Fixed Term Contracts

Labour Court

Our labour lawyers frequently appear in the Labour Court in Johannesburg

Employers tend to employ employees on a fixed term contract for specific reasons. This will usually include an employee going on maternity leave or where an employee provides services to a company, which will only be for a fixed period or at the occurrence of a specific event. Employees cannot keep their employers on a fixed term contract indefinitely.

TERMINATING AN EMPLOYEE ON A FIXED TERM CONTRACT MAY CONSTITUTE A DIMISSAL

In terms of the Labour Relations Act, if an employee reasonably expected that his contract will be renewed after the period stipulated in the fixed term contract has ended, and the employer fails to renew the fixed term contract on similar terms or employ them on a permanent basis, this may constitute a dismissal.

3 MONTH PERIOD OR LONGER

An employer may only keep an employee on a fixed term contract for a period of 3 months, unless the employee can show good cause why the period should be longer than 3 months. In the event that an employer retains the employee after the fixed term period without indicating whether the contract is renewed or not, the employee will be deemed to be employed on a permanent basis.

WHEN WILL A FIXED TERM CONTRACT END?

A fixed term contract will usually end on expiry of the period agreed to between an employer and an employee, unless the terms of the fixed term contract makes provision for earlier termination by notice or by an occurrence of a specific event. The fixed term 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.

A fixed term contract cannot stipulate that it will end automatically if an employee is guilty of misconduct or fails to adhere to certain performance standards stipulated in the contract. The courts take an evaluative view of fixed term contracts and the duration thereof.

REASONABLE EXPECTATION OF RENEWAL

In the event that an employee had a reasonable expectation that the contract will be renewed, and it is not renewed by the employer, it may constitute dismissal. This will be dependant on the circumstances revolving around the alleged dismissal. If the contract clearly stipulates that the contract is for a fixed term and sufficient notice is given to an employee that it will terminate, the employee will have a hard time proving that the dismissal was unfair.

CONCLUSION

Employer should be careful when employing employees on a fixed term contract basis, because if the employee had a reasonable expectation that the contract will be renewed, it may constitute a dismissal. The employee will then have to prove at the CCMA that it does not constitute a dismissal, and this may lead to unnecessary expenses. An employee should ensure that they adhere to the terms as set out in the LRA. Employers on the other hand should know when they sign a fixed term contract what the exact termination period will be.

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