With the advent of welcoming in 2015 so too did we welcome in the arrival of the new Labour Relations Amendment Act of 2014 (“the Amendment Act”) which became effective on 1 January 2015. Along with numerous changes brought about by the Amendment Act it also introduced stricter provisions in relation to fixed term employment contracts (these amendments can be seen in section 198B – 198D). The purpose of such an amendment was specifically aimed at giving labour broking employees, employees employed on fixed term contracts, and part-time employees’ greater protection than that which was previously afforded to them under the provisions of the Labour Relations Act, 66 of 1995 (“the LRA”). The new amendments invite a noble aim which is intended to provide employees with more job security. Along with the amendments comes the call on employers to ensure that they comply in all respects with the new legislation.

The new amendments relative to fixed term contracts and introduced by the Amendment Act do not apply to –

a. employees earning more than R205 422.30 per annum (section 198B(2)(a));

b. an employer that employs less than 10 employees, or that employs more than 50 employees and whose business has been in operation for less than two years (unless the employer conducts more than one business or the business was formed by the division or dissolution for any reason of an existing business) (section 198B(2)(b)); and

c. an employee employed in terms of a fixed term contract which is permitted by any statute, sectoral determination or collective agreement (section 198B(2)(c)).

Under the Amendment Act, as a general rule, fixed term employment contracts with lower earning employees are limited to a maximum period of 3 months (section 198A(1)). However, section 198B(3) of the Amendment Act states that an employer may employ an employee on a fixed term contract or successive fixed term contracts for longer than 3 months only if either the nature of the work is of a limited or definite duration, or the employer can demonstrate a justifiable reason for the longer term. The following are examples of justifiable reasons as prescribed by section 198B(4) –

• replacing another employee who is temporarily absent from work;
• employed on account of a temporary increase in the volume of work which is not expected to endure beyond 12 months;
• 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;
• employed to work exclusively on a specific project that has a limited or defined duration;
• a non-citizen who has been granted a work permit for a defined period;
• employed to perform seasonal work;
• employed for the purpose of an official public works scheme or similar public job creation scheme;
• employed in a position which is funded by an external source for a limited period; or
• has reached the normal or agreed retirement age applicable in the employer’s business.

If an employer fails to meet the requirements of section 198B(3), the employee is deemed to be employed indefinitely (section 198B(5)). It is noteworthy that the list of examples set out in section 198B(4) are not a closed list and an employer could employ an employee for a limited duration so long as there is an objectively reasonable ground for doing so. These longer fixed term contracts must now also be in writing and state the reason for the longer term (section 198B(6)).

A key feature of the Amendment Act is the equal treatment of employees employed on fixed term contracts of more than 3 months with employees employed on a permanent basis. Section 198B(8)(a) of the Amendment Act states that an employee employed under a fixed term contract for more than 3 months must not be treated less favourably than an employee employed on a permanent basis performing the same or similar work, unless there is a justifiable reason for different treatment. Section 198D(2) lists the justifiable reasons that could be relied upon, namely seniority, experience, length of service, merit, quantity or quality of work performed and any other non-discriminatory reason.  The equal treatment provisions become effective, in respect of fixed term contracts concluded before 1 January 2015, on 1 April 2015, and ,in respect of fixed term contracts concluded after 1 January 2015, on the date on which the fixed term contract is concluded (section 198B(8)(b)).

Another key feature of the Amendment Act is the equal access to vacancies provision. Section 198B(9) of the Amendment Act provides that employers must provide employees employed on fixed term contracts and employees employed on a permanent basis with equal access to opportunities to apply for vacancies at the employer. This means that employers who distinguish between their permanent and fixed term employees in communicating existing vacancies will have to review these practices in order ensure that fixed term employees have equal access to opportunities to apply for vacant positions at the employer.

One of the most fundamental changes brought about by the Amendment Act is the end of term payment provision. Section 198B(10)(a) of the Amendment Act provides that employees who are employed to work on a specific project that has a limited or defined duration for a period exceeding 24 months are, on expiry of the contract, entitled to an end of term payment equal to one week’s remuneration for every completed year of the contract. This provision is in many respects similar to a severance payment when an employee is retrenched.  Of importance though is that only the contract period after 1 January 2015 will be taken into account in determining the value of the end of term payment (section 198B(10)(b)). However, an employee will not be entitled to this end of term payment if, prior to the expiry of the contract, the employer offered the employee employment on the same or similar terms starting at the expiry of the fixed term contract (section 198B(11)). It is important to remember that the end of term payment is only payable in respect of fixed term contracts where the reason for fixing the term is due to work being for a specified project.  

Fixed term employees, as atypical and contingent employees, are in a particularly weak bargaining position in the employment relationship. Unfortunately it has become common practice for employers to treat fixed term employees differently to their permanent colleagues. The new Amendment Act will now however level the playing field and provide fixed term employees with a mechanism to enforce equal treatment in employment. Employers should ensure that they comply in all respects with the new amendments. This will however involve a rigorous investigation by many employers into the conditions of employment of those fixed term employees earning below the threshold amount.

Written by Marco Schepers, Associate (Kampel Kaufmann Attorneys)