Fixed-Term Contracts and Employee Rights

Prasa, the CCMA and Fixed-Term Contracts

In a recent case of ours between The Passenger Rail Agency of SA (Prasa), trading as Metrorail Western Cape, and almost 200 of their workers, the Commission for Conciliation Mediation and Arbitration (CCMA) ordered the employer to pay a hefty total of about R35.5m due to their failure to employ them on a permanent basis after their fixed-term contracts should have ended.

The South African Labour Guide on Fixed-Term Contracts

As described in the South African Labour guide, many employers utilise Fixed-Term Contracts purely as a means of evading their statutory obligations in terms of the BCEA and the LRA and the EEA, and also to save money by denying the employee the opportunity of pension or provident fund benefits and also medical aid benefits. Further to this, in the event of retrenchments, the employees on Fixed-Term Contracts are robbed of their severance pay. Additional rights of a permanent employee include annual leave and pay.

Before 2014, the Labour Relations Act in South Africa defined a Fixed-Term Contract as “a means of employment which terminated on the occurrence of a specified event, the completion of a specified task or project, or on a fixed date other than an employee’s normal or agreed-upon retirement age”. However, on 17 August 2014, the President of the Republic of South Africa signed into law the Labour Relations Amendment Act, 2004 (Act No. 6 of 2014) in terms of section 84(2)(a) of the constitution which fundamentally changed Fixed Term Contract employment with the introduction of section 198B.

The new Act stipulates that an employee may not be employed on a Fixed-Term Contract for longer than a period of three months, nor may there be unreasonable renewals of a Fixed Contract. Our case against Prasa provided unequivocal evidence that our clients had each been employed on a Fixed Term Contract over three years starting from the 1st of January 2015 to 2018 with no reasonable evidence to show that these workers shouldn’t be employed on a permanent basis so they would be entitled to the same financial benefits and fundamental labour rights as their permanently employed peers.

In South Africa, Fixed Term Contracts can only be justified under certain conditions, which include if the employee:
Is replacing another employee who is temporarily absent from work.
Is employed on account of a temporary increase in the volume of work which is not expected to endure beyond twelve months.
Is a student or recent graduate employed for the purpose of being trained or gaining work experience to enter a job or profession.
Is employed to work exclusively on a specific project which has a limited or defined duration.
Is a non-citizen who has been granted a work permit for a defined period.
Is employed to perform seasonal work.
Is employed for the purposes of an official public works scheme or similar public job creation scheme.
Is employed in a position funded by an external source for a limited period.
Has reached the normal or agreed-upon retirement age applicable in the employer’s business.

In our client’s case, none of the above was applicable therefore the remuneration was substantial. Their award also accompanied a permanent contract of employment to ensure that their working rights were no longer violated in future.