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Fixed-term contracts: Creating a reasonable expectation of renewal
09 March 2020  | Charl Theunissen
An employee has been employed on a fixed-term employment contract for a number of years. Each consecutive year, the fixed contract is renewed at the election of the employer. After the fixed contract expired, the employer decides not to renew the employee’s contract. Is the employee entitled to a renewal of the fixed-term employment contract based on previous renewals? 

Section 186(1)(b) of the Labour Relations Act (“the Act”) makes provision that one of the definitions of a dismissal is that an employee reasonably expected the employer to renew a fixed-term contract of employment on the same or similar terms, but the employer offered to renew it on less favourable terms, or did not renew it at all. The requirement that such expectation of the employee must be reasonable is one of the most important considerations and will be dealt with in-depth hereunder.

In terms of case law, the Labour Court held that the purpose of the above section of the Act is to prevent the unfair practice by employers of keeping an employee on a temporary basis, without employment security such as pension and medical aid until such time as the employer wants to dismiss the employee without complying with the obligations imposed by the Act in respect of permanent employees.

“Rolling over” a contract is when a fixed-term contract is continuously renewed by the employer after the expiry of each term. It is not against the law or forbidden for an employer to renew such a contract once or twice but, when a contract is rolled over for a third or fourth time, the employee may develop a right to expect that the employer will continue to renew the contract. In other words, the number of times that a fixed-term contract has been rolled over may contribute towards an expectation of another similar contract after the natural expiry of the last contract.

The employee’s expectation of renewal is open to the interpretation of the Courts and may depend on the facts in the circumstances. In Malandoh v SABC, the employee was employed on a renewable fixed-term contract, which was rolled over for eight consecutive periods. The employee was then informed that it would not be renewed again. It was found that the contract itself created no expectation of renewal. On the other hand, in Thiso & Others v King Sabata Municipality, the employer’s refusal to renew fixed-term contracts after it had automatically renewed them for four consecutive years, was held to constitute a dismissal.

In Dierks v University of South Africa, it was decided that, in determining whether an employee has a right of reasonable expectation, the following factors are to be taken into account:
1. the significance or otherwise of any contractual stipulation;
2. undertakings by the employer;
3. the practice of the employer with regard to the renewal of employment;
4. the availability of work;
5. the purpose of concluding the fixed-term contract;
6. failure to give reasonable notice; and
7. the nature of the employer’s business.

The above list is not exhaustive and other factors may also need to be considered.

In University of Pretoria v CCMA and others, the Labour Appeal Court was faced with a decision on whether section 186(1)(b), mentioned above, extended to include the expectation by an employee of permanent employment? The applicant in this matter was employed by the university on a number of fixed-term contracts for three consecutive years. During this period, the employee applied for one of several permanent positions that the university had vacant but was unsuccessful in her application. She was, however, offered another fixed-term contract of employment but failed to accept the contract and opted to refer the matter to the CCMA as an unfair dismissal in terms of section 186(1)(b). The Court noted that specific reference was made to fixed-term contracts only. According to the Court, the legislature opted to specifically limit this right of expectation to fixed-term contracts and that the expectation of permanent employment cannot be dealt with under the current section 186(1)(b) unless the Act is amended. 

With the above-mentioned in mind, it may, therefore, be prudent for you to discuss your situation with a labour specialist that can review your circumstances and fixed-term contract and advise you on the correct steps going forward.
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