The Labour Relations Amendment Act which came into operation on 1st of January 2015, places significant restrictions on the use of fixed term contracts. Employers would be ill advised not to take note and adapt their employment contracts to comply with the new provisions.
The concept of a fixed term contract of employment is defined in Section 198B (1) of the LRA. In terms of the definition, a fixed term contract is a contract that terminates:
on the occurrence of a specific event,
or on completion of a specific task or project, or
on a fixed date other than an employee’s normal or agreed retirement age.
In terms of Section 198B (2), the provisions of Section 198B do not apply to employees who earn in excess of the Section 6(3) Basic Conditions of Employment Act threshold, or where the employer employs:
less than 10 employees, or
employs less than 50 employees and whose business has been in operation for less than two years, unless the employer conducts more than one business; or
the business was formed by the division or dissolution for any reason of an existing business.
The provisions do not apply where the employee is employed in terms of a fixed term contract which is permitted by any statute, sectoral determination or collective agreement.
Employment in terms of a fixed term contract (newly concluded or renewed) for longer than three (3) months will be deemed to become permanent employment without a justifiable reason. An employer cannot avoid this provision by using continuous fixed term contracts limited to three (3) months each. It is not the current contract period, but the total period of employment, that must not exceed three (3) months.
There are specific exceptions created, being firstly if the employer can prove the actual nature of the work the employee is required to perform is of a limited or definite duration, or the employer can prove another “justifiable reason”.
The employer will always have the onus in this regard, as provided for in Section 198B (7). Section 198B (4) provides a guide as to what would be considered to be “justifiable” in specific instances.
This would be:
If the employee replaces a permanent employee of an employer that is temporarily absent;
If there is a temporary increase in the volume of work of an employer, provided the contract is then not for a period of more than 12 (twelve) months;
If the employee is a student or recent graduate being trained for a profession;
If the employee is actually engaged to work on a genuine and specific project that has a limited or specified duration;
If the employee is not a citizen and the employment is linked to the period of the employee’s work permit;
The performing of seasonal work;
If the employee is engaged in an official public works scheme or public job creation scheme;
Where the position the employee occupies is funded by an external source for a limited period;
If the employee has reached normal or agreed retirement age.
Where an employee is then employed on a fixed term contract, or an existing fixed term contract of employment is renewed, in contravention of Section 198A (3), the employment of the employee is then in terms of Section 198B (5) deemed to be permanent employment. Therefore, and specifically, permanent employment is created, and not just an expectation of renewal of a fixed term employment contract.
Section 198B (6) requires that all fixed term contracts of employment must be in writing, and must actually set out the justification for the fixed term in the written agreement itself, which justification must be as contemplated by the provisions of Section 198B (3).
Fixed term contract employees to which Section 198B applies and who are employed for longer than 3 (three) months must have the same terms and conditions of employment and employment benefits of similar / related permanent employees of an employer, unless the employer can prove that there is a justifiable reason for differential treatment (Section 198B(8)). An employer must however always provide all the fixed term contract employees with the same opportunity to apply for vacancies for permanent positions as provided to its permanent employees (Section 198B(9)).
Employers who are affected in terms of past practices cannot afford to ignore this and should ensure that their employment contracts are in line with legislation. A review of the contents of pro forma fixed term employment contracts is also highly recommended. Kindly contact LabourNet if you are not currently a client, or your allocated consultant if would like more information or assistance with fixed term contracts.
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