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Employers, Employees: You And The New Fixed Term Contract Rules

Employers, Employees: You And The New Fixed Term Contract Rules

employersThe new Labour Relations Amendment Act gives significant new protections to employees on a new or renewed fixed term contract.

What follows is of necessity only a brief summary of some complex new provisions in our labour laws – your downside if you get this wrong will be substantial, so specific advice is essential!

The exclusions

Excluded are –

  1. Employees earning over R205,433-30 (the current Basic Conditions of Employment Act threshold),
  2. Small employers (less than 10 employees) and start-ups (under 2 years old and less than 50 employees – note that some specific exceptions apply here),
  3. Fixed term contracts permitted by statute, sectoral determination or collective agreement.

The employee protections

If you employ anyone for more than 3 months on a fixed term contract (or succession of contracts), they effectively acquire the rights and protections of permanent employees unless –

  1. The nature of the work itself is of a limited or definite duration, or
  2. You can demonstrate (the onus is on you) any other “justifiable reason” for fixing the term of the contract.

What is a “justifiable reason”?

Circumstances – specifically stated to be non-exclusive – in which fixed term contracts are justified include replacing a temporarily absent employee, a temporary increase in the volume of work (12 months or less), students gaining work experience, specific projects, limited time work permits, seasonal work, retirees, and so on.  There are inevitably going to be grey areas here, so take advice on your specific circumstances.

Note:  All fixed term contracts must …..

  1. Be in writing, and
  2. State the reasons justifying the fixed term.

Rights and remedies

If you can’t justify a fixed term contract, it is deemed to be an indefinite one, your employee “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”, and must have equal rights to apply for vacancies.

Note that any fixed term contracts entered into before 1 January (the Act’s commencement date) are largely excluded for 3 months, giving affected employers some breathing space to comply.

Even where fixed term employment is justified, after 24 months the employee will, with only a few exceptions, be entitled to severance pay.