Did that fixed term contract really end?

The use of fixed term contracts of employment (FTCs) is commonplace in employment practices and despite employees agreeing and entering into such contracts with eyes wide open and fully accepting the temporary nature of their employment, these very same employees still commonly claim the natural conclusion of such agreements amount to an unfair dismissal or even permanent employment. The reality is that quite often these employees are correct.

In the case of November v Kele Mining Solutions and Others (JR217/23) [2024] handed down on (31 July 2024) the Labour Court cautioned employers and CCMA commissioners alike not to simply rely on the express wording of termination clauses in FTCs and confirmed that parties to an employment contract cannot contract out of the protection against unfair dismissal afforded to the employee, whether through the device of “automatic termination” provisions or otherwise. The Court stated that a commissioner seized with determining whether a dismissal occurred would need to conduct a multi-faceted analysis to properly exercise a value judgment as to whether the automatic termination of a contract amounts to a dismissal or not and proposed the following approach as a guideline:

Par 44 to 56 of the Judgment sets out the following:

The First phase in an enquiry is determining if the ‘trigger event’ leading to the application of the automatic termination clause in a contract has in fact occurred.

The second phase of the inquiry could be sensibly conducted in separate steps, along the following lines:

Step 1 – consider the employment contract

The wording and nature of the employment contract should be tested against the following questions.
• Is the duration for a specified period?
• Is the duration and termination of employment linked to the attainment of a particular goal, or the happening of a particular event, which can be objectively verified?
• Is the employment contract, read as a whole, intended to or does it have the effect of seeking to bypass the statutory protections against unfair dismissal, and/or the right to challenge the fairness of a dismissal?
• Is the termination clause triggered by the exercise of the client’s will, or at the client’s discretion?

(In other words, does the client determine when the trigger event occurs?)

Step 2 – consider whether section 198 applies

Does the matter fall within the scope of Section 198, 198A and/or 198B of the Labour Relations Act (‘LRA’)? If so, the factors and requirements listed in the relevant sections of these statutory provisions should be considered which may determine that there was in fact deemed permanent employment of the employee which would support a dismissal.

Step 3 – consider the events giving rise to the termination of employment

• What event or events triggered the termination of the employment contract?
• Are these events justified by objective and proper economic and commercial considerations?

The closer the trigger event for the contractual automatic termination is linked to the occurrence of an objective (and objectively determinable) event (such as an agreed termination date, or completion of the project to which an employee was assigned), the more likely it is that the enforcement of the automatic termination clause will not result in an unfair infringement of the employee’s right not to be unfairly dismissed.

At the other end of the spectrum are the cases where the trigger event lies in the sole judgment or discretion of the client. A commissioner will need to assess the extent to which the event relied upon by the client to terminate the work to which an employee has been assigned, is objective, or whether it is closer to the will or whim of the client. Termination of a particular employee’s contract at the mere say-so of a client is likely not to pass muster as a valid automatic termination of employment and is more likely to constitute a dismissal.

Step 4 – consider the effect of enforcement on the employee’s statutory rights

The commissioner should consider whether enforcing the termination clause, in the circumstances of the case, and on the application of the above factors, would unfairly restrict the employees’ right to fair labour practices, the right not to be unfairly dismissed, or the right to challenge the fairness of a dismissal.

Step 5 – consider other issues that may affect the final determination of whether a dismissal occurred

Issues that may affect a finding on whether a dismissal occurred, are, for example:

• Whether the employee claims a reasonable expectation of renewal of the fixed term contract. This is a self-standing ground of dismissal in the LRA and requires evidence to be presented before a determination can be made. Even if the employment contract is held to have validly terminated, a hearing would still be required to determine if a dismissal occurred on grounds of a reasonable expectation of renewal or extension.
• Whether the employee claims that the decision to terminate was tainted by bias (e.g., the client demanding that a particular employee be removed from its premises) or other improper motive.
• Whether the employee claims that there were alternative positions available to him, or that he was unfairly selected for termination, or that the employer engaged others to perform similar work after termination of his contract.

The Court concluded that a commissioner after having considered all relevant evidence and factors, and having exercised the required value judgment, will either reach the conclusion that the employee has successfully discharged the onus of proving the existence of a dismissal, or has failed to do so.