‘SEASONAL WORK’ v ‘FIXED-TERM CONTRACTS’ v ‘TEMPORARY CONTRACTS’?

SEASONAL WORK

“The first thing we do, let’s kill all the lawyers” Henry The Sixth, Part 2 Act 4, scene 2, 71–78 William Shakespeare.

At the outset the quotation should not be interpreted by the reader literally, it’s a lawyer joke“The first thing we do,” said the character in Shakespeare’s Henry VI, is “kill all the lawyers.” Contrary to popular belief, the proposal was not designed to restore sanity to commercial life. “Rather, it was intended to eliminate those who might stand in the way of a contemplated revolution — thus underscoring the important role that lawyers can play in society.” Dickstein Shapiro Morin & Oshinsky LLP Firm Profile.

INTRODUCTORY REMARKS

The lawmaker and the legal profession in South Africa have recently been under scrutiny and the subject matter of severe criticism by the public, politicians [‘the lawmakers’] and by all and sundry for various reasons.

However and as was reiterated above, the quotation cited calls for a contextual interpretation. The words uttered should be read and interpreted within the context of the work by the play write. A literal interpretation of the said uttering would lead to a manifest absurdity, repugnance, undue hardship or a result contrary to good order, the fundamental tenets of morality and popular religious belief.

Having clarified the quotation recorded above, the South African Labour Relations Amendment Act, 6 of 2014 (the LRA) came into effect on January 1, 2015. The amendments to SA labour legislation and especially those contained in Section 198 of the LRA have been the subject matter of much-heated debate and criticism.

The debate was between employment law and human resources practitioners since the amendments to the LRA came into effect on January 1, 2015 and after a transitional period April 1, 2015. The debate centred on what the legislature intended when saying that a labour broker employee is ‘deemed the employee of a client’.

[See: articles published LinkedIn: “Regulation of Non-Standard or A-Typical Employment – South Africa” July 05, 2015 and Interpretation ‘Deeming Provision’ S198A of the Labour Relations Act – South Africa” July 12, 2015 ]. 

The subject matter discussed in the articles referred to pertained to an arbitration award, Assign Services (Pty) Ltd // Krost Shelving & Racking (Pty) Ltd  & National Union of Metal Workers of South Africa (NUMSA)  CCMA Case Number ECEL1652-15  and a ruling, Refilwe Esau Mphirime // Value Logistics Ltd / BDM Staffing (Pty) Ltd BC Case Reference Number FSRBFBC34922.

Following the delivery of the Assign Services Award and the Value Logistics ruling legal representatives of the Respondent parties and employer organisations acting on behalf of Temporary Employment Services [TES] or as they are commonly known as labour brokers gave notice in the media that the cited award and ruling would be taken on review in the SA Labour Court.

According to a posting in LinkedIn as to the status of the pending two review applications the following has been reported, “CAPES NEWS –

The way forward:

The legal team has already been briefed to draft urgent review papers. Review papers will be filed by Friday 3 July 2015.

Arrangements are being made for this matter to be heard on an urgent basis. We plan on having it heard before the end of July 2015.

In the interim, it is intended to approach the CCMA and bargaining councils with a view to putting similar cases on hold pending the Labour Court ruling. [Emphasis added].

It has always been known that this issue will not end at the CCMA. Accordingly, CAPES urges all to recognise that there is every chance of the Labour Court setting aside this ruling, and therefore planning and strategy should take this into account.”

Writer deemed it appropriate to reply in good faith to the posting as quoted, “Thank you J…and especially to ‘CAPES NEWS’…for the news! Let us pray that all interested parties would abide by the Court’s judgment in compliance with the legal maxim ‘id certum est quod certum reddi potest’, or ‘whatever can be made certain, is certain’, if only by an independent third party deciding the issue’ :-).

Suffice it to record that all interested parties are awaiting the SA Labour Court’s judgment[s]. However, in the interim dispute referrals in all probability are lodged. The referrals would in all probability be entertained by the Commission for Conciliation, Mediation & Arbitration (CCMA).

