THE termination of an employee’s fixed-term contract of employment who is paid below the earnings threshold to perform work of a permanent nature, amounts to an unfair dismissal.
Section 198B of the Labour Relations 66 of 1995 (LRA) provides that fixed-term employees earning less than R205 433.30 per annum (threshold) may only be employed for longer than three months if the work they perform is of a limited or definite duration, or if the employer can demonstrate any other justifiable reason for fixing the term of the contract. In the absence of a justifiable reason, the employee will be regarded as being indefinitely employed.
In the case of Ntsoko v St John the Baptist Catholic School (2019) 28 the Commission for Conciliation, Mediation and Arbitration (CCMA) 7.1.12, Ntsoko (the employee) was employed as an educator at St John the Baptist Catholic School (the employer). Ntsoko 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 October 31, 2017 and was to run from January 1 to December 31, 2018. The contract was not renewed and this (the non-renewal of this contract) was the subject matter of the dispute between the parties. On November 15, 2018, Ntsoko was advised that his fixed-term contract would not be renewed for 2019.
Ntsoko 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. Section 186 of the LRA provides that if a person employed in terms of a fixed-term contract of employment reasonably expected the employer to renew it on the same or similar terms, or to be retained on an indefinite basis on the same or similar terms, but the employer offered to renew or retain the employee’s employment on less favourable terms or did not renew or retain the employee at all, it constitutes a dismissal. The parties argued the matter before the CCMA on the basis of a non-renewal of the employment contract.
The commissioner noted that the employee earned R10 000 a month and therefore section 198B of the LRA applied. Section 198B (3) of the LRA provides that an employer may only employ someone who earns below the threshold on a fixed-term contract for longer than three months if the nature of the work for which he/she is 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. Any fixed-term employment contract that contravenes the provisions of section 198B (3) is deemed to be of indefinite duration. In other words, the employee is regarded as being a permanent employee.
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 Ntsoko on a fixed-term contract. He was therefore a permanent employee. The letter of November 15, 2018 informing Ntsoko that his contract would not be renewed constituted a dismissal. The commissioner was satisfied that the employee had shown that he had been dismissed. All dismissals must follow a fair process and be for a valid reason. No procedure was followed and no valid explanation had been provided justifying Ntsoko’s dismissal. The employee’s dismissal was therefore substantively and procedurally unfair. Ntsoko did not seek reinstatement. The commissioner awarded compensation equivalent to the salary of four months.
Importance of the case
The case highlighted the protection the LRA provides to employees earning below the threshold who are employed on fixed-term contracts. If employers intend engaging employees on fixed-term contracts for a period of more than three months, justifiable reasons need to be present for fixing the term of the contract. In the absence of doing so, there is a risk that these employees are indefinite employees and that the non-renewal of the fixed-term contract of employment will constitute a dismissal.
Andre van Heerden and Jacques van Wyk are labour law specialists at Werksmans Attorneys.