4.1 The Labour Relations Amendment Act 6 of 2014
In order to overcome the restrictive limitations and safeguards presented by South African labour law, many employers reacted by restructuring their
businesses or in some instances, disguising permanent employment as a form of temporary or fixed-term employment.133 This resulted in a reduction in
employment security for a significant portion of the South African work force.134 A reform of employment legislation became necessary.
This need for reform was identified in research commissioned by the Department of Labour in 2002 and was submitted to the National Economic, Development &
Labour Council in 2004,135 though little was done in the way of reform in the immediate years that followed.
In 2009 the ANC Government’s election manifesto promised to introduce laws that would govern contract work, prohibit abusive labour practices, prevent
exploitation of workers and protect the employment relationship.136 Together with calls by the Congress of South African Trade Unions for an outright ban on the practice of temporary employment services,137 began the preparation and presentation to Parliament of labour related Amendment Bills.138 After much
133 P Benjamin ‘Labour law beyond employment’ (2012) Acta Juridica 21 at page 36
134 Ibid
135 Benjamin, Bhorat & Van der Westhuizen ‘Regulatory Impact Assessment of Selected Provisions of the:
Labour Relations Amendment Bill, 2010, Basic Conditions of Employment Amendment Bill, 2010, Employment Equity Amendment Bill, 2010, Employment Services Bill, 2010’ 2010 University of Cape Town at page 12
136 Ibid
137 D du Toit … et al. ‘Labour Relations Law – A Comprehensive Guide’. 6 ed. Part I, Chapter I, paragraph 8.3. available at https://www.mylexisnexis.co.za/ accessed on 30 June 2016.
138 The bills where the Labour Relations Amendment Bill 2010, the Basic Conditions of Employment Amendment Bill 2010, the Employment Equity Amendment Bill 2010 and the Employment Services Bill, 2010
debate and opposition, the Bills were passed by Parliament and assented to by the President during the course of 2013 and 2014.139
4.1.1 The amended section 186(1)(b)
The amended section 186(1)(b) reads as follows:
“Section 186(1) ‘Dismissal’ means that – (a) …
(b) an employee employed in terms of a fixed term contract of employment reasonably expected the employer –
(i) 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; or
(ii) to retain the employee in employment on an indefinite basis but otherwise on the same or similar terms as the fixed term contract, but the employer offered to retain the employee on less favourable terms, or did not offer to retain the employee.”140
By and large, section 186(1)(b)(i) is unchanged and does not require further discussion here. The information and analysis provided in Chapter 2 of this dissertation and the relevant case law is still applicable and will be used by the courts in interpreting and dealing with cases that fall to be decided under the new section 186(1)(b)(i).
The addition of the further sub-section (ii) can be described as a direct response to the untenable situation in which Mrs. Geldenhuys found herself following the decision in University of Pretoria v CCMA and Others.141 With the enactment of the new section 186(1)(b)(ii), the legislature voided the precedent set by the Labour Appeal Court in that case. No longer will fixed-term employees be unable
139 D du Toit … et al. ‘Labour Relations Law – A Comprehensive Guide’. 6 ed. Part I, Chapter I, paragraph 8.3. available at https://www.mylexisnexis.co.za/ accessed on 30 June 2016.
140 Section 186(1)(b) of the Labour Relations Act 66 of 1995, as amended.
141 (2012) 33 ILJ 183 (LAC) - See the discussion regarding this case and the expectation of indefinite employment in paragraph 3.1.1. above.
to claim dismissal where their expectation was of a contract of indefinite employment rather than a further fixed-term contract.
The amendment is certainly a welcome relief to fixed-term contract employees, closing a past vulnerability. In circumstances where an employee seeks to rely on the new section 186(1)(b)(ii), the following is submitted:
a) the employee will still need to prove that the expectation of renewal on an indefinite basis was reasonable, both subjectively and objectively; and
b) the facts of each case and the surrounding circumstances will
determine whether the expectation of renewal on an indefinite basis was reasonable of not.
4.1.2 The new section 198B
The new section is reproduced at some length below:
“Section 198B Fixed term contracts with employees earning below earnings threshold
(1) For the purpose of this section, a ‘fixed term contract’ means a contract of employment that terminates on —
(a) the occurrence of a specified event;
(b) the completion of a specified task or project; or
(c) a fixed date, other than an employee’s normal or agreed retirement age, subject to subsection (3).
