The reason and manner in which fixed-term contracts are terminated is an issue that is frequently decided by our courts and other dispute resolution forums, this too is the case with indefinite employment contracts of course. Fixed-term contracts are employment contracts wherein the parties expressly agree on the duration of the employee’s employment and stipulate the date, event or task which will terminate the employment relationship. Fixed-term contracts are generally not terminated prior to the specified termination date unless the parties agree to an early termination. Grounds for early termination may include, inter alia, misconduct, capacity, or the employer’s operational requirements, if so stated.
In Majambe // University of South Africa  7 BALR 770 (“Majambe”), a recent dismissal case heard before the Commission for Conciliation, Mediation and Arbitration (“CCMA”), the commissioner was tasked to decide whether the termination of a fixed-term contract amounted to a dismissal in terms of section 186 (1)(b) of the Labour Relations Act, 99 of 1995, as amended (“LRA”). In accordance with the aforementioned section, a dismissal means that “an employee employed in terms of a fixed-term contract of employment reasonably expected the employer (i) to renew a fixed-term contract 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 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.”. In order to prove an unfair dismissal on any of the above grounds, an employee will be required to establish the existence of the dismissal first and must satisfy the onus of proving a reasonable expectation of renewal or retention on an indefinite basis. To this effect, subjective and objective elements must be proven. Once the dismissal is proven, the employer bears the onus to prove that the dismissal of the fixed-term employee is fair.
Facts of the matter
Majambe, (“Applicant”) referred an unfair dismissal dispute to the CCMA alleging that the University of South Africa, (“Respondent”) created an expectation to the effect that her fixed-term contract would be renewed and its failure to do so thus amounted to an unfair dismissal as contemplated in of section 186 (1)(b) of the LRA.
The issue arose when Applicant was informed by Respondent’s Human Resource department that it had not received any motivation for the renewal of her fixed-term contract. No motivation was provided by the Manger to renew Applicant’s contract and this was communicated to Applicant prior to the expiration of her contract on 30 September 2022. On the last day of work, Applicant was advised by Respondent ’s Operations Manager and Deputy Director that she would not be required to return to the office and that she would be called when her contact was ready. In the absence of a renewed fixed-term contract, Applicant referred an unfair dismissal dispute to the CCMA and recorded her date of dismissal as 30 September 2022, the date her fixed-term contract expired.
During arbitration proceedings at the CCMA, Applicant argued that Respondent ’s failure to renew her fixed-term contract amounted to a dismissal as she had a reasonable expectation of renewal of her fixed-term contract. Applicant argued that she was dismissed rested on the fact that her fixed-term contracts had been renewed in the past on two (2) separate occasions; first for a period of approximately five (5) months and again for a period of approximately eleven (11) months. Secondly, she argued that it had become Respondent ’s culture or norm to renew fixed-term contracts and stated that it was Respondent ’s standard practice for the Manager to motivate why an individual’s fixed term contract should be renewed. Once motivation was received, the Deputy Director would approve the renewal. Thirdly, that her expectation of renewal was further motivated by the fact that she was advised that she would be called “as and when” her contract was ready. Applicant argued these words created the impression that she would receive a new contract. Lastly, Applicant believed that she was prejudiced economically by Respondent and that Respondent had enough work for her to remain employed.
Respondent contested Applicant ’s allegations and highlighted that each fixed-term contract was subject to specific terms and conditions of employment. Respondent demonstrated that Applicant agreed to and signed the declarations contained in her fixed-term contract whereby she – (i) accepted the terms of her temporary employment; (ii) expressly declared that she shall have no claim against Respondent for indefinite employment, deemed or actual; and (iii) expressly declared that she had no expectation of an extension or renewal of her fixed-term contract, or permanent employment. Respondent (1) also raised the fact that it was not required to furnish notice as Applicant ’s fixed-term contract was not terminated prior to the expiry date; and (2) further challenged the argument that the culture was for the Deputy Director to approve renewals and placed it on record that only the Deputy Registrar had the authority to create an expectation of renewal. Respondent therefore submitted that an expectation of renewal had not arisen as no motivation for such was provided and only a person in authority could create such an expectation, which did not occur in Applicant ’s case.
