The Labour Relations Act has been amended as of 1 January 2015.
It is a well-known and widespread practice for employers to structure contracts of employment in such a way that the permanence of the contract is avoided. For example an employer may keep renewing a contract with a duration of 6 months over and over, which in itself can create a permanent contract. The employer can also save money with fixed term contracts by denying the employee the opportunity of pension and/or provident fund benefits and also medical aid benefits, and in the event of retrenchments, the employee on a fixed term contract can be deprived of severance pay.
Employers need to be aware of the new Section 198B of the LRA:
a ‘fixed term contract’ means a contract of employment that terminates on—
(a) the occurrence of a specified event;
(b) the completion of a specified task or project; or
(c) a fixed date, other than an employee’s normal or agreed retirement age, subject to sub-section 3 of the LRA.
SUB-SECTION 3 OF THE LRA
In terms of subsection 3 of the LRA, 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:
(a) the nature of the work for which the employee is employed is of a limited or definite duration; or
(b) the employer can demonstrate any other justifiable reason for fixing the term of the contract
SUB-SECTION 4 OF THE LRA
Subsection 4 of the Act lists justifiable reasons for fixing the term of an employment contract which are the following:
If the employee
(a) is replacing another employee who is temporarily absent from work;
(b) is employed on account of a temporary increase in the volume of work which is not expected to endure beyond 12 months;
(c) 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;
(d) is employed to work exclusively on a specific project that has a limited or defined duration;
(e) is a non-citizen who has been granted a work permit for a defined period;
(f) is employed to perform seasonal work;
(g) is employed for the purpose of an official public works scheme or similar public job creation scheme;
(h) is employed in a position which is funded by an external source for a limited period; or
(i) has reached the normal or agreed retirement age applicable in the employer’s business.
The effect of Employment in terms of a fixed term contract concluded or renewed in contravention of subsection (3) is deemed to be of indefinite duration, which means that the benefits of a fixed term contract are lost.
3 REQUIREMENTS FOR FIXED TERM CONTRACTS
For fixed term contracts to be enforceable there are three main requirements that have to be met:
- Firstly, the nature of the work must be for a limited duration or there must be some other justifiable reason for fixing the term of the contract.
- Secondly, the fixed term contract must be in writing.
- Thirdly, the contract must specify the justifiable reason.
The onus is on the employer to prove that there is a justifiable reason and that the term of the contract has been agreed.