|Contract of Employment - Non-renewal of fixed-term contract
Thursday, 19 August 2010
Macholo / Nice
(2010) 19 CCMA 8.34.2
 7 BALR 730 (CCMA)
19 March 2010
Commission for Conciliation, Mediation and Arbitration
M van Aarde
Substantive Fairness in Dismissal
Contract of employment
substantive fairness in dismissal - contract of employment - non-renewal of fixed-term contract – applicant employed for three years on successive three-month fixed term contracts - dismissed when final contract not renewed – held employers can no longer rely on fixed-term contracts to justify a dismissal - dismissal unfair
The applicant, a sales assistant, was employed for nearly three years on successive three-month fixed-term contracts, the last of which was not renewed. She claimed in a default hearing that she had been unfairly dismissed.
The commissioner noted that some employers are under the misapprehension that they are entitled to employ staff on successive fixed-term contracts to evade their obligations under labour laws. Even if such arrangements are bona fide, it does not mean that the employer is then entitled to terminate the employee’s service at will. Under the current Labour Relations Act 66 of 1995 (“LRA”), employers are not entitled to raise the “automatic termination” doctrine of the common law. Employers can no longer rely on fixed-term contracts to justify a dismissal if, for example, the employee was unaware that he or she was employed for a limited duration contract or if the circumstances indicated that the relationship was in fact permanent. The commissioner held further that there was no reason why a reasonable expectation of permanent employment should disqualify an employee from claiming to have been dismissed in terms of section 186(1)(b) of the LRA.
The applicant was awarded compensation equal to six months’ salary as well as statutory amounts owing to her.
1. Details of hearing / representation
The case was set down for an arbitration hearing on 19 March 2010 (9am/case roll) at Welkom, Phakisa House. The applicant (“Macholo”) represented herself. The respondent failed to attend the proceedings. The proceedings were recorded (“DS300001”).
2. Issue(s) to be decided
The main issue in dispute relates to the alleged unfair dismissal of the applicant in terms of the Labour Relations Act 66 of 1995 (“LRA”), section 191(1) read with section 186(1)(b) (non-renewal of contract of employment). I am called upon to decide on the fairness thereof and to render an appropriate award.
3. Background to dispute
The applicant in this matter is Ms Beverly Mpolokeng Macholo. She was in the employment of the respondent since 14 August 2007 in the capacity of Sales Assistant. She earned a monthly salary of R1 493,85 (R345 per week). The respondent conducts business as a “clothing shop”;
The applicant was dismissed on 24 December 2009. Subsequently, she lodged a dispute/LRA 7.11 on 6 January 2010 challenging the fairness of her dismissal. The case was then set down for a conciliation hearing on 26 January 2010. The respondent failed to attend these proceedings and a certificate of non-resolution was accordingly issued in terms of section 135(5) of the LRA. The applicant then filed a request for arbitration on 2 February 2010.
As pointed out, the case was set down on 19 March 2010 at 9am. Notice was served on both parties by registered mail on 9 February 2010 to the addresses indicated on the referral form. At 9:30am the respondent has failed to attend the proceedings. I did not receive any excuse or explanation for his absence and I have decided to continue with the arbitration hearing in terms of section 138(5) of the LRA.
4. Survey of evidence/argument
Ms Beverly Mpolokeng Macholo (“applicant”) testified under oath briefly as follows:
she confirmed her employment-/personal details as set out above;
she and the other employees were appointed on a fixed-term contract of employment which are renewed every three (3) months for the past two years;
on 24 December 2009 the Store Manager told her that her contract has expired/she must not report for duty anymore;
she believes her dismissal was unfair;
although she received her weekly salary up to 24 December 2009, she did not take any leave during the previous 12 months/no leave pay was paid to her;
she does not want to be reinstated but only seeks compensation/payment of all the monies due to her (re leave pay).
As pointed out, the respondent has failed to attend the proceedings and it follows that the facts put forward by the applicant are undisputed and unchallenged.
5. Analysis of evidence/argument
I will address the material issues separately.
Onus of proof
The onus to prove the fairness of a dismissal dispute rests on the employer’s party/ respondent in terms of section 192(2) of the LRA. By failing to show, one can hardly cross this bridge.
From the evidence before me it is clear that the applicant’s service was terminated on the basis that her contract had expired. It is furthermore clear that the contract of employment was renewed several times (every 2–3 months) since date of engagement (14 August 2007) – that is to say, the applicant was in the full time employment of the respondent for two years and four months.
There also appears to be a general conception from (some) employers that they are legally entitled to appoint employees on a temporarily (fixed-term) basis for as long as they wish. In many of these cases, this form of employment is an endeavour to escape the application of our labour laws. In Biggs v Rand Water (2003) 24 ILJ 1957 (LC), the court held as follows:
“Sec 186(1)(b) was included in the LRA to prevent the unfair practice of keeping an employee on a temporary basis without employment security until it suits the employer to dismiss such an employee without the unpleasant obligations imposed on the employer by the LRA in respect of permanent employees.”
