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 Ivan Israelstam

 

Recently employers have suffered a spate of losses at the CCMA and bargaining councils, in cases relating to fixed-term contracts.  The reason is that employers do not understand the legal purpose of fixed-term contracts and the circumstances under which they are safe to implement or terminate.

The point at which the employer gets caught out is not normally at the date of employment but rather at the stage when the employee loses either benefits or the job itself. That is, as long as the fixed-term employee receives the same benefits as his/her permanent colleagues and as long as the employer continues to renew the fixed-term contract, the employee has no legal grounds to complain.

It is when fixed-term employees perceive that they are losing out on benefits or a job that they are likely to become unhappy.  However, if the job itself is genuinely of fixed duration, the employee's legal case will be weakened. This is because the employer may well have the right to treat a fixed-term employee who is in a genuine fixed-term job differently to permanent employees.

For example, where a temporary backlog in the collection of debts arises, the employer may hire another employee for two months to help remove the backlog.  As soon as the backlog has been cleared, the fixed-term job has come to an end and it is fair to allow the fixed-term contract to expire.

Also, in the above scenario, the fixed-term employee would not expect the employer to put him/her on the company pension fund because, by nature, such funds are for long-term employees. Thus, it is where employers fill permanent jobs with fixed-term employees that things go wrong.

So, what is the difference between a fixed-term and a permanent job? A permanent job is one where there is no reason to expect the work to come to an end.  Put another way, no matter how far you look into the future, the expectation is that this job will always be needed.

On the other hand, a fixed-term job is one where, at the time of the job's inception, it is clear that the job will last for only a limited duration. The situation mentioned above of the temporary debtors clerk serves as a typical example.  In summary then, employers should reserve fixed-term employment contracts for filling fixed-term jobs.

Where employers misuse fixed-term contracts for other reasons, they are risking labour law problems. For example, employers are fond of employing workers on fixed-term contracts as a way of testing out whether the employee is going to fit into the organisation.

This is not a legitimate function of a fixed-term contract. In Abrahams v Rapitrade (Pty) Ltd (2007, 6 BALR 501) the employee was hired on the basis of a contract containing a probationary clause.  However, when the employee's performance was found wanting the employer claimed that the employee was on a fixed-term contract and informed the employee that this contract was not going to be renewed.

The employee lodged an unfair dismissal dispute and the employer claimed that the employee's performance had been poor. The arbitrator found that:

  • The employee was not on a fixed-term contract but on a normal contract with a probationary clause;
  • In any case, if the employee's performance was poor the employer was obliged to provide counselling and training before considering dismissal;
  • The dismissal was therefore unfair.

 

Mixing up probationary clauses with fixed-term contracts is not the only way in which employers get into trouble.  In Nyama v Twala's Construction (2007, 2 BALR 166), the employer terminated the employee's fixed-term contract before its expiry date. As there was no justification for this, the arbitrator decided the dismissal was unfair and that the employer had to pay the employee the wages he would have earned until the contract's expiry.

In Feni v SA Five Engineering (2007, BALR), the employee was hired via six successive one-month employment contracts. He was then given work to do for another five months without a contract being signed. Then the employer terminated the employee's employment and he referred a dispute to the Metal and Engineering Industries Bargaining Council.

The arbitrator found that:

  • As soon as the employee started working for the employer without a valid fixed-term contract he became a permanent employee;
  • No valid reason was given for the dismissal;
  • Proper pre-dismissal procedures were not followed;
  • The employer was to reinstate the employee with full back pay.
 

These cases make it clear that before employers consider using fixed-term contracts as short-cuts, they should consider whether the short-cut they use will lead them to the CCMA or bargaining council. Distinguishing between legal and illegal use of fixed-term contracts can be tricky, so obtain advice from a reputable labour law expert.

  • Ivan Israelstam is chief executive of Labour Law Management Consulting.
  • He can be contacted on 011-888-7944 or  

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