Fixed-term Contracts and the Amended LRA – What to do?

The inception of the Labour Relations Act 65 of 2014 on 1 January 2015 provides new protection for employees on fixed-term contracts.

The Amendment Act’s provisions that now regulate fixed-term contracts are provided for in the new Section 198B. This section does not apply to employers who have fewer than 10 employees, nor to those who employ more than 50 employees during the first two years of the business’s existence, nor to employees earning more than the statutory remuneration threshold of R 205 433,30. It also does not apply to employees on a fixed contract that is permitted by any statute, sectoral determination or collective agreement.

An employer is permitted to employ an employee to whom the new section applies on a fixed-term contract or successive fixed-term contracts for up to three months. (The meaning that will be given to the word ‘successive’ will be critical – there is no specific explanation or provision to the effect that fixed-term contracts may or may not be interrupted by a certain period of time when calculating the three-month period. The probable interpretation will be that the collective duration of separate fixed-term contracts will be utilised to determine whether the three-month period has been exceeded.)

The employer may employ an individual on a fixed-term or successive contract for longer than three months only if the nature of the work for which they are employed is of a limited or definite duration, or if the employer can demonstrate any other justifiable reason for fixing the term of the contract. Section 198B(4) sets out a non-exhaustive list of justifiable reasons for fixing the term of the contract.

Employment in terms of a fixed-term contract concluded in contravention of Section 198B is deemed to be of indefinite duration, unless the nature of the work is of a limited or definite duration, or the employer can demonstrate any other justifiable reason for fixing the term of the contract.

An individual employed on a fixed-term contract for longer than three months must not be treated less favourably than an employee on a permanent basis performing the same or similar work, unless there is a justifiable reason for different treatment. This provision on treatment applies three months after commencement of the Amendment Act, i.e. on 1 April 2015, for fixed-term contracts of employment entered into before the commencement of the Amendment Act. One would think that this provision would only become effective after the employee is deemed to be permanent, or at least after any longer justifiable duration (as is permitted), but that is not the way the relevant sub-section is worded.

Those employees on fixed-term contracts of employment must now be afforded equal opportunity to apply for vacancies. Section 198C also introduces new provisions in respect of part-time employees.

There are therefore a number of urgent considerations to be dealt with by employers who utilise fixed-term contracts of employment. These considerations will include assessing what justifiable reasons might exist to extend the duration of fixed-term contracts (for example, temporary increases in the volume of work, or employment on a specific, limited project), analysing the terms and conditions of employment of fixed-term employees, determining the possibility of concluding a collective agreement with the trade union, and analysing fixed-term contracts of employment entered into prior to the Amendment Act.

It should also be borne in mind that the existing provisions on the law of dismissal and the concept of reasonable expectation of renewal of a fixed-term contract of employment remain, and in fact now extend the expectation to include an expectation of permanent employment.

Other questions will relate to the right of the employer to employ the employee on a fixed-term probationary period and the existing provisions of certain bargaining councils on the utilisation of fixed-term contracts, which may differ, for example, in respect of the permissible duration of fixed-term contracts.