Fixed-term employment contracts are a common form of employment in South Africa. However, they can lead to a variety of legal issues, particularly when they are used inappropriately or in an exploitative manner. This article will explore some of the key legal issues surrounding the use of fixed-term contracts in South Africa.
A fixed-term contract is a type of employment agreement that runs from one specified date to another. It can also be specified as the completion of a specific project, the actual date of completion being uncertain. Employers often use fixed-term contracts as a means of evading their statutory obligations, denying employees the opportunity of pension/provident fund benefits, and also medical aid benefits.
An employer can renew a fixed-term employment contract. However, there are certain considerations to keep in mind:
- The Labour Relations Amendment Act, 2014 has specific provisions for the use of fixed-term contracts. Any employer making use of fixed term contracts should review their policies and practices particularly where the employees are earning less than R205 433, 30 per annum and the periods of the contract together with any renewal exceeds three months.
- Employers can renew fixed-term contracts, a practice known as “rolling over” the contract. However, if a contract is rolled over for the third or fourth time, the employee obtains what is known as “the right of expectation”. This means that the employee may expect the contract to be renewed again, based on the employer’s past behaviour. If an employer fails to meet this expectation, it could potentially be seen as an unfair dismissal.
- If an employee continues working after the expiry of a fixed-term contract, it does not necessarily mean that they automatically become a “permanent” employee. The employee will continue to be employed on an indefinite basis which will require from the employee and the employer to terminate the employment relationship in a manner similar to that of permanent employees. The specific facts of the case will determine the nature of the relationship after the expiry of the contract.
- Therefore, while it is not forbidden to renew a fixed-term contract, care should be taken if the contract is continuously renewed.
The early termination of a fixed-term contract is a complex issue that requires careful consideration. Here are some key points:
- The common law position is that fixed-term contracts of employment cannot be prematurely terminated unless there is repudiation or a material breach of the contract by either party.
- The contract can also terminate by agreement between the parties, repudiation by one of the parties, or by a fundamental breach committed by one of the parties.
- An employer will have to show good cause why a fixed-term contract should be terminated before the expiry thereof, if it wishes to do so.
- Fixed-term contracts may terminate prior to a fixed date for a reason recognised in law – e.g. misconduct or poor performance. However, a fair procedure has to be followed as per the requirements of the Labour Relations Act.
- If the contract period has expired (and is not renewed and the employee does not continue to work for the employer, the contract comes to an end automatically. In such a case there is no dismissal.
- It is also advisable to include a specific clause in the fixed-term agreement to provide for circumstances where the agreement can be terminated within the three-month period.
While fixed-term contracts can be a useful tool for employers, they must be used responsibly and in accordance with the law. Employers who misuse these contracts to evade their obligations or exploit their employees can face significant legal consequences. Therefore, it is crucial for employers to understand the legal issues surrounding fixed-term contracts and to seek proper advice before entering into such agreements.
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