All about the FIXED-TERM Contract (FTC): Since January 2015 and on?

(Q)     Must (FTC’s) have an end date?

(A)    No!  The “end date” may also be determined by;

  1. a) An event reached or materialising,
  2. b) A task completed.

Labour Relations Amendment Act:

The term ‘fixed-term contract’ was given more substance by the amendments to the Labour Relations Act. These amendments came into effect on 1 January 2015. The provisions surrounding fixed-term contracts are important in respect of employees who are employed for more than 3 months and earn below the relevant threshold. Such employees may be regarded as permanently employed if their contracts don’t contain a justifiable reason for the ‘fixed term’.

Unlike the general reference to a ‘temporary’ contract of employment, one’s first impression is that the term ‘fixed-term contract’ is more specific. It seems to suggest that there must be a start date and an end date. However, the newly introduced Section 198B defines a ‘fixed-term contract’ as a contract of employment that terminates on –

(a)  the occurrence of a specified event;
(b) the completion of a specified task or project; or
(c) a fixed date other than an employee’s normal or agreed retirement age.

Duration not certain:

From the above we can see that the Act allows for circumstances where the duration is uncertain and where it would not be possible to specify an end date.   Clearly describe the event, task or project. For example, the contract will terminate “… at the end of grape picking season on the Farm”; or “… once you have painted the interior walls of the tool shed.

Notice of Termination:

While notice of termination may not be strictly necessary in these cases, it would still be a good idea to anticipate the end date as it approaches.  Then communicate with the employee about the date on which the event, task or projects will come to an end and so employment.

Fixed-Term Contracts: Changes effective 01 Jan 2015

One of the most important changes to the Labour Relations Amendment Act as of 01 January 2015, is the added protection afforded to employees on fixed term contracts. The relevant provisions, which are contained in a new Section 198B of the Act, are summarised below;

What is a fixed term contract?
A ‘fixed term contract’ is defined in the Act as a contract of employment that terminates on –

(a) the occurrence of a specified event;
(b) the completion of a specified task or project; or
(c) a fixed date other than an employee’s normal or agreed retirement age.

Fixed term employment beyond 3 months

The real impact of the amendments relates to fixed term contracts that are for a period of longer than 3 months. For such contracts to be enforceable there are three main requirements that have to be met.

  1. The nature of the work must be for a limited duration or there must be some other justifiable reason for fixing the term of the contract.
  2. The fixed term contract must be in writing. Thirdly, the contract must specify the ‘justifiable reason’. A dispute may arise in the context of termination of employment. Should the employer fail to prove that the requirements mentioned above have been met, the employee will be regarded as having been employed on an indefinite basis In these circumstances there is a good chance that the employee’s services would not have been terminated for a fair reason and it is unlikely that the requirements of a fair procedure (for misconduct, incapacity or operational requirements) would have been met. The potential adverse implications for the employer should therefore be obvious.

What is a justifiable reason?

The Act lists examples of ‘justifiable reasons’ for employing someone for a fixed term period of longer than 3 months. These are:

(a) Replacing another employee who is temporarily absent from work;
(b) A temporary increase in work volume which is not expected to endure beyond 12 months;
(c) A student or recent graduate who is employed to undergo training or gain work experience;
(d) Exclusive work on a specific project that has a limited or defined duration;
(e) A non-citizen who has been granted a temporary work permit;
(f) Seasonal work;
(g) An official public works scheme or similar public job creation scheme;
(h) The position is funded by an external source for a limited period;
(i) The employment of a person beyond the normal or agreed retirement age.

Additional protections

Additional provisions aimed at protecting employees on fixed term contracts.

  1. A person employed on a fixed-term contract for longer than 3 months, may not be treated less favourably than someone employed on a permanent basis performing the same or similar work, unless there is a justifiable reason for different treatment. (Part-time employees also enjoy protection against unfavourable treatment).
  2. Employees on fixed term contracts must also be given equal access to opportunities to apply for vacancies.
  3. Where an employee is employed on a fixed-term contract exceeding 24 months, the employee would be entitled to an additional payment upon termination.
  4. Where the employer has failed to renew a fixed term contract where there was a ‘reasonable expectation’ of such renewal (or where the employer offered to renew it on less favourable terms), the basis for an unfair dismissal claim has been extended to also include an expectation of indefinite employment. The onus to prove the expectation remains on the employee.

Fixed-term employment for 3 months or less

If someone is employed for 3 months or less, the provisions above do not apply. However, employees on shorter fixed term contracts should continue to enjoy the protections that existed prior to the amendments. An employer may, for example, not abuse a fixed term contract by using it as a substitute for probation. Another example is where an employee works beyond the expiry date of the contract without signing a new agreement – the employee could still successfully argue that employment has become indefinite. Furthermore, the provisions relating to a ‘reasonable expectation’ of renewal or (permanent employment) may also be relied upon by these employees.

Which employers are excluded?

Small businesses and their employees are generally not directly affected by these provisions. Employers that employ less than 10 employees, or employers that employ less than 50 employees and whose business has been in operation for less than two years, are excluded (but there are certain exceptions, e.g. an employer that conducts more than one business, or where an existing business dissolves and it results in the formation of more than one business). Some businesses may be specifically excluded from the effect of these amendments by the provisions of another statute, sectoral determination or collective agreement (for example, in a bargaining council).

Which employees are excluded?

The protections afforded to employees on fixed term contracts are not intended for high earners. Employees who earn more than the relevant threshold determined by the Minister from time to time (currently R205433 per annum), are therefore excluded.