Permanent or full-time employment has traditionally been the most common form of employment and is assumed to be the standard or typical form of employment. The contract of employment is usually for an indefinite period, and the employment relationship may be terminated by various means, including but not limited to a mutual agreement, dismissal, or resignation.
Permanent employment, however, is not the only form of employment that exists. Another commonly used form of employment is the fixed-term or limited duration contract of employment. S198B of the Labour Relations Act (LRA) encompasses a whole host of provisions that govern the fixed-term employment relationship, most of which will be discussed in later articles in this series. For the purposes of this article, however, and to address the most prominent legal requirements of fixed-term contracts, S198(B)(1) of the LRA defines a fixed-term contract as a contract of employment that terminates on:
a. the occurrence of a specified event;
b. the completion of a specified task or project, or;
c. a fixed date, other than an employee’s normal or agreed on retirement age, subject to subsection (3);
Practical examples of the above that spring to mind are the construction industry or the hospitality industry, wherein seasonal workers are only required for a specified time frame or a specific task or project. From the definition as per S198B, this form of employment is never intended to be permanent in nature and is specifically entered into with the sole purpose of working for a specified time frame or completing a specified task or project.
While on the face of it, this may seem straight forward it is of utmost importance that employers are acutely aware of the provisions of S198B of the LRA as a whole but more specifically S198B(6), which states the following:
(6) An offer to employ an employee on a fixed-term contract or to renew or extend a fixed-term contract must-
a. be in writing; and
b. state the reasons contemplated in subsection (3)(a) or (b);
It is of utmost importance for employers to take note of and be familiar with subsection (6) above as this often leads to an employer having to defend a claim of unfair dismissal at the CCMA due to the employer not reducing the fixed-term contract to writing.
By their nature, fixed-term contracts provide many advantages for employers as they create certainty and limit legal risk regarding employment solutions. Appointing an employee for a fixed period or defined project allows an employer to plan for the employee’s departure in advance and structure their business accordingly. This is because the contract will expire on a specific date or upon completing a defined task without the limitations of only being able to terminate the contract for valid reasons and after following a fair procedure.
Employers often distinguish between different categories of employees for the purposes of benefits, and often these benefits are either not afforded to fixed-term employees, or the benefits offered are significantly less favourable compared to those afforded to permanent employees. Employers need to remember that employees appointed on a fixed-term contract are still employees as defined in the LRA and are entitled to the protections afforded by labour legislation.
Just as the fixed-term contract may have many advantages for employers, there are also instances where these types of contracts can be abused. A common occurrence is where an employer continuously renews or extends the fixed-term contract of the employee. To address the abuse of employees where such a scenario arises, additional provisions have been included in the LRA.
Section 186(1)(b) of the Act expressly addresses the circumvention of protection against unfair dismissal by using fixed-term contracts. This section provides that where a fixed-term employee has a reasonable expectation of a renewal of his/her fixed-term contract, or even of permanent employment, and the contract is not renewed, or renewed on less favourable terms, or permanent employment is not offered, this is deemed to be a dismissal.
In such a scenario, an aggrieved employee may approach the CCMA or relevant Bargaining Council in terms of S186(1)(b) regarding the alleged expectation that was created by the employer and if it can be proven that a reasonable expectation of permanent employment was created, it will be deemed that a dismissal has occurred.
Fixed-term appointments can have many benefits when utilised for proper and lawful reasons, and they allow employers the flexibility to manage their human resources and business operations.
However, to effectively make use of these types of contracts and to avoid potentially being confronted with an unfair dismissal claim or being burdened with additional employees because the expiration date of the particular contracts was not adhered to, employers must keep a close and proper record of all their fixed-term contracts, their relevant termination dates as well as maintaining a close eye on the prescripts of S198B of the LRA.
Article by: Porthri Blauw
Dispute Resolution Official – George
Carlien Nienaber 2021-10-29T13:05:33+02:00 October 29th, 2021 | Contracts | Comments Off on Limited duration contract – A Brief overview of the legal requirements