Have Fixed Term Contracts Been Renewed To An Indefinite Period By The Inclusion Of Section 198b To The Labour Relations Act?

On the 15th of January 2015 the Labour Relations Amendment Act came into operation, which gave rise to the infamous Section 198B.

Dreadful in the eyes of employers and welcomed by employees, Section 198B is here to stay as it in essence gives effect to the legislator’s intentions. Fixed term contracts have formed part of the Labour Relations Act (LRA) since its enactment in 1995 and therefore are not a new concept in the South African labour law. What is new is the application thereof.

Prior to the Amendment Act, failure to renew an employee’s fixed term contract could have constituted dismissal and in such instances provided some security to the employee. The effects of Section 198B is that the onus as well as the burden of proof have shifted to the employer, as the employer may only employ an employee on a fixed term contract or successive fixed term contract for longer than three months if: the nature of the of the work for which the employee is being employed is of a limited or definite nature or the employer can demonstrate any other justifiable reason for fixing the term of the contract. Therefore an employer will be required to prove that there was a justifiable reason for fixing the term of the contract.

The effect of the above is that, should an employer employ an employee or renew an employee’s employment in terms of a fixed term contract without a justifiable reason such an employee will be deemed to have been employed for an indefinite duration. Section 198B(6)(a) and (b) supports this notion in that employment on such terms must be in writing and state the reasons for the fixing of the term of the contract as contemplated in subsection (3) as mentioned above.

Unfortunately or fortunately, depending on which side you are on, the legislator has limited the application of Section 198B to employees earning less than R205 433.30 per annum, employees employed by an employer with less than 10 employees or has less than 50 employees and has been in operation for less than two years or has been formed by the division or dissolution for any reason from an existing business. In the instances where an employee has been excluded, and employed in terms of a fixed term contract, the status quo remains, meaning an employer’s failure to renew or willingness to renew a fixed term contract on less favourable terms could constitute dismissal should the employee be under reasonable expectations that the fixed term contract would have been renewed.

As if the Amendment Act has not placed enough stress on employers already, employers are expected to conclude such fixed term contracts with current fixed term employees within three months from the 15th of January 2015, as it is contemplated in Section 198B (8) (b) that the application of subsection (a) has been postponed for three months after the date of commencement. Failure could result in labour disputes relating to possible dismissal of an employee employed for an indefinite purpose, which we all know as a permanent employee.

With all this having been said it is the duty of the Government to protect the vulnerable persons in society and through this Amendment Act the legislator appears to be alive to that responsibility in light of the fragile labour market in our country.

Article written by

Albert Arnold