(2) This section does not apply to —
(a) employees earning in excess of the threshold prescribed by the Minister in terms of section 6(3) of the Basic Conditions of Employment Act;
(b) an employer that employs less than 10 employees, or that employs less than 50 employees and whose business has been in operation for less than two years, unless —
(i) the employer conducts more than one business; or
(ii) the business was formed by the division or dissolution for any reason of an existing business; and
(c) an employee employed in terms of a fixed term contract which is permitted by any statute, sectoral determination or collective agreement.
(3) An employer may employ an employee on a fixed term contract or successive fixed term contracts for longer than three months of employment only if —
(a) the nature of the work for which the employee is employed is of a limited or definite duration; or
(b) the employer can demonstrate any other justifiable reason for fixing the term of the contract.
(4) Without limiting the generality of subsection (3), the conclusion of a fixed term contract will be justified if the employee —
(a) is replacing another employee who is temporarily absent from work;
(b) is employed on account of a temporary increase in the volume of work which is not expected to endure beyond 12 months;
(c) is a student or recent graduate who is employed for the purpose of being trained or gaining work experience in order to enter a job or profession;
(d) is employed to work exclusively on a specific project that has a limited or defined duration;
(e) is a non-citizen who has been granted a work permit for a defined period;
(f) is employed to perform seasonal work;
(g) is employed for the purpose of an official public works scheme or similar public job creation scheme;
(h) is employed in a position which is funded by an external source for a limited period; or
(i) has reached the normal or agreed retirement age applicable in the employer’s business.
(5) Employment in terms of a fixed term contract concluded or renewed in contravention of subsection (3) is deemed to be of indefinite duration.
(6) An offer to employ an employee on a fixed term contract or to renew or extend a fixed term contract, must —
(a) be in writing; and
(b) state the reasons contemplated in subsection (3)(a) or (b).
(7) If it is relevant in any proceedings, an employer must prove that there was a justifiable reason for fixing the term of the contract as contemplated in subsection (3) and that the term was agreed.
(8)(a) An employee employed in terms of a fixed term contract for longer than three months 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.
(b) Paragraph (a) applies, three months after the commencement of the Labour Relations Amendment Act, 2014, to fixed term contracts of employment entered into before the commencement of the Labour Relations Amendment Act, 2014.
(9) As from the commencement of the Labour Relations Amendment Act, 2014, an employer must provide an employee employed in terms of a fixed term contract and an employee employed on a permanent basis with equal access to opportunities to apply for vacancies.
(10)(a) An employer who employs an employee in terms of a fixed term contract for a reason contemplated in subsection (4)(d) for a period exceeding 24 months must, subject to the terms of any applicable collective agreement, pay the employee on expiry of the contract one week’s remuneration for each completed year of the contract calculated in accordance with section 35 of the Basic Conditions of Employment Act.
(b) An employee employed in terms of a fixed-term contract, as contemplated in
paragraph (a), before the commencement of the Labour Relations Amendment Act, 2014, is entitled to the remuneration contemplated in paragraph (a) in respect of any period worked after the commencement of the said Act.
(11) An employee is not entitled to payment in terms of subsection (10) if, prior to the expiry of the fixed term contract, the employer offers the employee employment or procures employment for the employee with a different employer, which commences at the expiry of the contract and on the same or similar terms.”
The introduction of section 198B is an attempt to limit fixed-term contracts to types of employment where this type of employment is genuinely required and
appropriate and to address the issue of indefinite renewals of fixed-term contracts.142
Section 198B(1) provides a statutory definition of a fixed-term contract of employment. The statutory definition, discussed in some detail in Chapter Two, must be read together with section 198B(3), which limits fixed-term contracts to a period of 3 months unless otherwise justified.
Section 198B(2) provides a closed list of persons to whom the whole of section 198B does not apply. This will be discussed in detail in section 4.2.1. but briefly, the excluded persons are:
a) employees earning in excess of the threshold determined by the Minister of Labour;143
b) an employer that employs less than 10 employees or an employer that employs less than 50 employees and whose business has been in operation for less than 2 years, unless the employer carries on more than one business or the business was formed as a result of the division or dissolution (for any reason) of an existing business.144 c) an employee employed in terms of a fixed-term contract of
employment which is permitted in terms of a specific statute, sectoral determination or collective agreement.145
In most cases, section 198B(3) limits the duration of a fixed-term contract to 3 months. The 3 month limitation also applies as the total period over which successive fixed-term contracts may be renewed,146 so, for example, a one month fixed-term contract may only be renewed for 3 consecutive months before
142 SB Gericke op cit note 14 at page 97
143 Section 198B(2)(a) [The threshold is currently set at an earning of R205,433.30 per annum – Government Notice no. 531 in Government Gazette no. 37795, Vol. 589 of 1 July 2014]
144 Section 198B(2)(b)
145 Section 198B(2)(c)
146 John Grogan op cit note 37 at page 650
it offends section 198B(3). The section provides for the duration of the fixed-term contract (or renewal period) to extend beyond this period only if the nature of the work is for a definite (i.e. fixed) or limited (i.e. temporary) duration. The sub- section goes on to allow an employer to demonstrate any other justifiable reason for employing in terms of a fixed-term contract of employment that extends beyond three months.
