View Full Version : Fixed term contracts and the expectation of permanent employment

20-08-2012, 21:35
Well worth the read - there is 'justice' in certain labour courts IF YOUR PAPERWORK AND SYSTEMS ARE CORRECT :)

The South African Labour Guide (http://www.labourguide.co.za/most-recent-publications/fixed-term-contracts-and-the-expectation-of-permanent-employment)

Fixed term contracts Section 186 (1) (b) and the expectation of permanent employment

Jan du Toit and Andre Claassen

Section 186 (1) (b) makes provision that one of the definitions of a dismissal is that an employee reasonably expected the employer to renew a fixed term contract of employment on the same or similar terms, but the employer offered to renew it on less favorable terms, or did not to renew it at all.

In Biggs v Rand Water, the Labour Court held that the purpose of the above section of the LRA is to prevent the unfair practice by employers of keeping an employee on a temporary basis, without employment security such as pension and medical aid until such time as the employer wants to dismiss the employee without complying with the obligations imposed by the LRA in respect of permanent employees.

The right of expectation.

It is generally believed that after a fixed term contract or temporary contract of employment is rolled over or renewed, the employee may develop a right to expect that the employer will continue to renew the contract. The number of times that a fixed term contract of employment has been rolled over may contribute towards an expectation of another similar contract after the natural expiry of the last contract.

In Malandoh v SABC this was certainly not the case. The employee was employed on a renewable fixed term contract, which was rolled over for eight consecutive periods. He was then informed that it would not be renewed again. It was found that the contract itself created no expectation of renewal. While certain persons had allegedly promised the applicant a permanent position, it was found that they had no authority to do so. Moreover, the applicant had been unsuccessful in an application for a permanent position and the employer was bound by a collective agreement which made no provision for an appointment by means of the conduct relied upon by the applicant. There was accordingly no "reasonable expectation" of renewal.

However in Thiso & Others v King Sabata Dalindyebo Municipality, the employer's refusal to renew fixed term contracts after it had automatically renewed them for four consecutive years, was held to constitute a dismissal. This matter was taken on review but the decision of the arbitrator was confirmed.

In Dierks v University of South Africa, it was held that an evaluation of all the surrounding circumstances must be considered such as:

the significance or otherwise of the contractual stipulation,
undertakings by the employer,
or practice or custom in regard to renewal of the employment,
the availability of work,
the purpose of or the reason for concluding the fixed term contract,
inconsistent conduct,
failure to give reasonable notice,
and the nature of the employer's business.

This list of criteria is not exhaustive and it may well be that other factors also need to be considered.

In Van Blerk vs. Tshwane University of Technology Commissioner Skhosana cited an array of cases to highlight circumstances under which expectation of continued employment may or may not be created.

Employees have successfully argued “reasonable expectation” in the following example of cases:

In King Sabata Dalindyebo Municipality v CCMA & others (2005) 26 ILJ 474 (LC), the Labour Court found that employees (cleaners) had established a reasonable expectation, and consequently that then dismissal was deemed to be unfair in circumstances in which there were repeated renewals of the contract, their services as cleaners was still required, and the Municipality had sufficient funds to sustain the renewal. (The important principles to establish a reasonable expectation: repeated renewals, services still required and available funds).

In McInnes v Technikon Natal (2000) 21 ILJ 1138 (LC) [also reported at [2000] 6 BLLR 701 (LC) – Ed], the Labour Court found that an employee had an expectation of permanent employment which was created by her employer and the court ordered reinstatement. In this case a lecturer had been on fixed term contract and told by the Head of Department that her post was being made permanent and that it was hers provided she “did not mess up”. She applied, was favourably assessed but in the end not appointed by virtue of the university’s employment equity policy. A black candidate was appointed but left soon thereafter. The Labour Court found she had been unfairly discriminated against and ordered her reinstatement to the permanent post. (The principle: the employer created the expectation of permanent employment).

In SACTWU & another v Cadema Industries (Pty) Ltd [2008] 8 BLLR 790 (LC), the Labour Court found that the employers’ decision not to renew a fixed term contract is unfair. There had been repeated renewals over a 4 year period. Sewing work was available for the employee. She had satisfied a reasonable expectation of renewal. The employer contended that the termination was for operational reasons but led no evidence in this regard. The court held thus in circumstances where the contract is not renewed because of operational requirements and the employee has a reasonable expectation that that contract would be renewed, the employer is obliged to comply with the operational requirement procedures for the dismissal, to be procedurally fair. And for the dismissal to be substantively fair, in these case circumstances, the employer has to prove that the dismissal was for a valid and legitimate reason. (The principle: work was available for the employee to do, and the employee could do it).

No reasonable expectation was found in the following cases:

In SA Rugby Player Association v SA Rugby (Pty) Ltd (2008) 29 ILJ 2218 (LAC) [also reported at [2008] 9 BLLR 845 (LAC) – Ed], the Labour Appeal Court found that employees (Springbok rugby players) could not rely on a statement by coach Streuli that the players would have a further contract when he was shortly thereafter removed and replaced by a different coach (Jake White) – any expectation created should have been diminished when Streuli’s contract was terminated. (The principle: The authority of the person representing the employer is thus important).

In Black v John Snow Public Health Group (2010) 31 ILJ 1152 (LC) [also reported at [2010] 4 BLLR 374 (LC) – Ed], the Labour Court held that the evidence presented did not support the contention that the employee had a reasonable expectation that her contract would be renewed or made permanent. She knew that the organisation was reliant on donor funding and she had been notified that her contract would be renewed. The mere proposal by the employer that temporary positions ought to be converted to permanent ones could not have elevated any expectation of permanent employment to a reasonable expectation of permanent employment to a reasonable expectation. (The principle: Limited financial resources and notice of termination are thus important considerations to mitigate the argument of reasonable expectation).

