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The misconception about fixed term contracts

Article provided by SEESA

Much like the COVID-19 pandemic, the misconception that employers can hold their employees to successive fixed-term employment contracts is going nowhere in a hurry.

Legal advisors often hear one or more of the following scenarios:

  • The employer wants to see if the employee is the ‘right fit’ for the workplace;
  • The employer wants to see if the employee is truly capable of performing the job that he/she was hired for, and most often
  • The employee’s performance is not up to standard, therefore his/her fixed-term contract is extended, usually, more than once, to ‘evaluate the probability of improvement’.

In all fairness, it has been several years since the Labour Relations Amendment Act of 2014 (LRAA) was effected. Section 198B of the Act sets out the requirements relating to fixed-term contracts.

While it is not the purpose of this article to regurgitate said requirements in detail; simply put, the employer should not deny an employee the status and/or rights of permanent appointment if that employee occupies a key function or job inherent to the business’s operations.

The amendments to the Act had the principal aim of affording employees the protection of a stable position in the workplace. The secondary effect was binding employers into a permanent employment relationship.

These days, many employers still think that there is an advantage in retaining an employee on a fixed-term contract, in that such contract can be terminated at the discretion of the employer with minimal repercussions, sans any formal procedure (whether it be an attempt to by-pass discipline of one’s personnel or the process of poor work performance).

In Allan v Maidstone Country Club [2003] 3 BALR 255 (CCMA) the applicant was employed on a renewable fixed-term contract as a manager of the club. Following a change of ownership, the applicant’s employment contract was terminated, with notice, as his contract made provision for same. The dismissal was allegedly due to an amalgamation of allegations of misconduct, poor work performance as well as incompatibility. The trouble here was that the applicant had never been counselled, nor faced any disciplinary enquiry. The true cause for the dismissal was the breakdown of the employer-employee relationship. In lieu of any formal procedures, the dismissal was found to be unfair.

While incapacity arising from poor work performance is recognised as a valid reason to terminate the employment relationship, provided that Item 8 and 9 of the Code of Good Practice: dismissals have adhered to the repeated renewal of a fixed-term contract is no remedy for an underperforming employee. To complicate matters, many employers still confuse ‘contract of limited duration’ with ‘probation’.

So let us revise the concept of probation. Item 8(1) of the Code deals with newly-appointed employees, whose employment contracts may legally contain a probation clause, which timeframe must be reasonable, given the nature of the job and the time it takes to determine the employee’s suitability for the role.

Employers ought to provide the necessary evaluation, instruction, training and guidance from the outset. If the employer considers the employee’s performance to be lacking to a certain degree, the employer holds the responsibility to counsel the employee in terms of those aspects in which the employer considers the employee to be failing. Doing so allows the employee an opportunity to improve in his/her position. Only when there is a case of little to no improvement should the employee’s probationary period be extended, or the employment relationship terminated based on incapacity.

In Abrahams v Rapitrade (Pty) Ltd (2007, 6 BALR 501) the applicant was hired on a contract containing a probationary clause. Upon subsequent underperformance by the applicant, the employer claimed that the appointment was on a fixed-term basis and chose not to renew the contract. On referral to the CCMA, it was determined that the employee had not been employed on a fixed-term contract, but on a normal contract with a probationary clause. The employer ought to have provided counselling and/or conduct poor work performance procedures prior to termination of service. The dismissal was found to be unfair.

In Venter v Vereeniging Abattoir (Pty) Ltd / Midland Group (2014) 35 ILJ 2318 (CCMA)the commissioner found that the employer had ‘disguised the employee’s probation period as a fixed-term contract…’.

Employers would be well advised to refer back to Item 8(1)(j) of the Code before relying on a fixed-term contract of employment when they ought to appoint an employee in a permanent position on probation.

Employers will find themselves in hot water in instances of termination of the employment relationship where the employee reasonably expected a permanent position upon expiry of his/her fixed-term contract. Should the employee prove that a reasonable ground for expecting a renewal of the contract exists, that employee holds a claim for unfair dismissal?

How would an employee prove a reasonable expectation existed at the time of the expiration of the contract? In the matter of Price / National Health Laboratory Services [2011] 8 BALR 860 (CCMA), the factors considered included, but weren’t limited to; the contractual terms, the past practice of contract renewals, the nature of the job; the reason for a fixed-term agreement; as well as any assurances that the employee could expect an ongoing relationship with the employer.

In short, the expectation could be as simple as an expressed or implied promise made by the employer that the employee’s services could be extended on the basis of his/her performance. The above is only a handful of the many cases that stand as precedents, but they ought to serve as strict reminders to employers that there are no quick and easy means to the end of an employment relationship.

The troubles that legal advisors face in many present-day scenarios is that the employers have compromised themselves in respect of fixed-term contracts long before they decide to seek reputable legal advice thereon.

Contact your nearest SEESA office to assist your business with fixed-term contracts or any other labour related queries.

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