Dangers of hiring fixed-term staff under vague conditions
By Ivan Israelstam
In cases where a job itself is permanent, it is dangerous to employ staff on anything but a permanent contract. In the first instance, this is fixed because the Labour Relations Act provides for fixed-term employees to have a reasonable expectation of renewal of their contracts at the expiry date. And secondly, case law has gradually narrowed down those circumstances under which an employment agreement can legitimately be accepted as a limited duration contract with no prospects of renewal.
In the case of Numsa obo Majoro and others v Purple Moss 1309 t/a Kopano Thermal Insulation (2008, 4 BALR 342), the six employees of Purple Moss, a labour broker, were placed at a client on limited-duration contracts. After a strike, the client informed the labour broker it no longer required the services of the six labour broker employees.
The labour broker therefore gave its six employees notice, invoking a clause in their employment contracts that effectively allowed the contracts to terminate automatically when the broker's client no longer required the services of the workers.
The trade union alleged these terminations were unfair because:
- The employees had been told their temporary employment was for a period of six months (even though the contracts they signed had not mentioned this), and that thereafter they would become permanent employees of the labour broker.
Aggravating matters was that after termination of the workers' employment, other employees were employed in their place.
- The employees had been required to sign the fixed-term contracts without being allowed to read them first.
- Their letter of termination did not refer to the limited duration nature of their contract, and gave no reason for the termination of employment.
The employer contended that the termination did not constitute a dismissal, but an agreed termination of a contract, as a result of a circumstance envisaged at the outset in the employment contract. Those circumstances were that the client had decided it no longer required the services of the employees.
The arbitrator assigned by the Metal and Engineering Industry Bargaining Council (MEIBC) found:
- Sections 4 and 5 of the Basic Conditions of Employment Act (BCEA) prohibit the provisions of an employment contract from diminishing an employee's rights granted by any law.
- The metal and engineering industry regulations require limited duration contracts to specify the end date of the contract.
- Section 29(1)(m) of the BCEA requires limited duration contracts to specify the end date of the contract.
In fact, I believe that the arbitrator has exaggerated here, as this section merely requires that, where employment is for a "specified period", the contract must contain the date when the employment is to terminate. The section does not say that all limited period employment contracts must have end dates. That is, the BCEA does not prohibit employment contracts where the end of the contract is determined by an event instead of a specific date.
But the arbitrator goes on to state it is not right for employment contracts to contain agreements as to the end of the contract, unless the end date is specified in the contract. She argues this reduces the employment security of the employee, who due to the uncertainty as to the end date of employment is unable to manage his/her financial affairs properly, or to know whether to seek other employment or not. The arbitrator deemed the limited duration clauses in the employees' contracts to be invalid.
She deemed the employees to have been employed permanently, and the termination of their employment unfair! This finding followed a similar decision made by the Labour Court in the case of Saccawu and others v Primeserv (2007, 1 BLLR 78).
The arbitrator in the Purple Moss case found the dismissals to be unfair, and ordered the employer to pay each employee compensation equal to 12 months' remuneration. The key finding of the arbitrator was that, where a limited duration contract does not specify an end date, the employees are deemed to be permanent.
In the light of the above employers need to:
- Re-look at their limited-duration employment contracts
- Proceed with great caution where they are unable to insert specific end dates into such contracts
- Get advice from a reputable labour law expert, especially where they need to find out how to word limited duration contracts in circumstances where they are unable to specify end dates.
Ivan Israelstam is chief executive of Labour Law Management Consulting. He can be contacted on 0110- 888-7944 or