Recently in Sindane v Prestige Cleaning Services (2009) ZALC (unreported) case number JS594/07 [reported at [2009] 12 BLLR 1249 (LC) – Ed] the Labour Court found that an employee who was on a fixed term contract which was terminated ultimately because the employer’s client no longer needed his services was not a dismissal. (The principle: a termination at the instance of a third party does not constitute a dismissal).

Expectation of permanent employment.

Very often employees claim that they expected to be appointed permanently as a result of continuous “indefinite” fixed term contracts or because the temporary position became permanent.

In terms of section 186 (1) (b) employees will not be able to extend their expectations as discussed above to right to be permanently or indefinitely employed. Section 186 specifically refers to fixed term contracts:

“an employee reasonably expected the employer to renew a fixed term contract of employment on the same or similar terms but the employer offered to renew it on less favourable terms, or did not renew it;”

A couple of interesting awards were however made during 2012 relating to the expectation of permanent employment.

The first award was made by Panelist Whitcher from the South African Local Government Bargaining Council in the matter between Nyadeni and the Ethekwini Municipality. This matter was dealt with in April 2011.

The applicant worked for the Respondent for two years on a number of three month contracts. After two years of employment on fixed term contracts she was handed notice of termination of her temporary employment. The Applicant referred the matter for arbitration and claimed that she expected to be appointed permanently and that she in fact believed that she had already been appointed permanently.

The arbitrator held that to succeed under section 186(1) (b) of the Act the applicant had to establish a subjective expectation that the respondent would make her employment permanent and that this expectation was reasonable.

Section 186(1) (b) of the Act contemplated claims for renewal of a fixed-term contract, and not claims for permanent employment. The Respondent in any event had a policy in place that stated that permanent employment will not be automatic after temporary employment on fixed term contracts.

Therefore her expectation was not realistic since it was based on a false premise created by her and not by the respondent. The respondent’s failure to renew a fixed-term contract and create permanent employment did not amount to an unfair dismissal in terms of 186(1) (b) of the Act.

During December 2011 in Van Blerk vs. Tshwane University of Technology (referred to earlier) Commissioner Skhosana made an interesting award regarding the expectation of permanent employment. The Applicant was employed as a quality control officer on a series of 6 month fixed term contracts for 6 years. After he was informed that his final fixed term contract would not be renewed the Applicant referred the matter to the CCMA claiming that he was unfairly dismissed since he had a reasonable expectation that he would remain in the employ of the Respondent. He further claimed that the Respondent acted unfairly in that he was not promoted to a position he applied for earlier.

The Respondent argued that the Applicant was kept on a fixed term contract because the business of the Respondent merged with two other institutions and positions had to be found for the permanent employees affected by this merger. A permanent employee was appointed to the position that the Applicant was appointed in and as such his fixed term contract of employment was not renewed.

The Commissioner reasoned that the process of matching a permanent employee to the post the Applicant was (temporarily) appointed in was completed some time before the notice of termination of employment was given to the Applicant. As such the Applicant had a reasonable and legitimate expectation of continued employment. The Commissioner indicated that the Applicant served on a number of fixed term contracts and that as a result of this expectation of permanent employment was created.

The Respondent was ordered to reinstate with back pay the applicant to the position of quality controller and that his employment must be indefinite. The Respondent was further ordered to shortlist the Applicant for the position Head of Department – Accommodation, Residence Life and Catering.

What did the Labour Appeal Court say?

During November 2011 in a matter involving another university the Labour Appeal Court had to decide whether section 186 (1) (b) includes the right of expectation of permanent employment.

In the University of Pretoria vs. Commission for Conciliation, Mediation & Arbitration & others, the applicant was employed by the university on a number of fixed term contracts for three years. During this period the employee applied for one of several permanent positions that the university needed to fill but was she unsuccessful in her application. She was however offer another fixed term contract of employment but failed to accept the contract and opted to refer the matter to the CCMA as an unfair dismissal in terms of section 186(1) (b). She also claimed that she expected to be appointed permanently. No clear explanation was given by the employee as to why she declined the offer of another fixed term contract.

The university argued that no dismissal took place in terms of section 186(1) (b) of the Act. The commissioner disagreed and held that the employee had discharged the onus of proving that she had reasonable expectation of permanent employment. The university took the matter on review but was unsuccessful and then took the matter on appeal.

The issue that was to be decided upon by the court was as to whether section 186(1) (b) could be understood to include a right of expectation of permanent employment. The court noted that specific reference was made to fixed term contracts only. According the court the legislature opted to specifically limit this right of expectation to fixed term contracts and that the expectation of permanent employment cannot be dealt with under the current section 186(1) (b) unless the Act is amended. The appeal of the university was upheld.

Since this matter has been dealt with by the LAC the 2012 Relations Amendment Bill was published in March and now indeed makes provision for the right of reasonable expectation of indefinite employment. This must however still be enacted.

21-08-2012, 06:49
Just be very careful that you don't say the words "if there is more work for you at the end of the contract we will give it to you" or words to that effect and make sure that you don't 'roll' the contract over more than twice. In fact don't 'extend' the date of the contract at all - rather issued a brand new contract. Fixed term contracts can be for projects, client contracts, seasonal, learnerships etc - be specific about why the contract has an end date - that way there can be 'no expectation".