Understanding permanent vs fixed term employment contracts

04 Mar 2024

Introduction

Fixed term contracts play a significant role in the employment landscape, providing flexibility to both employers and employees. However, issues surrounding the expectations of permanent employment in the context of fixed term employment contracts have raised questions about fairness and legal obligations.

Section 186(1)(b) of the Labour Relations Act 66 of 1995 addresses this concern by defining a specific scenario in which the non-renewal of a fixed term contract can be deemed a dismissal. It establishes a framework within which the expectations of an employee regarding the renewal of a fixed term contract can be assessed.

According to this provision, a dismissal occurs when an employee reasonably anticipates that their fixed term contract will be renewed on comparable terms, but the employer proposes less favourable terms or fails to renew the contract altogether.

The intention behind Section 186(1)(b) is to prevent employers from exploiting the temporary nature of fixed term contracts. Employers are prohibited from keeping employees in a prolonged state of temporary employment without offering the security and benefits associated with permanent employment, thereby avoiding the obligations prescribed by labour regulations for permanent employees.

The right of expectation

A common belief among employees is that continued renewal of a fixed term contract over time can lead to a legitimate expectation of permanent employment. This assumption, however, is not always upheld in legal cases. For example, in the case of Malandoh v SABC, an employee who had his fixed term contract renewed for eight consecutive periods did not establish a reasonable expectation of renewal. The court determined that the employee’s contract did not create a genuine expectation, and promises made by unauthorised individuals could not be upheld.

Determining whether a reasonable expectation of permanent employment exists requires a comprehensive evaluation of multiple factors.

These factors include:

1. Contractual stipulations and agreements;
2. Employer commitments and practices related to contract renewal;
3. Availability of work and its relevance to the employment relationship;
4. Purpose and rationale behind the fixed term contract;
5. Inconsistent actions or conduct by the employer;
6. Adherence to reasonable notice periods; and
7. The nature of the employer’s business.

While this list of criteria is not exhaustive, it provides a framework for assessing each case individually.

Legal cases have highlighted the complex nature of establishing a reasonable expectation of permanent employment. Successful claims have been built on factors such as repeated contract renewals, ongoing job requirements, and available financial resources. However, in cases where expectations were not deemed reasonable, considerations such as limited financial resources and notice of termination played a crucial role.

Recent developments and future implications

The landscape surrounding the expectation of permanent employment in the context of fixed term contracts has seen ongoing legal deliberations. While the legislative framework initially focused on fixed term contracts, amendments have been proposed to extend the right of reasonable expectation to indefinite employment.

This evolving legal environment underscores the importance of staying updated on labour law changes and their potential impact on both employers and employees.

Conclusion

Fixed term contracts provide flexibility in employment relationships but can also raise concerns about the expectation of permanent employment. Section 186(1)(b) serves as a safeguard against unfair practices, aiming to balance the interests of employers and employees. The determination of a reasonable expectation of permanent employment hinges on various factors, requiring a thorough assessment of each case’s circumstances.

As the legal landscape evolves, stakeholders in the employment sector should remain vigilant and informed about developments that could impact their rights and obligations.

Article sourced from SchoemanLaw Inc.

See also:

• Employee vs. Independent contractor relationships
• South African Legal Job Market – March 2024
• What is the difference between permanent, fixed term and part time contracts of employment?
• Are you an employee or an independent contractor? What is the difference?

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)