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The Labour Relations Amendment Bill – Expectation of permanent employment

30th September 2013

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Very often employees will claim at the CCMA that they expected to be appointed permanently as a result of consecutive or “indefinite” fixed term contracts that they accepted over a period of time or because the temporary position became permanent.

Section 186(1)(b) of the Labour Relations 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 to renew it at all.

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“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;”

It is therefore clear that employees will under the current section 186(1)(b) not be able to extend their expectations to include an expectation of permanent or indefinite employment.

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During November 2011 in a matter involving another university the Labour Appeal Court had to decide whether section 186 (1) (b) includes the right of expectation of permanent employment.

In the University of Pretoria vs. Commission for Conciliation, Mediation & Arbitration & others, the applicant was employed by the university on a number of fixed term contracts for three years. During this period the employee applied for one of several permanent positions that the university needed to fill but was she 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). She also claimed that she expected to be appointed permanently. No clear explanation was given by the employee as to why she declined the offer of another fixed term contract.

The university argued that no dismissal took place in terms of section 186(1) (b) of the Act. The commissioner disagreed and held that the employee had discharged the onus of proving that she had a reasonable expectation of permanent employment. The university took the matter on review but was unsuccessful and then took the matter on appeal.

The issue that was to be decided upon by the court was as to whether section 186(1) (b) could be understood to include a right of expectation of permanent employment. The court noted that specific reference was made to fixed term contracts only. According 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. The appeal of the university was upheld.

The 2013 Labour Relations Amendment Bill and the way forward

The Labour Relations Amendment Bill was adopted by the National Assembly in Parliament on 20 August 2013. The amendment of the provisions of section 186 of the Act is only one of many that will have far reaching implications for employers in South Africa. Section 186(1)(b) will be amended to read as follows:

“(b) an employee employed in terms of a fixed term contract of employment reasonably expected the employer—

(i) 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; or

(ii) to retain the employee in employment on an indefinite basis but otherwise on the same or similar terms as the fixed term contract, but the employer offered to retain the employee on less favourable terms, or did not offer to retain the employee;’’

The practical implication of this change will be that employees appointed on fixed term contracts will be able to claim that they reasonably expected to be appointed indefinitely as a result of the behaviour of the employer.

Under such circumstances the onus will be on the employee prove that the employer created the expectation. An evaluation of all the surrounding circumstances will however have to be considered such as:

  • undertakings by the employer,
  • practice or custom in regard to the permanent appointment of employees previously appointed on fixed term contracts,
  • the availability of work,
  • the purpose of or the reason for concluding the fixed term contract,
  • the nature of the employer's business.

This list of criteria is not exhaustive and it may well be that other factors also need to be considered.

Going forward it will therefore be possible for an employee that was appointed on a fixed term contract for “probation” to claim that expectation of indefinite or permanent employment was created as a result of the behaviour of the employer.

For instance the employee may be able to claim and prove that he /she applied for a permanent position and was offered a fixed term contract for the purpose of probation. During the aforementioned “probation period” the employee never committed any acts of misconduct and neither did the employer have to address a lack of performance by the employee. In addition to this the position is indeed permanent in the company and the employer will replace the employee with another employee. An arbitrator will now be able to order permanent employment if he / she agrees with the employee that reasonable expectation of indefinite employment was created by the employer.

With all of the changes that will be made to the Labour Relations Act employers are advised to obtain expert assistance from reputable labour law experts in order to avoid pitfalls such as this one.

Written by Jan du Toit of SA Labour Guide. He is available to assist employers with appropriate measures to effectively deal with the impact that the Labour Relations Amendment Act will have. Jan can be emailed at jand@labourguide.co.za.

First published by SA Labour Guide

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