Employment law update – Interpreting a ‘reasonable expectation’

February 1st, 2012
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University of Pretoria v CCMA and Others (LAC) (unreported case no JA38/2010, 4-11-11) (Davis JA)

By Moksha Naidoo

Section 186(1)(b) of the Labour Relations Act 66 of 1995 has given rise to much debate, including conflicting Labour Court judgments.

Section 186(1) defines various grounds on which an employee can claim an unfair dismissal, one such ground, as set out in s 186(1)(b), reads as follows:

‘[A]n employee reasonably expected the employer to renew a fixed term contract on the same or similar terms but the employer offered to renew it on less favourable terms, or did not renew it.’

An employee, relying on this section when claiming an unfair dismissal, bears the onus of establishing that he had a reasonable expectation that his contract would be renewed.

The question, which forms the centre of this debate, is whether or not the employee’s expectation is limited to a renewal of another fixed term contract or whether it can be broadly interpreted to include an expectation of permanent employment.

The Labour Appeal Court (LAC), in this decision, put this debate to rest – for now at least.

Setting the scene

During the period February 2004 to November 2007, the appellant (employer) employed the third respondent (employee) on several consecutive fixed term contracts. In November 2007 the employee was interviewed for a permanent position. Having been informed that she was unsuccessful, the employee referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA).

The jurisdictional ruling at the CCMA

The point in limine before the second respondent commissioner (in Geldenhuys v University of Pretoria 2008 29 ILJ 1772), was whether or not an employee, currently on a fixed term contract and who has a reasonable expectation of being offered permanent employment, can rely on s 186(1)(b) when his expectation is not realised at the end of his contract.

In accepting the employee’s argument, the commissioner said the following in his ruling:

‘The legislature did not restrict the ambit of s 186(1)(b) to a reasonable expectation of renewed employment on exactly the same terms. Explicit provision was also made for a reasonable expectation of renewed employment on similar terms. I believe that this is wide enough to include a reasonable expectation of permanent employment, particularly in view of the fact that the Act should be purposively interpreted.’

Labour Court

The appellant sought an order from the Labour Court declaring the employee was never dismissed, alternatively that the commissioner’s ruling be reviewed and set aside. The court, per Nyathela AJ took the following position, at paras 28 – 30:

‘In my view, the LRA is a piece of social legislation which should be interpreted in a liberal manner so as to ensure the attainment of fairness at the workplace.

I am further of the view that the purpose of section 186(1)(b) of the LRA was to curb the anomaly that employers would deprive employees of job security and other benefits which are enjoyed by permanent employees by simply employing employees on fixed term contracts and renewing the said contracts each time such contracts expired.

In view of the purpose of section 186(1)(b), it could not have been the intention of the legislature to limit the concept of reasonable expectation to the renewal of the contract and thereby exclude an expectation of permanent employment where the evidence shows that the employee indeed had a reasonable expectation of permanent employment.’

The Labour Court dismissed the application with costs.

On appeal

Finding support in the judgment of Dirks v University of South Africa (1999) 20 ILJ 1227 (LC) and from an article written by M Olivier, the employer’s argument was that an employee who claims a dismissal under s 186(1)(b) must base his expectation on the renewal of a fixed term contract and not on an offer of permanent employment. It was further submitted that the wording of s 186(1)(b) substantiates this interpretation and, in doing so, excludes the interpretation proffered by the employee.

On behalf of the employee, it was submitted that the section was designed to prevent employers from constantly renewing fixed term contracts and then bringing an end to the employment relationship without having to provide any reason other than the expiry of the current contract. Moreover, employees whose contracts were continuously renewed were denied social security and other benefits enjoyed by employees who were on indefinite employment contracts.

Given this, the employee’s representative argued that if ‘reasonable expectation’ in s 186(1)(b) is limited to yet another fixed term contract, then this interpretation perpetuates the very same problem the section sought to cure.

Also before the LAC was the judgment of McInnes v Technikon Natal (2000) 21 ILJ 1138 (LC) and J Grogan’s writings on s 186(1)(b), both of which support the view that an employee can rely on this section if he reasonably expects an offer of permanent employment once his fixed term contract expires.

The LAC findings

In light of certain authorities, including the Constitutional Court’s decision in S v Zuma and Others 1995 (2) SA 642 (CC), the LAC cautioned against interpreting legislation in a manner that cannot be sustained by the express wording of the legislature. The LAC went on to say that a court is obliged to develop an interpretation of any particular section that is ‘plausibly justified on the basis of the words chosen by the legislature’.

Applying this to s 186(1)(b), the LAC said the following at paras 18 and 21 –

‘The words employed in s 186 envisage that two requirements must be met in order for an employer’s action to constitute a dismissal:

(1)     a reasonable expectation on the part of the employee that a fixed term contract on the same or similar terms will be renewed; and

(2)     a failure by the employer to renew the contract on the same terms or a failure to renew it at all.

These words do not however carry the meaning which is urged by third respondent, namely that, by being employed on the basis of a series of fixed terms contracts, an employee has without more a reasonable expectation of a permanent appointment … .

The words chosen by the legislature, absent an amendment to the legislation, cannot carry the burden of third respondent’s case in that it covers a restrictive set of circumstances, namely a reasonable expectation of a renewal of that which had previously governed the employment relationship, namely a fixed term contract which had previously been enjoyed, which had now expired and, by virtue of the factual matrix created, at best, a reasonable expectation of a renewal.’

The appeal was upheld and the Labour Court’s findings were replaced with an order that the employee was not dismissed. How long this judgment will remain in effect will depend on whether or not the proposed amendment to s 186(1)(b) in the Labour Relations Amendment Bill, 2010 is passed.

The proposed amendment reads as follows:

‘Section 186 of the principal Act is amended by –

(a)     the substitution in subsection (1) for paragraph (b) of the following paragraph:

(b)     an employee engaged under 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 offer the employee an indefinite contract of employment on the same or similar terms but the employer offered it on less favourable terms, or did not offer it, where there was reasonable expectation.’

Thus the amendment expressly and deliberately allows an employee to claim an unfair dismissal by establishing a reasonable expectation for a renewal of the contract or for permanent employment.

Note: Unreported cases at date of publication may have subsequently been reported.

Moksha Naidoo BA (Wits) LLB (UKZN) is an advocate at the Johannesburg Bar.

This article was first published in De Rebus in 2012 (Jan/Feb) DR 51.