Contracts of Employment

Questions surrounding fixed term contracts abound - from both employers and employees.

I received literally dozens of questions on this issue on a weekly basis. I came across a rather interesting case the other day on the question of the renewal of a fixed term contract. In Feni v SA Five Engineering (Pty) Ltd [2007] 6 BALR 516 (MEIBC) heard on the 15th of February this year at the Metal and Engineering Industries Bargaining Council, the question of renewal arose at the arbitration proceedings.


Briefly, the applicant had worked for the employer for six months on monthly fixed term contracts, and was then sent to work on another site on a five-month contract which was not renewed. The applicant maintained that he had been unfairly dismissed because he had not been given notice that his contract would terminate, and because they was still work for him at the time. The applicant also disputed the employer's right to continually roll over repeated fixed term contracts.


In the employer's evidence, it was revealed that there were in fact 8 fixed term contracts governing the employees period of employment from 8th of August 2005, to 15th August 2006 - these contracts having been continually renewed upon expiry of the previous contract. When the most recent contract expired on the 15th of August 2006, the applicant was informed that his contract had expired and he was therefore dismissed.


The employer denied that the applicant had been dismissed, but stated that the employment had been terminated because of expiry of the contract. The question of "was there in existence a valid contract?" was examined. It appears that the employer in this matter had, each time the contract was renewed, merely placed an endorsement in the employees file to that effect - in other words the contract was "rolled over."


This practice is no doubt followed by many employers - on the premise that the fixed term contract is merely renewed without any material changes to the contract - so what is the point of issuing a new contract? Surely an endorsement to the effect that the contract is renewed or is to continue for a further period of time is sufficient?


However, following such a process appears to result in only one thing – an invalid contract. The arbitrator found that the only difference between a permanent employee and one who is on a limited duration or fixed term contract lies precisely in the fact that, at the end of each contract period, the two parties reach a new agreement and sign a new contract. In terms of the Bargaining Council's main agreement, the employer should engage the employee afresh at the beginning of each contact period.


In other words, upon the expiry of the fixed term contract the employee is no longer employed - he is then subsequently offered fresh employment under a fresh contract. In the case mentioned above, the employer was in fact a party to the Metal Industries Bargaining Council, who had precisely such a ruling in the council's main agreement. The employer did not comply with that condition in the main agreement, resulting in the arbitration ruling that the assumption by the employer that the fixed term contract is renewed by a simple endorsement in the employees file is not acceptable. The endorsement does not constitute a new fixed term contract, and therefore the employee becomes permanent.


The forgoing supports our view, which is that we have always stated and advised employers never to indulge in the practice of rolling over fixed term or temporary contracts. We have always advocated that the employment must end upon the expiry of any limited duration contract, and that if there is a need for further employment then a further limited duration contract can be offered, or the employee must be made permanent. We realise that not every employer is party to a Bargaining Council main agreement, but the principle nevertheless applies.


In addition, in the case under discussion, the arbitrator found that proper pre-dismissal procedures were not observed when the contract was terminated - that the employer had in fact not even taken the trouble to give the employee the 1 week notice as stipulated in the (invalid) contract.


The arbitrator did observe that employees in other industries, who do not have the protection of an agreement similar to the main agreement of the Metal and Engineering Industries, may be employed on a continuous succession of limited duration contracts - in other words there is no law against continually " rolling over" a limited duration contract.


But just because there is no law against it, does not make it a desirable practice. The arbitrator ordered the reinstatement of the employee, without loss of benefits, and also ordered compensation of almost R20, 000 rand plus interest. This goes to illustrate the great care that employers must exercise with limited duration contracts.


The terms and conditions of the contract - in particular with reference to the question of continued employment upon expiry of the contract - must be specifically stated in the contract, as well as the conditions under which the contract may be ended or terminated by the employer before the specified end date of the contract.


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