixed date”, as contemplated by section 198B(1). This is so in that a “specified event”, “the completion of a specified task or project” or a “fixed date” does not constitute a possibility that future contracts may not be supplied in future by an employer’s clients. This remains a possibility and nothing more than that. It is by no means a specified event which in future will arise, nor is it related to the completion of a task or project or a fixed date but is in fact an operational risk which may occur and one under which the business operates.
  • The LAC further held that the purpose of section 198B is to provide security of employment, except in circumstances where a fixed-term or limited-duration contract is clearly justified. The court was also correct in finding that to place a construction of the words “specified event” on the cancellation of the commercial contract with the client went beyond the intention of the legislature. From a plain reading of the contract that was concluded between the employer and certain of the employees, no limited duration or fixed term can be read into what is clearly, according to its terms, an unlimited-duration employment contract entered into between the parties.

SERR Synergy assist employers to understand and appreciate not only the risks and pitfalls associated with the recent amendments to fixed-term contracts but also how to apply the said amendments when appointing employees on fixed-term contracts. We provide employers with tailor-made, industry-specific fixed-term contracts that are compliant with the fixed-term contractual provisions. We have also recently developed a unique fixed-term contract specifically for purpose of the Youth Employment Service (YES) project.

About the author: Jared Francis joined SERR Synergy in October 2016, and currently holds the title of KZN Labour Manager. He is an admitted attorney who has practised in KZN and Gauteng. He holds an LLB degree, a Post-Graduate Diploma in Industrial Relations and a Post-Graduate Certificate in Forensic Investigation from the University of KwaZulu-Natal. He also holds Post-Graduate Certificates in Advanced Labour Law, Corporate Law, Advanced Human Resource Management and Health and Safety from UNISA and has more than 10 years’ experience in the legal and industrial relations fields respectively.

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