Employment law update – Employee working post the expiry of a fixed term contract – automatically permanent or not?

May 1st, 2020
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Ukweza Holdings (Pty) Ltd v Nyondo and Others (LAC) (unreported case no PA2/19, 4-3-2020) (Waglay JP (Murphy and Savage AJJA concurring))

The appellant employer appointed the respondent employee on a fixed-term contract, commencing 11 December 2014 and ending 31 December 2014.

The employee’s duties as a project manager, was to manage a catering service provided by the employer to its client, Life St George’s Hospital. At the time the employer had a three month ‘probationary’ contract with the hospital where after, the employer and hospital would have had an opportunity to enter into a longer service level agreement. During its three-month contract with the hospital, the employer’s erstwhile project manager resigned, prompting the employer to enter into a fixed-term contract with the employee.

Post 31 December 2014, the employee continued to tender services and it was only in the second week of January 2015, that the employer, by consent with the employee, extended the fixed-term contract to 31 January 2015.

Sometime in January the employee became aware that the position he occupied was being advertised. He contacted his supervisor who assured him he would be considered for the permanent post along with all others who applied.

On 3 February 2015, the employee received a notice of termination advising him that his fixed-term contract would end on 13 February 2015. The employer was under the impression that it had to afford the employee two-week notice period in line with the provisions of the Basic Conditions of Employment Act 75 of 1997. The employee was also informed that he was unsuccessful in his application for the post he occupied.

The employee referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA) citing that he had an expectation that he would be permanently employed.

At arbitration the employer objected to the CCMA’s jurisdiction, arguing that the employee had not been dismissed but rather that his contract was terminated due to the effluxion of time.

The arbitrator found that the employee had been dismissed. Once the contract expired on 31 January 2015 the employee had continued to tender his services which meant, according to the arbitrator, that the employee as at 3 February 2015, was employed on a permanent basis and not in terms of a fixed-term contract. Having satisfied himself that the employee was dismissed, the arbitrator went further and found that his dismissal was unfair and awarded him compensation.

The Labour Court (LC) dismissed a review application brought by the employer. The court held that it could not fault the arbitrator’s finding in respect of the employer terminating the employee’s services after the fixed-term contract had expired at the time the employer issued the notice of termination of employment.

The employer, with leave from the LC, turned to the Labour Appeal Court (LAC), before which it raised several grounds on appeal.

The LAC reaffirmed that the test on review was not whether the arbitrator arrived at a reasonable decision but rather whether his decision, in respect of the employee being dismissed, was a correct decision.

Adopting this approach, the LAC found that the arbitrator’s approach was too technical and failed to take into account the practical manner in which the parties dealt with each other. On the arbitrator’s reasoning, the LAC held, the employee would have been permanently employed as of 1 January 2015, that being when the initial fixed term contract expired and before parties agreeing to extend the fixed-term contract. However, the reality was that the parties only commenced discussion and agreed to an extension of the initial fixed-term contract in mid-January 2015 and at that time, there was no discussion or suggestion that the employee had already been made a permanent employee as of 1 January 2015.

The LAC went further to say:

‘On 3 February, after being informed that he was unsuccessful, the employee raised the issue that he had a legitimate expectation to be permanently appointed to the post and as such the notice to say that his fixed term contact came to an end constituted a dismissal. This argument is misconceived. The facts are that the employee was or became aware that the appellant advertised to fill the post the employee occupied and that he made himself available to be considered for the post. In the circumstances there could be no legitimate expectation to the post he occupied. Furthermore, that he rendered services to the appellant after the end of January when his fixed-term contract came to an end does not mean that … the fixed-term contract morphed into permanent employment. Also the appellant’s mistaken belief that it was obliged to pay two weeks’ notice pay, during which time the employee did not nor was he required to render any services meant that the relationship had gone beyond the fixed-term relationship.

In my view, the fixed term contact ended on 31 January 2015. The fact that the appellant did not inform the employee prior to the expiry of the contract that the contract will not be renewed or extended or that it will be coming to an end does not mean that it is either automatically extended or that the employment has become permanent, unless provisions of the law specifically provided for that.’

The LAC upheld the appeal and substituted the award with a finding that the ‘CCMA has no jurisdiction to arbitrate the dispute in the absence of a dismissal’.

Moksha Naidoo BA (Wits) LLB (UKZN) is a legal practitioner holding chambers at the Johannesburg Bar (Sandton), as well as the KwaZulu-Natal Bar (Durban).

This article was first published in De Rebus in 2020 (May) DR 33.