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Home RA Newsletters Renewal Of Fixed TermContracts- Legitimate Expectations

Renewal Of Fixed TermContracts- Legitimate Expectations

12 March 2010.

Dear Reader.
Section 186(1) (b) of the Labour Relations Act defines it to be dismissal if an 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 favourable terms, or did not renew it.
Many employers employ employees on short fixed term contracts for 3 or 6 months and then renew them again a few times, then upon the expiry of the last renewal, inform the employee that the contract won’t be renewed again.  The question is did the employee have a legitimate expectation that the fixed term contract will be renewed again?
It is for the employee to prove that he/she had a reasonable expectation of renewal.  The repeated renewal of fixed term contracts will count in the favour of the employee, but is not conclusive proof of a legitimate expectation.
Throughout the years the following principles have came stemmed from judgements in our various courts:
•    South African Veterinary Council v Szymanski 2003 (4) SA 42 (SCA) and National Director of Public Prosecutions v Phillips 2002 (1) BCLR 41 (W)
    the representation underlying the expectation must be clear, unambiguous and not subject to qualification;
    the expectation must be reasonable;
    the representation must have been induced by the decision-maker; and
    The representation must be one which it was competent for the decision-maker to make without which the reliance cannot be legitimate.
•    SACTWU & another v Cadema Industries (Pty) Ltd (unreported) judgement delivered on 24 January 2008, the Labour Court held that the repeated renewals over a long period of relatively short fixed term contracts gave rise to a reasonable expectation of renewal, and that the termination of the final contract constituted a dismissal.
•    If the employer allows the employee to work beyond the termination date of the final contract, it may reinforce the expectation of renewal and may constitute dismissal if it is not renewed.
•    It is the employee who bears the onus to establish that they had a reasonable expectation that the contract will be renewed. – SA Rugby Players Association & Others v SA Rugby (Pty) Ltd & others (2008) 29 ILJ 2218 (LAC). In this case the players based their claim that they had a reasonable expectation of renewal on their individual performances during 2003 and on certain remarks of the then coach, Strauli.  In the CCMA it was found that the non renewal of all 3 players contracts constituted dismissals in terms of section 186(1)(b), the Labour Court found that Bands and Bezuidenhout had not been dismissed because they had no reasonable expectation of renewal, but that Matfield had such an expectation and was therefore dismissed.
The Labour Appeal Court found that because the fixed term contracts contained clear statements that they should not expect renewal, it was required of them to present more than feeble evidence or just saying that they had a legitimate expectation.  All the players contracts were for a specific event – the World Cup, which had come and gone.  Therefore the performance of the players could do no more than place them in a better position when contracts for the following year were concluded.  Should they have been selected again, it would have been on materially different contracts.  The Appeal court confirmed the Labour court’s finding that Bands and Bezuidenhout was not dismissed.
With regards to Matfield the Appeal Court said that the failure to communicate an intention not to renew cannot mean that the contract will be renewed when the contract itself does not provide for renewal.  Furthermore because the coach lacked authority to offer contracts, his assurances could also not be relied upon and the Labour Appeal Court came to the conclusion that Matfield therefore did not have a legitimate expectation of renewal and therefore was not dismissed when the contract was not renewed.
•    The principles for the SA Rugby case is thus that:
a.    The person making a promise of renewal must have the authority to offer contracts / renew contracts and to bind the employer by its decisions;
b.    The employee bears the onus to prove the legitimate expectation
c.    Substantiated evidence must be provided of the legitimate expectation.
•    The reason for entering into a fixed term contract is also relevant in establishing whether a reasonable expectation for renewal exists.  For example where an employer enters into a fixed term contract to replace an employee who is on leave, for example maternity leave, there could never be a legitimate expectation of renewal, but where a fixed term contract is entered into subject to the availability of continued funding, there can be a reasonable expectation of renewal as long as the funding continues.

•    SA Bank of Athens Ltd v Cellier NO & Others (2009) 30 ILJ 197 (LC) it was found that the mere fact that the fixed term contract made provision for the negotiating of the possible renewal of the contract, does not in itself mean that there is a reasonable expectation for renewal.

•    In terms of Nobubele v Kujawa NO & another (2008) 29 ILJ 2986 (LC), there cannot be a legitimate expectation of renewal, where an employee, like in this case, had been suspended on suspicion of misconduct before the expiry of her fixed term contract.

As set out above it is not that easy to prove a legitimate expectation of renewal.  Please contact us for professional advice and assistance in this regard.
Mrs. Lezanne Bouwer
General Manager: Legal Assistance



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