One of the most important changes to the Labour Relations Act (the Act), which came into effect on 1 January 2015, is the added protection afforded to employees on fixed term contracts. While some employers and employees are not directly affected, the impact will be far reaching and employers are encouraged to review their current contracts and practices to ensure compliance.  The relevant provisions, which are contained in a new Section 198B of the Act, are summarised below. However, to apply the correct laws respectfully, it is important to be able to firstly differentiate between employees and independent contractors. Section 83A of the BCEA and Section 200(A) of the LRA creates an assumption in favour of an employee and states that a person is deemed to be an employee until otherwise proven. Section 200 (A) of the LRA provides guidelines that emphasize what factors  determine an employee status. In order to differentiate between a dependent worker status (employees), and an independent worker status (independent contractors), the Common Law Dominant Impression Test, needs to be applied.  The test questions three aspects: Near Conclusive - control manner / exclusive acquisition Persuasive - extent of control Relevant - labels, clauses, compliance, economic circumstances, "resonant" of. Briefly explained, A Dependent Contractor / Employee: - Is supervised - Renders personal services - Employment terminates on   death,  breach or expiration of   the period of employment - Is provided with tools and   equipment - Has duties which are dependent   on the employer - Is paid a fixed salary - Is subject to the discipline of the   employer - Is protected by labour legislation An independent contractor: - Is equal with and not subordinate to the employer - Performs specified work or a   specific result - Relationship is only terminated   by breach, completion of the job   or consent - Uses own tools and equipment - Hires own staff - Is paid in accordance with hours   worked or on commission - Is not subject to discipline by   another - Is not protected by labour   legislation - Could work any hours that suit   him/her - Can enter into as many    contracts as he wants - Is not supervised on a day-to day basis What is a fixed term contract? A 'fixed term contract' is defined in the Act as a contract of employment that terminates on:
• the occurrence of a specified   event
• the completion of a specified   task or project
• a fixed date other than an   employee's normal or agreed   retirement age. Fixed term employment beyond three months The real impact of the amendments relates to fixed term contracts that are for a period of longer than three months. For such contracts to be enforceable there are three main requirements that must be met
• The nature of the work must be   for a limited duration or there   must be some other justifiable   reason for fixing the term of the   contract
• The fixed term contract must be   in writing
• The contract must specify the   'justifiable reason'. A dispute would typically arise in the context of termination of employment. Should the employer fail to prove that the requirements mentioned above have been met, the employee will be regarded as having been employed on an indefinite (permanent) basis. In these circumstances there is a good chance that the employee's services would not have been terminated for a fair reason and it is probable that the requirements of a fair procedure (for misconduct, incapacity or operational requirements) would have not been met. The potential adverse implications for the employer should therefore be compounded. What is a justifiable reason? The Act lists examples of 'justifiable reasons' for employing someone for a fixed term period of longer than three months. The conclusions of a fixed-term contract will be justified if the employee is:
• Replacing another employee   who is temporarily absent from   work
• Engaged on account of a   temporary increase in work   volume, which is not expected   to endure beyond 12 months
• 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
• Engaged to work exclusively on   a genuine and specific project   that has a limited or defined   duration
•  A non-citizen who has been   granted a temporary work   permit
•  Engaged to perform seasonal   work
• On an official public works   scheme or similar public job   creation scheme
• Engaged in a position which is   funded by an external source for   a limited period
• Has reached the normal or   agreed retirement age applicable   in the employer's business.

The above covers the common situations that come to mind, but there may be other justifiable reasons that have not been listed in the Act. Fixed term employment for three months or less If someone is employed for three months or less, the provisions above do not apply.  However, employees on shorter fixed term contracts should continue to enjoy the protections that existed prior to the 2015 amendments. An employer may, for example, not abuse a fixed term contract by using it as a substitute for probation. Another example is where an employee works beyond the expiry date of the contract without signing a new agreement - the employee could still successfully argue that employment has become indefinite. Furthermore, the provisions relating to a reasonable expectation of renewal or permanent employment may also be expected by these employees. Which employers and employees are excluded? Fixed term contract employees are employed for a fixed period or specific task and cannot expect to be hired on a permanent basis. The LRAA of 2013 introduced some far-reaching amendments regarding fixed term contracts workers. Such amendments do not apply to:
• Employee who earn above the   threshold as set out in the BCEA
• Employers that employ less than   10 employees
• Employers that employ less than   50 employees and whose 
 business has been in operation   for less than two years
• An employee engaged in terms   if a fixed term contract that is   permitted by any statute, sectoral determination or   collective agreement. Additional Protections There are some additional provisions aimed at protecting employees on fixed term contracts. Firstly, a person employed on a fixed term contract for longer than three months, may not be treated less favourably than someone employed on a permanent basis performing the same or similar work, unless there is a justifiable reason for different treatment. (Part-time employees also enjoy protection against unfavourable treatment).  Secondly, employees on fixed term contracts must also be given equal access to opportunities to apply for vacancies.  Thirdly, where an employee is employed on a fixed term contract exceeding 24 months, the employee would be entitled to severance pay upon termination.  Fourthly, where the employer has failed to renew a fixed term contract where there was a 'reasonable expectation' of such renewal (or where the employer offered to renew it on less favourable terms), the basis for an unfair dismissal claim has been extended to also include an expectation of indefinite employment. The onus to prove the expectation remains on the employee. Implication of changes There is likely to be a significant increase in disputes that are referred to the CCMA. These would include unfair dismissal disputes, as well as unfair labour disputes arising out of less favourable treatment of employees employed for a fixed term or part-time. Termination, unfair dismissal, and consequences of misuse of fixed term contracts  Fixed term contracts are as binding as any other contract, and due respect should be provided by both parties to meet the obligations on the terms and conditions of the fixed term contract.  Termination of a fixed term contract prior to the stated termination date, warrants justifiable reasons that can be verified. 

According to sections 193 and 194 of the LRA the awards and
orders that can be made against the employer for unfair dismissal are as follows:
• The LRA requires the CCMA or Labour Court to reinstate the employee. This means that the   employer must give the    employee his/her job back and   to pay the employee all remuneration calculated back to   the date of the dismissal. The   employer must also reinstate all   the employee's benefits    retrospectively
• The LRA also permits the   CCMA or Labour Court to order re-employment instead of   reinstatement. This means that,   while the employer must give   the employee his/her job back,   this will not be with back pay
• Even if the employer does not   have to take the employee back  at all it may still have to pay compensation up to a maximum of 12 months' remuneration   calculated at the employee's   newest rate of remuneration
• If the dismissal is deemed to be   automatically unfair the maximum compensation that  may be awarded is 24 months'  remuneration
• Such compensation is payable in   addition to all other possible   dues to the employee. These   could include notice pay, leave   pay and even payment for the   unexpired portion of the   employee's contract. The Labour Court and CCMA have the powers to make such additional awards by virtue of section 195 of the LRA and section 74(1) of the BCEA.  Furthermore, the Labour Court has jurisdiction, in terms of section 77(3) of the BCEA to determine any matter relating to a contract of employment.

For these reasons above, it is of utmost importance that the proper formulation, implementation, enforcement, and compliance in the processes involved in the take-on, on boarding and monitoring of employees on fixed term contracts, exudes diligence and assiduousness, in order to avoid financial implications and non-compliance with the law.
Nikita Pillay is employed at DRG as a Human Resource Generalist, accompanied by experience in Industrial Relations. Her key focus is Labour Law compliance, and providing advice and guidance in this respect.
T: 031 767 0625
C: 073 366 8377
nikita@drg.co.za
www.drg.co.za