PURPOSE OF THE ARTICLE

At the outset it should not be recorded that postings on the LinkedIn network should preferably be brief and not created; nor should it be perceived by the reader as if a comprehensive or an authoritative work of reference on the subject matter. The objective is to edify, within the confines of the medium and to generate interest and possible debate on the subject matter.

The purpose of the article is to briefly address the substance and nature of the legislative amendments, if any as they may have a bearing on employment relationships commonly referred to, or termed in agreements or contracts as, ‘Seasonal Work’, ‘Fixed-Term Contracts’ and ‘Temporary Contracts’.

At first glance and upon interpretation of the wording of the three contractual relationships, ‘Seasonal’, “Fixed-Term’ and “Temporary’ it is very much apparent that the relationship is bound to come to an end in some way or another.

Therefore, there could be no talk or rather expectation of security of tenure for example as in the event of a contract referred to as ‘permanent’ or an ‘indefinite contract’.

The celebrated author Professor John Grogan in the authoritative publication, J Grogan “Workplace Law” 10th ed (2009) 42, edifies that the label ‘indefinite-period’ employment contract is something of a misnomer, because an employment contract expires automatically when the employee dies or reaches the agreed or normal retirement age.

A contract of employment is indefinite in this sense only—where the parties do not specify a date of termination, the contract then endures until it is terminated by agreement, by the giving of the contractually stipulated or reasonable notice of termination, or until either party elects to terminate on fundamental breach by the other, or on retirement at the agreed age, or on one of the other grounds accepted in law.

The words of Benjamin Franklin, one of the founding fathers of the United States, as recorded in a letter to Jean-Baptiste Leroy, 1789 came to mind wherein he wrote, ”Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”

The same could be said about the ‘permanency’ of employment relationships albeit of relevance in South Africa or anywhere else for that matter.

Pursuant to the posting of the first article, South African readers may find of interest the comments made as to the subject matter of the article, by Professor George J. Gliaudys Jr, Dean at Irvine  University College of Law, Los Angeles, USA:

“Dear Colleague in Law,

The broader context of temporary employees is that there is an over-supply of labor in many of the developed countries including your own SA these days. The need for agile management of human resources and fiscal expenditures make temporary employee resourcing and utilization almost a mandatory best business judgement principle for corporate leadership in keeping with their fiduciary responsibilities to the shareholders to increase share values.

It might be a good thing to simply admit to this business reality and not try to make a temporary worker obtained to fill a work need of a short duration into a “quasi” permanent employee through adding benefits by the company that gets them from an employment service company specializing in temporary labor provision to a corporation needing such tabor resourcing flexibility

It’s an issue that resonates throughout the world these days. I’m pleased that you are in a position to shape its contours as a Commissioner

George”

Against this background the article was conceptualised and drafted.

SECTION 198B OF THE LRA : FIXED-TERM CONTRACTS

Clause 36 of the Explanatory Memorandum on the Objects of the Labour Relations Amendment Bill No. 16B of 2012 – Regulation of Non-Standard Employment and General Provisions (Chapter IX) that led to the amendments to the LRA ‘Non-standard’ employment in the Labour Relations Amendment Act of 2013 (LRAA) refers to;

Part-time work;

Fixed-term contract work; and

– Employment through labour brokers or rather Temporary Employment Services (TES).  

In an article published in the authoritative publication by Professor J Grogan, “The New Dispensation – The Amendments to the Labour Relations Act, Part 1 – ‘Fixed Term Contracts” Employment Law Journal, (June 2014) the learned author observes that prior to the amendments, the only protection afforded employees on fixed-term contracts has been that provided by section 186(1)(b) of the LRA,  the right to sue for unfair dismissal if the employee acquired a reasonable expectation that the fixed term contract would be renewed “on the same or similar terms”.

Reasonable expectation of permanent employment?

In an article published in an authoritative publication by Professor PAK Le Roux, “Amendments to the Labour Relations Act – Part 1: Proposed changes on unfair dismissal, on-standard employment. Strikes and lockouts” Contemporary Labour Law (May 2012) Vol 21, 90 the learned author observes that the most important amendment to the definition of dismissal is that relating to the expiry of fixed term contracts. In terms of s 186(1)(b) a dismissal takes place if an employee employed in terms of a fixed term contract reasonably expected that the employer would renew the contract on the same or similar terms but the employer did not renew the contract, or offered to renew it on less favourable terms.