Even in bona fide appointments on a fixed-term contract of employment, it also does not mean that an employer has the legal right to simply terminate the employment relationship at will. Our Legislator has specifically introduced section 186(1)(b) of the LRA to govern these situations.
In common law/law of contract, a fixed-term contract of employment (entered into for a specific period/a specific project) expires ex lege (automatically by law) at the end of the period, and generally the employer does not need to give any notice (as required to do in terms of the Basic Conditions of Employment Act 75 of 1997, section 37) to the employee that the contract will not be renewed. In most cases, the employee will be faced with a verbal instruction not to report for duty on the last day the contract expires (or in many circumstances some days later after the contract has expired).
As pointed out, with the inception of section 186 of the LRA, the legal position has changed dramatically. Section 186 of the LRA now puts it beyond doubt that, in certain circumstances, an employer will not be entitled to rely on the automatic termination doctrine which generally governed the termination of employment contract by force of law (ex lege). That will be the case where the employee had a reasonable expectation of renewal.
In terms of subsection 186(1)(b) above, it is firstly clear that the existence of a fixed-term contract must be established. This requires that the contract of employment for a fixed period, linked to a determined or determinably period or the completion of a particular task, must have been entered into. It is of no avail if only the employer had the animus or held the view that the contract is of a limited duration, while the employee was in the absence of a (valid) written agreement completely unaware thereof. (See McKenzie v Econ Systems  1 BLLR 64 (IC); De Sousa v Wonder Air  2 BLLR 49 (IC)).
It is furthermore possible that the relationship between employer and employee could be construed as aiming at a permanent duration, despite an official description to the contrary. (See SACTWU v Mediterranean Woollen Mills (Pty) Ltd (1995) 4 ILJ 889 at 291 (LAC) [also reported at  3 BLLR 24 (LAC) – Ed]. It also follows that the basis, on which an employee is employed, can change. However, if the change allegedly comprehends that a contract of an indefinite duration or temporary status has been replaced by a fixed-term contract, quite a heavy onus rests on the employer to prove the cancellation of the normal employment contract by agreement and novation. See Wonder Air case (1995), supra, regarding the indicia that plays a role in this regard.
Section 186(1)(b) also implies that the refusal to renew a fixed-term contract under specific circumstances is a species of a dismissal (dispute). See also Cremark a Division of Triple P-Chemical Ventures (Pty) Ltd v SACWU (1994) 15 ILJ 289 (LAC) where the Labour Appeal Court held that the termination of fixed-term contracts of employment is no different from a termination of a contract on other grounds, ie misconduct, incapacity or operational requirements. What is required is that the termination must have been both procedurally and substantively fair/justified. In fact, the court confirmed that the employer did not have an unfettered discretion to renew or not to renew, whatever the reason might have been.
It is thus now settled law that the employment relationship does not necessarily terminate at the formal expiry of a contract of employment within the meaning of section 186(1)(b). It also follows that the employee must have had a reasonable expectation of renewal of the fixed-term contract: this is a jurisdictional fact that must be proven by the employee in terms of section 192(1).
Having regard to the evidence before me, I am of the opinion that Grogan: Workplace Law amply summarise the legal position where he stated as follows:
“The notion of reasonable expectation clearly suggests an objective test: the employee must prove the existence of facts that . . . would lead a reasonable person to anticipate renewal. The facts that found a reasonable expectation will clearly differ from case to case but will most commonly take the form of some prior promise or past practice – e.g., where the employer habitually renewed the contract. That a fixed long term contract has been renewed a number of times is not in itself indicative of the existence of a reasonable expectation of renewal; whether there was a reasonable expectation of renewal must be determined from the perspective of both the employer and the employee. The conduct of the employer in dealing with the relationship, what the employer said to the employee at the time the contract was concluded or thereafter, and the motive for terminating the relationship have been cited as factors to be considered.”
“It is submitted that there is no reason in logic or law why an expectation of permanent employment should not provide a ground for a claim for dismissal in terms of sec 186(1)(b).”
Having stated the above, I am thus of the opinion that the applicant’s dismissal was unfair. The applicant also does not wish to be reinstated but only seeks compensation of all monies due to her (including 3 x weeks leave pay: R345 per week x 3).
In case FS74-10, the following award is rendered:
I find the dismissal of the applicant (Beverly Mpolokeng Macholo) to be unfair.
The respondent (Max Nice) is hereby ordered to pay a total amount of R9 998,10 to the applicant, calculated as follows–
compensation equal to six (6) months salary in terms of the Labour Relations Act 66 of 1995, section 193(1)(c): R1 493,85 x 6 = R8 963,10;
leave pay equal to 3x weeks (R345 per week x 3 = R1 035) in terms of the Basic Conditions of Employment Act 75 of 1997, sections 40 and 74.
Said payment to be made by the respondent to the applicant on/before 7 April 2010, if not, the respondent is also ordered to pay interest on the outstanding amount calculated at a rate of 1.5% per month until final date of payment.