The Commissioner, upon analysing the evidence and arguments presented in relation to Applicant’s claim that she was unfairly dismissed, held that (1) the Legislature attempted to curb possible exploitation and abuse by enacting section 186 (1)(b) of the LRA; and (2) that the onus to prove a reasonable expectation, rests on the employee who has to show that they actually or subjectively expected an employer to renew their fixed-term contract or to retain them in employment on an indefinite basis. In view of this, the commissioner applied the criterion set out by the Labour Appeal Court (“LAC”) in De Milander v Member of the Executive Council for the Department of Finance: Eastern Cape and others (2013) 34 ILJ 1427 (LAC) where it was held that:
- it was first necessary to determine whether the employee in fact expected her contract to be renewed (which was the subjective element); and
- if the employee did have such an expectation, whether, taking into account all the facts, that expectation was reasonable (which was the objective element).
In the aforementioned case, the LAC held that whether or not an expectation was reasonable will depend on whether it was actually and genuinely entertained.
On determining the subjective elements – i.e., whether Applicant had indeed expected renewal of her fixed-term contract, the commissioner found that – (i) Applicant might have wished or hoped that her fixed-term contract would be renewed, however she ought to have appreciated the fact that there was a real risk of non-renewal; (ii) the contractual provisions of Applicant ’s conditions of employment could not simply be ignored; (iii) no precedent was created by Respondent by the mere fact that it renewed Applicant ’s fixed-term contract on two previous occasions; and (iv) the use of the words “as and when”, referred to an uncertain future event did not imply that Applicant would indeed have been given a new contract. The words simply meant “if and when” and in context leaves no room for Applicant ’s contention that this was the reason why she expected her contract to be renewed. On this point the commissioner also noted that Applicant did not call her colleague who was with her at the time these words were said, or anyone else to corroborate this allegation. Based on this, the commissioner found that Applicant could not have expected Respondent to renew her fixed-term contract of employment.
On determining the objective elements – i.e., whether Applicant ’s alleged expectation of renewal was reasonable, the commissioner held that Applicant cannot be said to have had a reasonable expectation of renewal as (i) her appointment was subject to Respondent ’s conditions of service in terms of which she declared that she harboured no expectation of an extension or renewal; (ii) Applicant was well aware of the risk of non-renewal and accepted that risk; (iii) the mere fact that Applicant ’s fixed-term contract had been renewed on two previous occasions could not per se have resulted in a reasonable expectation of yet another renewal; (iv) Applicant furnished no concrete evidence to substantiate or corroborate her averment that a “culture or norm” to renew fixed-term contracts existed; and (v) no evidence was presented to prove that anyone with or without authority to renew fixed-term contracts verbally or in writing communicated anything whatsoever to Applicant which could have resulted in a reasonable expectation that her fixed-term contract of employment would be renewed. For these reasons, the commissioner found that Applicant failed to prove her alleged expectation of renewal had been reasonable.
On the issue of notice not being furnished to Applicant , the commissioner stated that (1) it is the position that a fixed-term contract normally expires or terminates by operation of law at the end of its term; (2) employers are not required to give notice of termination in such cases; and (3) the absence of notice does not constitute “dismissal”.
As Applicant failed to satisfy her onus of proving she had an expectation of renewal and that this expectation was a reasonable expectation, no dismissal was proven on her part. On account of there being no dismissal, the commissioner held that the CCMA lacked jurisdiction to arbitrate the dispute.
Important to note
Where it is alleged that a reasonable expectation of renewal or indefinite employment was created merely because a fixed-term contract was renewed more than once, it appears based on this case, that such an argument alone will not suffice for purposes of proving an unfair dismissal. Employees are required to subjectively and objectively prove a genuine expectation existed and that such expectation was reasonable in the circumstances.
Although the provisions of a fixed-term contract play a crucial role in mitigating the risk of an employee expecting renewal thereof or indefinite employment, employers are cautioned against solely relying on the conditions of employment to dispute allegations of unfair dismissal. Creating a culture where fixed-term contracts are successively renewed may become problematic in the long run, particularly where (1) no justifiable reason for renewal is provided; (2) the employee who makes the allegation earns below the basic earnings threshold and; (3) the terms of the contract do not explicitly indemnify the employer against any claims of unfair dismissal should the contract not be extended, renewed, or endure indefinitely.