Section 198B(4) goes on to provide examples of common justifiable reasons for a fixed-term contract or one in excess of the normal 3 month limit. These specific examples however, do not limit the generality of section 198B(3)(b) and the words ‘any other justifiable reason’ therein, meaning that the list provided in section 198B(4) is not closed and an employer may still raise other reasons to justify fixed-term contracts, or a fixed-term longer than 3 months.
Section 198B(5) offers further protection, providing that a fixed-term contract of employment concluded or renewed in contravention of section198B(3) is deemed to be of indefinite duration. The section aims to restore those employees
improperly held under fixed-term contracts to standard employment, and to restore to them the accompanying rights and considerations that they had been denied..
Section 198B(6) should be read with section 198B(3) and (5) in mind. This section requires that a fixed-term contract or the offer to renew a fixed-term contract be in writing and that the written offer must state the rationale for having a fixed-term, or for continuing it.
It is possible that going forward, a failure to comply with 198B(6), a failure to makes one’s offer in writing or provide justification will be interpreted by the courts as non-compliance with section 198B(3). As a result then of section 198B(5) the work could then be deemed to be of an indefinite duration.
It is submitted that section 198B(7) creates a presumption in favour of the fixed- term employee, placing the onus on an employer to prove a justification for fixed- term employment in relevant proceedings. This contrasts sharply against the previous legislation discussed in 3.1.2 above, where the justification for entering into the fixed-term contract was only scrutinized if and when a dismissal was alleged under section 186(1)(b). Under the new section 198B(7), if the employer fails to show a suitable justification for a fixed-term contract, section 198B(5) would apply and the contract would then be considered an indefinite contract of employment. While the onus of proving a dismissal in terms of section 186(1)(b) still rests with the employee, it is commendable that an important onus now rests on the employer as well to provide a justification for employment on a fixed-term basis. The amendment is welcomed. Without it, a fixed-term employee would have difficulty in proving that their fixed-term contract was unjustified. The employer on the other hand, not only typically determines the type of contract offered, but has far greater access to the circumstances and facts that may justify such a contract. Where the employer has abused fixed-term contracts without justification, the onus being properly theirs under section 198B(7) will reveal the true intentions.
Section 198B(8)(a) is a step towards achieving equality in the workplace for fixed-term contract employees who have been treated poorly compared to permanent employees solely on the basis of their fixed-term employment.
Section 198B(8)(a) does not allow a fixed-term employee to be treated differently to a permanent employee performing the same or similar work, unless a
justifiable reason exists for such differentiation.147 This section should be read alongside section 198D(2) which provides that a system legitimate criteria may
147 Section 198B(8)(b) is in effect an administrative provision, providing the same rights as provided for in section 198B(8)(a) retrospectively to fixed-term employees employed in terms of fixed-term contracts prior to the commencement of the amendment Act 6 of 2014 but which continue to remain in existence
thereafter. The sub-section stipulates that 198B(8)(a) will apply to fixed-term contracts entered into prior to the commencement of the amendment Act only 3 months after its commencement, presumably with a view to allowing employers (who may have distinguished or treated fixed-term employees differently to permanent employees performing the same or similar work) an opportunity to bring themselves within the ambit of 198B(8)(a).
be used to differentiate between employees (fixed-term or permanent) performing the same or similar work. These legitimate criteria for different treatment are listed as seniority, experience, length of service, merit, quality or quantity of work performed or any other criteria of a similar nature.148
Section 198B(9) is a further step towards equality in the workplace ensuring that fixed-term employees have equal access to apply for vacancies that the
employer may offer.