Employees have tried to argue that this section also covers the situation where an employee alleges that she reasonably expected “permanent employment” – the term permanent employment referring to the situation where the employee would not be employed in terms of another fixed term contract, but would be employed in terms of contract for an indefinite period of time.

After several years of controversy and conflicting decisions, the Labour Appeal Court held, in University of Pretoria v Commission for Conciliation, Mediation & Arbitration & others (2012) 23 ILJ 183 (LAC) that a reasonable expectation of permanent employment does not fall within the definition for dismissal. The LRAA in effect changed the LAC’s decision in University of Pretoria.

The controversy over whether this right extends to situations where the employee expected permanent employment has been resolved.

Now, the period for which employers may keep employees on fixed term contracts is limited, because these employees are also performing “temporary service”. For this purpose, “fixed-term contract bears its standard meaning a contract that terminates on the occurrence of a specified event or completion of a specified task or project or on a fixed date other than an employee’s normal or agreed retirement age.” [See: section 198B(1) of the LRA].

Section 198B(1) Definition of a fixed-term contract:

 Fixed-term contract is one which expires upon:

(a) The occurrence of a specified event;

(b) The completion of a specified task or project;

(c) A fixed date, other than an employee’s  normal or agreed retirement Age. (The Social Security legislation has fixed the retirement age, however policies of companies may provide otherwise).

In terms of s 198B (2) (a) the protection provided for In section 198B only applies to employees employed on fixed-term contracts who earn below the BCEA-threshold. [Currently R205 433.30 per annum].

It must however, be home In mind that the amendments to Section 186, which allows for a new category of dismissal in that fixed-term employees may prove a legitimate expectation to be Indefinitely employed applies to all employees, irrespective of earnings.

Successive Fixed-Term Contracts:

Section 198B (3) provides for employers to employ employees on fixed-term contracts or successive fixed term contracts for longer than 3 months only if:

(a) The nature of the work is of a limited or definite duration or;

(b) The employer can demonstrate any other justifiable reason for fixing the term of the contract.

Section 198B(4) contains a non-exhaustive list of justifiable reasons.

What could be ‘justifiable reasons’ in terms of Section 198B(4)?

(a) the replacement of an employee who Is temporarily absent;

(b) a temporary increase in work which is not expected to endure beyond 12 months;

(c) a student or graduate;

(d) a project that has limited or defined duration;

(e) a non-citizen who has been granted a work permit;

(f) seasonal work;

(g) public works or job creation scheme;

(h) a project funded by an external source;

(i) the employee has reached the normal or agreed retirement age.

According to Grogan referred to supra among reasons that may be considered ‘justifiable’ in this regard are such factors as seniority, experience, length of service, merit, and “other criteria of a similar nature”.

Here again there is ‘boundless scope for controversy.’ Employees on 24 months on fixed term contracts are entitled to severance pay on termination, unless the employer arranges alternative employment [See: sections 198B( 10) and (11) of the LRA].

The effect of contravention of Section 198B?

Where employment occurs in contravention of Section 198B (3) ‘Successive Fixed-Term Contracts’  such employment is deemed to be of an indefinite duration and the employees are then accordingly considered permanent.

Employees employed in terms of fixed-term contracts for longer than three months should not be treated less favourably than those employees employed on a permanent basis performing same or similar work unless there are justifiable reasons for different treatment. The Employer must prove the existence of any justifiable reasons. [See: section 198D (2) of the LRA infra ].

Employers must provide an employee employed in terms of a fixed-term contract with equal access to opportunities to apply for vacancies.

Provisions of Section 198D(2) of the LRA – controversial?

“(2) For the purposes of sections 198A(5), 198B(8) and 198C(3)(a) ,a justifiable reason includes that the different treatment is a result of the application of a system that takes into account—

(a) seniority, experience or length of service;

(b) merit;

(c) the quality or quantity of work performed; or

(d) any other criteria of a similar nature,

And such reason is not prohibited by section 6(1) of the Employment Equity Act, 1998 (Act No. 55 of 1998, as amended).” 

