Section 198B of the Labour Relations Act (LRA) sets out the requirements for employers on how fixed-term contracts are to be used. It is important to note that fixed term and probationary contracts are not the same. Understanding both is important to avoid unfavourable outcomes when disputes are referred to the Commission for Conciliation, Mediation and Arbitration (CCMA) or any Council with jurisdiction. This article focus will be aimed at the deeming provisions of S198B and the general guiding provisions of the section.
The purpose of Section 198B is to ensure fair and equitable labour practices by employers and to avoid exploitation of temporary employment to get around benefits that would ordinarily only apply to permanent employees.
In a previous article in this series, the discussion was had as to what the definition of a fixed-term contract is and the manner and style in which a fixed-term contract should be concluded. With this background in mind, attention must also be given to S198B(2) of the LRA, which sets out the categories of employees to which S198B does not apply. To this end, the subsection sets out as follows:
(2) This section does not apply to—
- employees earning in excess of the threshold prescribed by the Minister in terms of section 6(3) of the Basic Conditions of Employment Act;
- an employer that employs less than 10 employees, or that employs less than 50 employees and whose business has been in operation for less than two years;
The threshold is currently at R211 596.30 per annum. The Commissioner will first have to determine whether the employee falls under the annual threshold when a matter is referred in terms of Section 186 of the Labour Relations Act.
Section 198B does not apply to employees employed on fixed-term contracts if such fixed-term contracts are considered permissible by any statute, sectoral determination, or Collective Agreement.
SUCCESSIVE FIXED-TERM CONTRACTS (ROLLING)
The most important aspect of this article and the provisions discussed below relate to when employers give employees successive fixed-term contracts or continuously “roll” the contracts from one to the other. This practice of instances where employers “roll” successive fixed-term contracts may give rise to an expectation of permanent employment. Employers need to be warned against rolling over fixed-term contracts without operational reasons to avoid an instance whereby the fixed-term employee is deemed to have permanent employment. If the reason for rolling is not justified, it may result in unfavourable outcomes. To this end, employers need to regard what S198B(3)-(4) of the LRA states.
Section 198B (3) – (4) sets out:
(3) An employer may employ an employee on a fixed-term contract or successive fixed-term contracts for longer than three months of employment only if—
- the nature of the work for which the employee is employed is of a limited or definite duration; or
- the employer can demonstrate any other justifiable reason for fixing the term of the contract.
(4) Without limiting the generality of subsection (3), the conclusion of a fixed-term contract will be justified if the employee—
- is replacing another employee who is temporarily absent from work;
- is employed on account of a temporary increase in the volume of work which is not expected to endure beyond 12 months;
- is a student or recent graduate who is employed for the purpose of being trained or gaining work experience in order to enter a job or profession;
- is employed to work exclusively on a specific project that has a limited or defined duration;
- is a non-citizen who has been granted a work permit for a defined period;
- is employed to perform seasonal work;
- is employed for the purpose of an official public works scheme or similar public job creation scheme;
- is employed in a position which is funded by an external source for a limited period; or
- has reached the normal or agreed retirement age applicable in the employer’s business.
Furthermore, S198B (5) sets out that if there is any contravention of subsection (3), the employment contract can be deemed a permanent contract. It is this section which can have the greatest implications for employers as without compliance to subsection (3), the employee may be deemed a permanent employee, and thus any termination of their employment would attract adverse outcomes for employers as the dismissal would be deemed to be both substantively as well as procedurally unfair.
THE IMPORTANCE OF A JUSTIFIABLE REASON FOR A FIXED-TERM CONTRACT
Should an employer intend to employ an employee on a fixed-term contract for more than three months, the employer will need to have justifiable reasons to be present for fixing the term of the contract. Where an employer fails to give justifiable reasons, the fixed-term duration contract can be deemed a permanent contract and termination of the fixed-term contract will constitute a dismissal. The employee may then approach the CCMA or bargaining council in terms of Section 186 of the LRA alleging “reasonable expectation” for renewal of a fixed term.
The determination of “reasonable expectation” should be determined on a case-to-case basis with full consideration of all surrounding circumstances for the Commissioner to decide whether the employee had good reason to expect a renewal of a fixed-term contract.
In Ntsoko v St John the Baptist Catholic School (2019) 28 CCMA, the employee was employed as an educator at St John the Baptist Catholic School. The employee was employed in terms of four fixed-term contracts, the first of which was signed in February 2015. The last fixed-term contract was signed on 31 October 2017 and was to run from 1 January to 31 December 2018. On 15 November 2018, the employee was advised that his fixed-term contract would not be renewed for 2019. The employee contended that he had formed a reasonable expectation that his contract would be renewed and sought to challenge this decision. He referred a dispute to the CCMA relying on section 186 of the LRA.
The Commissioner held that the nature of the employee’s work was not of a limited or definite duration. The employer had failed to provide any justifiable reason for employing the employee on a fixed-term contract. The employee was, therefore, a permanent employee of the employer.
In deciding the fairness or otherwise of a non-renewal of a fixed-term contract, the Labour Court has held that it is important to look at the reason why the parties entered a fixed-term contract in the first place, the Commissioner should look at the nature of the work and motives of the employer to determine if the nature of the work is of a limited duration or serves a legitimate operational requirement of the employer as set out in Section 198B (4). If the nature of the fixed term is to avoid the consequences of a permanent contract of employment, or to circumvent the operation of any provision of the Labour Relations Act or relevant Legislation, it is unlikely that the employer will be able to give justifiable reasons and there is a risk that the fixed-term contract can be deemed a permanent contract and any termination without procedural and substantive fairness requirements may be deemed an unfair dismissal.
While S198B may be rather lengthy in nature, the prescripts which it lays out for employers are very clear and are there to safeguard against instances whereby employers try to circumvent their responsibilities in terms of labour legislation. It is important for employers to be aware of S198B to avoid unnecessary and potentially costly instances that may arise whereby aggrieved employees may have valid claims of being unfairly dismissed by the employer in a scenario whereby the prescripts of S198B have not been met, and the employment relationship is deemed to be of an indefinite nature and not fixed-term.
Article by: Wesley Lazarus
Dispute Resolution Official – George