Reasonable expectation of renewal of a fixed-term contract

The LAC found that an expectation of permanent employment could not give rise to a dismissal

The University of Pretoria renewed an employee’s fixed-term contract seven times during the period 1 February 2004 to 30 November 2007.  The University refused her request of a permanent position but offered her another fixed-term contract on better terms than the last.  The employee rejected the offer and referred an unfair dismissal dispute to the CCMA.
Section 186(b) of the Labour Relations Act, 1995 (“the Act) reads as follows:
“‘Dismissal’ means that an employee reasonably expected the employer 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”.
The Labour Appeal Court (“LAC”) dealt with the issue in the recent case of University of Pretoria v CCMA & others (case no. JA38/10 dated 4 November 2011) and found that an employee’s expectation of permanent employment, in circumstances in which a fixed-term contract had been renewed on several occasions, did not give rise to a claim of dismissal under section 186(b).
The LAC rejected the employee’s argument that it must give expression to the purpose of section 186(b), which she claimed was to protect employees from being denied the benefits of permanent employment by the continuous renewal of fixed term contracts.
The LAC stated that “a court is obliged to engage carefully with the words that have been used in the Act and to develop an interpretation which can plausibly be justified on the basis of the words chosen by the legislature.”
There are two requirements envisaged by section 186(b), namely:
“(1) a reasonable expectation on the part of the employee that a fixed term contract on the same terms and conditions 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.”
The employee’s application for a permanent position was indicative of the distinction between renewal of a fixed term contract and another form of contract.
The LAC found that an expectation of permanent employment could not give rise to a dismissal as envisaged by the relevant section and that the employee had not been dismissed.
This judgment clarifies the meaning of section 186(b). There are conflicting judgments in the Labour Court as to whether an employer’s failure to offer permanent employment where an employee reasonably holds that expectation, constitutes a dismissal.  Although the LAC’s judgment is decisive, employers ought not to regularly renew fixed term contracts without valid reason, and must still be careful not to create any expectation of a permanent or renewed fixed term contract.

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