BAD FAITH BARGAINING 2

*Commentary:

It is important to draw a clear distinction between what are considered as ‘justifiable reasons’  for fixing a ‘Fixed-Term Contract’ in  terms of section 198B(4)  – see the grounds as listed supra (a) to (i); with the ‘justifiable reasons for different treatment’ in terms of section 198D of the LRA.

Section 198D “General Dispute Resolution Provisions”  provides that any disputes arising from the interpretation and application of sections 198A to 198C may be referred to CCMA or Bargaining Council (with jurisdiction).

It is submitted that Commissioners and BC panellists by virtue of s 198D have the power to interpret the provisions of section 198A to section 198C, but also have the power to apply the amendments. It is trite that interpretation and application also include enforcement and compliance. 

Section 198D(2) stipulates as is set out hereunder:

[T]he justifiable reasons for differentiation as previously referred to is set out namely:

It refers to the application of a system that takes into account: 

– Seniority, experience or length of service; 

– Merit; 

– The quality or quantity of work; 

– Any other criteria of a similar nature, and such reason is not prohibited by the EEAA.”

*[The above commentary as to the importance of the distinction, between justification in fixing a term as provided for in section 198B(4) and justification to treat employees differently (section 198D) has been inserted for the purpose of clarification and courtesy of Senior CCMA Commissioner Eleanor Hambidge].

Commissioners of the CCMA in the analysis of cases involving fixed-term contracts would in all probability firstly, determine whether there Is indeed a valid fixed-term contract. If there is not a valid fixed-term contract in place, then the employee Is employed indefinitely.

Indefinite employment may terminate should a fair reason therefore exists, whereas a fixed-term contract terminates on the occurrence of a specified event, task or date.

What would be regarded as a ‘valid fixed-term contract’?

There are 3 basic requirements for a valid fixed-term contract:

  1. Must be in writing;
  2. Must state the term when It expires, which must be:

– Upon the occurrence of a specified event, or

– Upon the completion of a specified task or project; or

– On a fixed date, other than retirement age ; and

If the contract is longer than 3 months or if the employee has previously been employed for not less than 3 months, the fixed-term contract must state the reason –

If any of these are not met:

– Then it is not a fixed-term contract;

– Employment is of indefinite duration;

– The employee must be regarded as being employed on an indefinite basis; and

The provisions of section 189 of the LRA apply to any dismissal for operational requirements.

Finally, fixed-term contracts and the terms agreed upon should be in accordance with and subject to the test commonly used in assessment the validity of contractual arrangements namely that there should be consensus between the contacting parties, or in other words that there was a meeting of the minds. [See: RH Christie et al “The law of contract in South Africa” 6th ed (2010) 1, where referral is made to Saambou-Nasionale Bouvereniging v Friedman 1979 3 SA 978 (A) 993F Jansen JA, with whom the other four judges concurred, expressed the view that:

“In die algemeen word geleer dat die grondslag van ‘n ooreenkoms consensus ad idem, wilsooreenstemming tussen die partye, is. Ons bronne, literatuur en regspraak is deurspek met ‘n terminologie en stellings wat daarop dui dat met consensus bedoel word die saamval van wat elke party werklik (psigologies) wil. As dit inderdaad die grondslag van ooreenkoms en kontraktuele aanspreeklikheid is (die ‘wilsteorie’) dan volg die antwoord op die onderhawige geval byna vanselfsprekend” ].

For any fixed-term contract longer than 3 months, including the period of any previous contracts: that the reasons for fixing the term was objectively justified.

CONCLUSION

It was deemed appropriate to under this heading refer to the Explanatory Memorandum on the Objects of the Labour Relations Amendment Bill No. 16B of 2012 – Regulation of Non-Standard Employment and General Provisions (Chapter IX) that led to the amendments to the LRA – ‘Non-standard’ employment in the Labour Relations Amendment Act of 2013 (LRAA).

