A fixed term contract is quite simply as the name implies, a contract which is concluded from one specific date and shall terminate on another specific date. Alternatively, it could be a contract that is concluded for a specific project, in which case it will terminate when the project comes to an end.
Many employers elect to renew these fixed term contracts once the contract has expired, which is often referred to as the contract “rolling over”.
According to Section 186(1) of the Labour Relations Act No. 66 of 1995 (“the LRA”), a dismissal of a fixed term employee occurs if the employee had a reasonable expectation that the contract was going to be renewed on the same or similar terms. In these situations, does an employee have a right to be notified before the expiry of the contract, that it would not be renewed? Or is the employer within its right to continue the rolling over of the contract until the services are no longer required?
Rolling over of fixed term contracts
An unfortunate reality is that there are many employers who elect to conclude fixed term contracts and renew them on a regular basis in an attempt to avoid the statutory obligations that come with a permanent employment contract. Instead of concluding a permanent employment contract, the employer will conclude a fixed term contract and will renew it every time the contract expires, thus the concept of “rolling over”. However, once the contract has been renewed more than once, the employer should consider making the position permanent.
So, when does an employee have a reasonable expectation that the contract will be renewed? Although there is no set number of times that the contract must be renewed before this expectation can be deemed reasonable, it is often on the third or fourth renewal that this arises. This is also referred to as the right of expectation that such renewal will occur at the expiry of the fixed term contract.
In considering whether a right of expectation was established, several factors are looked at namely: the employment relationship; the practice regarding renewal of the employment contract; undertakings made by the employer; and the purpose of the fixed term contract to name but a few. Although a fixed term contract may be for any period of time, the LRA implemented a threshold of R205 433.30 per year, and a maximum period of three months. The employer will only be able to renew this contract beyond three months if there are justifiable reasons. However, if the employer renews the fixed term contract beyond the three months, and the employee is compensated below the legal threshold as referred to above, the employee will be deemed to be a permanent employee.
Although employers are well within their rights to conclude fixed term contracts with their employees as well as to renew these as and when the need arises, employers must be wary of abusing this form of contract. The lasting effects of the abuse of the fixed term contract only results in the employee not being able to receive certain benefits and protection under legislation.
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Source: www.golegal.co.za | By SchoemanLaw Inc