Section 198B(10)(a) is specific to fixed-term employees justifiably employed under a fixed-term contract contemplated in section 198B(4)(d), where the work is exclusively on a specific project that has a limited or defined duration. The sub- section should also be regarded as an effort towards achieving equal treatment of fixed-term employees in the workplace. It ensures such employees receive (subject to any collective agreement149), on expiry of the fixed-term contract, one week’s remuneration for each completed year of service under the contract.150 This acts as a form of severance pay, albeit it a small one.
Section 198B(11) limits section 198B(10) so that employees are not granted this additional pay if their employer has offered or procured for them further
employment on the same or similar terms, commencing at termination of the fixed-term contract.
The section does not specify whether the employment to be offered or secured must be of a permanent, or a fixed duration, but it is submitted that whatever the
148 Section 198D(2)(a) to (d) of Act 6 of 2014
149 A ‘collective agreement’ is defined in section 1 of the Basic Conditions of Employment 75 of 1997 as a written agreement concerning terms and conditions of employment, or any other matter of mutual interest concluded between one or more registered trade unions and one or more employer/s, registered employers’
organizations, or one or more of both.
150 As with section 198B(8)(b), section 198B(10)(b) appears to be administrative in nature, but limiting fixed-term contract employees employed in terms of fixed-term contracts (falling within the realm of 198B(4)(d)) prior to the commencement of the amendment Act to the right prescribed by 198B(10)(a) only for periods worked after the commencement of the amendment Act.
offer, compliance with section 198B(3) must be met in that if the employment is to be for a fixed-term, it cannot be for a period exceeding 3 months unless the employer is able to prove an exception as listed in section 198B(3)(a) or (b).
4.2 The limitations of the legislation in its current form
While the enactment of the amendments detailed in paragraphs 4.1.1 and 4.1.2 above is a triumph for the rights and protection of fixed-term contract employees in South Africa, hurdles do still exist.
4.2.1 Section 198B(2)
The section lists certain individuals (employers and employees) to whom the provisions of section 198B do not apply. These are:
(a) employees earning in excess of a threshold which is prescribed by the Minister of Labour in terms of section 6(3) of the Basic Conditions of Employment Act 75 of 1997 (BCEA), as amended;151
(b) an employer that employs less than 10 employees or an employer who employs less than 50 employees and whose business has operated for a period of less than 2 years, but not in circumstances where the employer conducts more than one business or the business was formed by dissolution or division of an existing business;152 or (c) an employee employed in terms of a fixed-term contract which is
permitted by statute, sectoral determination or collective agreement.153
The fact that the protections and rights provided for in section 198B are not available to every fixed-term employee is a major setback for those who fall within one of the exclusionary categories.154
151 198B(2)(a) of the Labour Relations Amendment Act 6 of 2014
152 198B(2)(b) of the Labour Relations Amendment Act 6 of 2014
153 198B(2)(c) of the Labour Relations Amendment Act 6 of 2014
No justification is provided in the legislation for the exclusions155 and perhaps the most notable criticism is that the exclusionary provision is in apparent conflict with section 23(1) of the Constitution which guarantees everyone the right to fair labour practices, making no exceptions for income or the size of the employer.156
The threshold stipulated in section 198B(2)(a) and prescribed by the Minister of Labour is currently set at R205,433.30,157 a relatively low ceiling, meaning a large percentage of fixed-term contract employees will never receive the benefits of the provisions of section198B158 and will ultimately continue to be subject to the shortcomings of the LRA in its previous form. It is unclear as to why an exclusion is permitted based on an employee’s earnings.
The legislature may have considered that high income employees are generally less vulnerable than lower income employees and accordingly the latter were in greater need of protection than the former. However, it is difficult to justify why a low income fixed-term employee should be afforded more rights than a high income fixed-term employee where they were in the past vulnerable to the same abuse, regardless of income.
This appears to be a limitation to the right to fair labour practices, which I pause to mention, is a right included in the Bill of Rights. A justifiable limitation of this right must be established by way of the limitations clause in the Constitution159 if it is to survive constitutional muster and be upheld. In terms of section 36(1) of the Constitution, a limitation must be reasonable and justifiable taking into account certain relevant factors, including, the nature of the right being limited, the importance of the purpose of the limitation of the right, the nature and extent
154 SB Gericke op cit note 14 at page 98
155 Likewise, no explanatory note exists to aid in the interpretation of and reasoning behind the exclusions.
156 SB Gericke op cit note 14 at page 98
157 Government Notice no. 531 in Government Gazette no. 37795, Vol. 589 of 1 July 2014
158 SB Gericke op cit note 14 at page 98
159 Section 36 of the Constitution of the Republic of South Africa Act 108 of 1996