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Employment: Fixed Term Contracts and Rolling Over

A fixed term contract is a contract of employment that, as the name suggests, is for a fixed period of time. The duration of the contract is specified and will indicate a starting date and an ending date.

 

A fixed term contract is entered into for a temporary period, it terminates either on a fixed date, on the happening of a specified event or on the completion of a task or project.

 

As from 1 January 2015 all fixed term or temporary employment contracts must be in writing and further, the reason why the contract is fixed term or temporary must be specified in the contract.

 

HOW MIGHT A FIXED TERM CONTRACT BE BENEFICIAL?

Employer are of the opinion that a fixed term contract will be beneficial to them in circumventing the Basic Conditions of Employment Act (75 of 1997) and/or the Labour Relations Act (66 of 1995).

 

A fixed term employment contract allows an employer to state which benefits such as medical aid, pension and provident fund, are applicable to the contract or not. Employers often see this as a way to cut costs and save money by denying fixed term contract employees these benefits. Further, should the employer need to retrench staff, fixed term contract employees can be denied severance pay – a further means for the employer to save money.

 

THE TRUTH ABOUT FIXED TERM CONTRACTS

If used incorrectly, fixed term contracts can be high risk for employers especially in as far as “rolling over” is concerned.

 

“Rolling over” a contract is when a fixed term contract is continuously renewed by the employer after the expiry of each term. It is not against the law, or forbidden for an employer to renew such a contract once or twice but, when a contract is rolled over for a third or fourth time, the employee then obtains a “right of expectation”.

 

Simply put, this means that the employee now has the right to expect that his or her employment will continue and their contract will be renewed on the same or similar terms. If the contract is not renewed the employee is deemed as dismissed and may approach the Commission for Conciliation Mediation and Arbitration (CCMA) on the grounds of unfair dismissal.

 

Despite explicit wording in a fixed term contract such as; ‘there will be no expectation of further employment,’ this will not be enough to protect an employer if, by their conduct they have led the employee to believe that there is, or may be, a reasonable expectation that their contract will be renewed.

 

SECTION 186(1)(b) AND THE EXPECTATION OF PERMANENT EMPLOYMENT

“186.      Meaning of dismissal and unfair labour practice

(1)          “Dismissal” means that-

(b)          an employee reasonably expected the employer 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; …”

 

The purpose of this section of the Labour Relations Act (LRA) is to prevent unfair labour practice by the employer. It makes the number of times a fixed term contract is renewed a contributing factor in the determination of an employee’s reasonable expectation of employment.

 

This section may be used for claims of renewal of fixed term contract and not claims for permanent employment.

 

THE RIGHT OF EXPECTATION

In determining whether an employee has a right of reasonable expectation, various factors are to taken into account, these factors can include:

  1. Previous renewals;
  2. Are the employees services still required or is the work still available and can the employee do it;
  3. Does the employer have funds to sustain the renewal of the employees contract;
  4. The purpose of or reason for concluding a fixed term contract;
  5. Undertakings by the employer;
  6. Failure to give reasonable notice; and
  7. The nature of the employers business.