REASONABLE EXPECTATIONS: What factors does the Labour Court consider in a claim based on reasonable expectations of renewal when a fixed term contract is not renewed?
LABOUR LAW, in a NUTSHELL, January 2021
It often happens that an employer renews a fixed term contract (FTC) several times and then decides for its own reasons not to renew it again. The Labour Relations Act (“the LRA”) includes this situation as a possible dismissal in Section 186(1)(b). It says that termination, for this reason, could be defined as a “dismissal” if –
- the 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 favorable terms; or
- if the employer did not renew it at all.
An employer may be able to “roll-over” an FTC once or twice without creating a reasonable expectation of continued employment. But if this happens three, four or more times, the employee’s expectations will become progressively greater.
In Dierks v University of South Africa the Labour Court noted that the following factors, amongst others, should be considered when determining whether an employee can succeed on a claim based on a reasonable expectation that an FTC would be renewed –
- The significance or otherwise of any contractual stipulation.
- Undertakings by the employer.
- The practice of the employer in relation to the renewal of employment.
- The availability of work.
- The purpose of concluding the fixed-term contract.
- Failure to give reasonable notice; and
- The nature of the employer’s business.
Source: Worklaw Newsletter
Dierks v University of South Africa (J399/98)  ZALC 126
The Labour Appeal Court has applied these factors in later cases. It could also consider the factors specified in section 198B (4). These are the factors an employer may rely on as grounds to justify the non-renewal of the FTC of a vulnerable employee.
The remedy for a successful claim based on a reasonable expectation under Section 186(1)(b) is limited to an order for the employer to reinstate the employee on the same or substantially the same terms and conditions as the expired FTC.
TIP: An Employer should take care not to use repeated renewals of an FTC as a strategy to limit its liability in terms of the LRA. The need for an FTC instead of permanent employment should be genuine and justifiable to minimise the risk of an unfair dismissal. They should also be careful not to say or to do anything which could create an expectation that an FTC will be renewed if that is not the intention.
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