DON’T MISUSE FIXED TERM CONTRACTS
The purpose of South Africa’s labour legislation is to protect employees rather than to deal with unemployment or to support employers. An example of this is the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA) both list seven factors that render a worker an employee covered by labour law rather than an independent contractor- someone who works for himself/herself.
Unfortunately the statutes do not assist employers in understanding what these statutory criteria actually mean. And this factor renders a worker an employee as opposed to an independent contractor is that “the person forms part of the organisation”. This concept is not defined and it is usually left up to employers to decide what it means and could cause an employer to terminate the contract of a consultant without following the labour law procedure. Then, at the CCMA, the consultant might be deemed to be an employee; and the employer will be penalised for having failed to follow the LRA’s procedures.
This is one of the reasons why employers lose dismissal cases on the grounds of failing to follow procedure at the CCMA or in Labour Court. The inability to make sense of the law of fair disciplinary procedure can be very costly for the employer.
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:
o 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.
o 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.
o 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.
o If the dismissal is deemed to be automatically unfair the maximum compensation that may be awarded is 24 months’ remuneration.
o Such compensation is payable in addition to all other payments due 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.
Lawyers and consultants now advise employers to reinstate dismissed employees where the employee disputes the dismissal procedure before the matter gets as far as court or arbitration so as to avoid these heavy penalties being imposed by the CCMA or Labour Court.
This reinstatement tactic has been effective. However, it is not always a safe option to implement retrenchments inexpertly and then hope to correct the error using the reinstatement tactic. It is difficult to prove that the consultations held during the second retrenchment exercise were conducted in good faith.
In many cases the employer cannot take the employee back because there is no place for them. Or the employer does not want the employee back because the employee is an under performer, breaks rules or is disliked by management.
In an attempt to circumvent the laws protecting employees, employers hire workers on fixed-term contracts. Then, if the employee is seen as unsuitable, the employer merely allows the contract to lapse at its expiry date and says goodbye to the employee. However, this is a dangerous tactic because labour law has closed this loophole. In the case of King Sabata Dalindyebo Municipality vs CCMA and Others (2005, 7 BLLR 696) the employer made a habit of regularly renewing fixed term contracts. But then it allowed the last contracts to lapse even though there was still available work for the terminated employees. The Labour Court found that the employees had a reasonable expectation of having their contracts renewed again and forced the employer to renew the contracts.
Under the new amendments to the LRA that came into effect on 1 January 2015 employees can also claim an expectation of permanent employment. The only route for employers to follow is to obtain expert advice before entering into fixed-term contracts and to make sure that they are getting the advice from a genuine and reputable labour law expert.
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Ivan Israelstam is the Chief Executive Officer of Labour Law Management Consulting. He is known as a leading practitioner in labour law and pragmatic labour relations management with many years experience in corporate human resources management. He has an honours degree from The University of the Witwatersrand and an IPM diploma in Personnel Management and in Training. Contact Ivan: This e-mail address is being protected from spambots. You need JavaScript enabled to view it. . |
