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It's dangerous to apply a fixed-term contract if the job isn't temporary

By Ivan Israelstam
 

According to sections 193 and 194 of the Labour Relations Act (LRA), the awards and orders that can be made against the employer for unfair dismissal are as follows:

The LRA requires the Commission for Conciliation, Mediation and Arbitration or the Labour Court to reinstate the employee. This means that the employer must give the employee his/her job back and pay the employee all remuneration calculated back to the date of the dismissal. The employer must also reinstate all the employee's benefits retrospectively.

  • The LRA also permits the CCMA or Labour Court to order re-employment instead of reinstatement. This means that, while the employer must give the employee his/her job back, this will not be with back pay.
  • Even if the employer does not have to take the employee back at all, it may still have to pay compensation up to a maximum of 12 months' remuneration calculated at the employee's latest rate of remuneration.
  • If the dismissal is deemed to be automatically unfair, the maximum compensation that may be awarded is 24 months' remuneration.
  • Such compensation is payable in addition to all other payments due to the employee. These can include notice pay, leave pay and even payment for the unexpired portion of the employee's contract.


The Labour Court and CCMA have the powers to make such additional awards by virtue of section 195 of the LRA and section 74(1) of the Basic Conditions of Employment Act (BCEA).  Furthermore, the Labour Court has jurisdiction, in terms of section 77(3) of the BCEA, to determine any matter relating to a contract of employment.

Therefore, in an attempt to circumvent all this onerous legislation, employers try to avoid having to dismiss undesirable employees by hiring workers on fixed-term contracts.  Then, if the employee is deemed unsuitable, the employer merely allows the contract to lapse at its expiry date and says goodbye to the employee.

However, this is a dangerous tactic because labour law has closed this loophole. The main purpose of a fixed-term contract is supposed to be the filling of a temporary job. So, the most appropriate time to hire an employee on a fixed-term contract is when the job itself is expected to come to an end at a specific time.

It can be dangerous to employ an employee on a fixed-term contract when the job itself is permanent (unless the temporary employee is merely standing for the permanent incumbent who is away on leave or has temporarily been deployed elsewhere).

According to the LRA, if the employer (even inadvertently) gives the employee a "reasonable expectation" that the contract will be renewed on expiry, the CCMA or bargaining council could force the employer to renew the contract.

However, the LRA does not define what constitutes "reasonable expectation". This confuses employers and allows arbitrators to make their own decisions as to what constitutes "reasonable expectation". In the case of King Sabata Dalindyebo Municipality v CCMA and Others (2005, 7 BLLR 696), the employer made a habit of regularly renewing fixed-term contracts.

But then it allowed the last contracts to lapse even though there was still work for the terminated employees.  The Labour Court found that the employees had a reasonable expectation of having their contracts renewed again, and forced the employer to renew the contracts.

In the case of Pretorius v Sasol Polymers (2008, 1 BALR 10), Ms Pretorius was appointed on a fixed-term contract to act in place of the permanent incumbent.  When Pretorius's contract expired, the employer advertised the post to be filled on a permanent basis and refused to renew Pretorius's contract.  She referred an unfair dismissal dispute to the bargaining council because she said she had a reasonable expectation that her contract would be renewed.

The arbitrator found that: 

  • The employer had a policy that required a fixed-term employee occupying a permanent post to be made permanent if management approved;
  • The fact that management had advertised the post constituted management approval;
  • This policy gave the employee a reasonable expectation of renewal of her contract; and
  • The employer's failure to give the employee the permanent post constituted an unfair dismissal and the employee was retrospectively reinstated.

Ivan Israelstam is CEO of Labour Law Management Consulting. Call him on  011-888-7944  or e-mail

Our appreciation to Ivan and The Star newspaper for permission to publish this article...

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