Labour Amendment Bill: Fixed Term Contracts

Introduction

A fixed-term contract of employment is a contract that has a start date and an end date. There was not much regulation to this type of contract. The major restriction has been that an employer cannot terminate a fixed-term contract and replace the employee. This would then constitute an unfair dismissal. Our perusal of the proposed Bill shows greater regulation for this type of contract. We believe the legislature wishes to deal with complaints of employees being put on perpetual fixed-term contracts. It also wants to restrict the termination of fixed-term contracts. This section looks at the provisions in the Bill and examines the consequences that will come with this amendment as far as fixed-term contracts are concerned.

The proposed amendment

The current Bill seeks to amend section 12 of the Act in respect to fixed terms contracts in the following manner;

“Section 12 (“Duration, particulars and termination of employment contract”) is amended—

(a) ………………..

(b) by the repeal of subsections (4a) and (4b) and the substitution of the following—

“(4a) A contract of employment may be terminated only, on the part of an employee, by his or her resignation or retirement, and in the following cases on the part of an employer—

(a) ……………………… or

(b) ……………………………………………………………

(c)  in the case of a fixed term contract, upon the expiry of the period of the contract without the need to give notice under subsection (4):

Provided that—

(i) notwithstanding anything in such contract to contrary no fixed term contract shall be for less than twelve months except—

A      in the case of employment that by its nature is casual or seasonal employment; or

B     the contract is for the performance of some specific service which may be completed before that time;

(ii) any fixed term contract that purports to be for a period off less than twelve months shall be deemed to be a contract for an indefinite period.

(iii) if the majority of employees engaged by the same employer are on fixed term contracts, and at any time when an employee’s employment is terminated on the expiry of his or her fixed term contract, then the provisions of sections 12C and 12D shall apply to such termination as if it was retrenchment.

(d)……………………………………………………………………………………

(e)  ………………………………………………………………………………..….

(f) for the breach of an express or implied term of contract, upon such breach being verified after due inquiry under an applicable employment code or in any other manner agreed in advance by the employer and employee concerned.”

The period of a fixed-term contract

The Bill provides that no fixed term contract shall be for less than twelve months. What this essentially means is that employers who had employees in contracts of less than twelve months will have to make the necessary changes on the expiry of the current contracts but before the Bill becomes an Act of parliament. The provision is not cast in stone as it unequivocally accepts that fixed-term contracts of less than 12 months are permissible in setups where the work is of a casual or seasonal nature as well as in situations where the work is of a specific service e.g. the agricultural sector. It follows that an employer who alleges that the work is seasonal or is for the performance of a specific service shall have the burden of proving the same.

The Deeming Provision

In addition to the restriction that’s coming with the period of a fixed-term contract, there is a deeming provision which provides that if an employee were to be on the contract of less than twelve months such an employee shall be deemed to be on a permanent contract. This section reads:

“(ii) any fixed term contract that purports to be for a period of less than twelve months shall be deemed to be a contract for an indefinite period.”

This stance is not surprising. Following the 2015 amendments to the Act, National Employment Councils have been capping the maximum number of times a fixed-term contract can be renewed. The following are examples:

  1. Commercial Sectors: 6 contracts
  2. Funeral Industry: 3 years
  3. Furniture Manufacturing Industry:  2 years
  4. Plastics Manufacturing Industry: 10 years

From 2015, there has been a shift towards the protection of employees on fixed-term contracts.

The proposed amendments will do away with most of these provisions in contracts and collective bargaining agreements. Every contract that is of a fixed term nature and is of less than twelve months shall be deemed to be permanent. When this happens, it means for example, in certain industries where employers are not obliged to pay pension for their fixed-term contractors, they will be obliged to pay such. For all intents and purposes, an employee who is on a contract of less than twelve months shall be deemed to be on a permanent contract at the time this law is put into effect. This is one of the intense consequences that’s going to flow from this provision. The provision does not allow a grace period to allow employers to restructure their establishments.

Termination at the expiry of the fixed-term contract

The law in its current form provides that an employee on a fixed-term contract gets nothing at the expiry of that contract. There is not even a need to give such an employee notice of the impending end to the employment relationship. Presumably, to offer some form of protection for workers and to ensure that they at least get terminal benefits at the expiry of the contract the following provision is being put in place in terms of the proposed amendments:

“iii. if the majority of employees engaged by the same employer are on fixed term contracts, and at any time when an employee’s employment is terminated on the expiry of his or her fixed term contract, then the provisions of sections 12C and 12D shall apply to such termination as if it was retrenchment”.[1]

The Bill provides that sections 12C and 12D shall apply when a fixed-term contract expires. The consequence is that a retrenchment package becomes payable to an employee. This retrenchment package can be a minimum or the negotiated retrenchment package, which is higher than the minimum, in terms of the proposed amendment.

This provision however does not apply to every employee. The provision applies if the majority of the employees of one employer are on fixed-term contracts. The Bill does not define what a majority entails, but one would postulate that this provision applies when more than 50% of the employees of one employer are on fixed-term contracts. The intention is clear, the legislature wants to do away with what others would term as casualisation of labour, a phenomenon where employees are perpetually on fixed-term contracts or where an employer deliberately puts employees on fixed-term contracts without any reasonable cause.

One thing that exercised our minds is that the provision is seemingly discriminatory. Employees who are employed in setups that do not have the majority of the employees on fixed-term contracts are not given the same benefit as those who belong to setups that have the majority on fixed-term contracts. Equally so, it punishes employers who employ more employees on fixed-term contracts even when the nature of business and the setup may not allow everyone to be on a permanent basis. This is not what the Constitution of the land intended when it provided that every person has the right to equality before the law. Every employee has the right to fair labour practices.  We respectfully submit that this provision may not survive constitutional scrutiny.

Furthermore, it is not clear how section 12 D of the Act will apply when a fixed-term contract is terminated. This is a source of controversy as section 12D provides for special measures to avoid retrenchment which measures are usually complied with before termination. The legislature needs to closely look at this provision in this regard.

Conclusion

In conclusion, the bottom line is that every employee, save for those on casual work or task contract, will, in the event that the Bill become law, be in a longer-term contract of at least twelve months. Fixed-term contracts of less than twelve months won’t exist when this law is passed. We are worried that the deeming provision does not allow employers to look into their systems and make the necessary changes before the provision comes into effect. By making everyone an employee on a permanent contract, employers may be prejudiced in situations where the work does not qualify as seasonal or task but at the same time, there is a need for flexibility in the management of contracts. We are also worried that the proposed Section 12 (4a) (c) (iii) is seemingly discriminatory as it affords more protection to employees who are employed by employers with many employees on fixed-term contracts compared to those employees employed by employers with fewer employees on fixed-term contracts.


[1]              Proposed Section 12 (4a) (c) (iii) of the Act.

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