Specific reference has been made to “Insertion of section 198B of Act 66 of 1995 – fixed-term contracts for employees earning below earnings threshold” by virtue of its importance in interpreting the purpose and objects of the amendments insofar as the subject matter of this article is concerned.

An amendment to section 186 – explained earlier – provides additional protection against dismissal for all employees employed on fixed-term contracts. Like section 198A, the new section 198B introduces additional protection for more vulnerable workers and applies only to employees who earn on or below the threshold prescribed in terms of section 6(3) of the BCEA.

The section does not apply to employees who are employed in terms of a statute, sectoral determination or collective agreement that permits the conclusion of a fixed-term contract.

In addition, and in order to accommodate new and small businesses, the section does not apply to:

 an employer that employs less than 10 employees;

 an employer that employs less than 50 employees and whose business has been in operation for less than two years.

These exclusions do not apply if the employer conducts more than one business or the business was formed by the division or dissolution for any reason of an existing business.

An employer is permitted to employ an employee to whom the new section applies on a fixed-term contract or successive fixed term contracts for up to three months. An employee may be employed on a fixed term contract for a longer period if the nature of the work for which the employee is engaged is of a limited or definite duration or the employer can demonstrate any other justifiable reason for fixing the term of the contract.

The period of three months may be varied by a sectoral determination or a collective agreement concluded at a bargaining council.

The section sets out a non-exhaustive list of ten justifiable reasons for fixing the term of a contract.

An employee to whom the section applies who is employed for a period longer than three months is deemed to be employed for an indefinite period unless the nature of the work is of a limited or definite duration or the employer can demonstrate any other justifiable reason for fixing the term of the contract.

An employer who employs an employee to whom the section applies on a fixed-term contract or who renews or extends a fixed term contract must do so in writing and must state the reason that justifies the fixed-term nature of the employment contract.

An employer bears an onus to prove in any relevant proceedings that there is a justifiable reason for fixing the term of the contract and that the term was agreed.

The new section contains additional protections for employees to whom it applies:

 An employee employed on a fixed-term contract for more than three months (or whatever period is determined by a sectoral determination or collective agreement concluded at a bargaining council) must be treated on the whole not less favourably than an employee on an indefinite contract performing the same or similar work, unless there is a justifiable reason for treating the employee differently. What may constitute a justifiable reason for this purpose is dealt with in section 198D.

 An employer must provide an employee employed on a fixed-term contract with the same access to opportunities to apply for vacancies as it provides to an employee employed on an indefinite contract of employment.

 If a fixed term of longer than 24 months can be justified under the section, the employer must, on expiry of the contract and subject to the terms of any collective agreement regulating the issue, pay the employee one week’s remuneration for each completed year of the contract.

The employer is not obliged to make this payment if, prior to the expiry of the fixed-term contract, it offers the employee employment or procures employment for the employee with a different employer which commences no later than 30 days after expiry of the contract and on the same or similar terms.

The commentary in the article referred to supra by PAL le Roux was also deemed of substantial interest and should be recorded herein.

According to the learned author it is difficult to predict how these provisions relating to non-standard employment will affect employer hiring and employment practices and the consequences of their application are difficult to predict.

Much will depend on the how arbitrators interpret concepts such as “comparable employees”, “similar work”, “justifiable reasons” and what they will regard as “on the whole not less favourable” terms and conditions of employment.

“What is clear is that arbitrators will face a difficult task in this regard and it is hoped that they will be given sufficient training to be able to handle these issues. It seems likely that these provisions will lead to a drop in the use of these types of employees – if only because employers will want to avoid the uncertainties of litigation on these issues.”

 

Johann Scheepers

July 24, 2015

Copyright:

Copyright reserved by the writer hereof. No part of this article / guide may be reproduced, without prior written permission by the author.

The content of this article is intended to be general in substance and nature; to provide commentary on contemporary issues and where appropriate constitutes a general guide to the subject matter. Specialist advice should be sought about the reader’s specific circumstances.

The commentary or opinions expressed herein is that of the writer and not that of any professional organisation or entity with which the writer may be associated with.

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