NON-RENEWAL OF A FIXED-TERM

EMPLOYMENT CONTRACT

by

LESTER CLEMENT TIMOTHY

Submitted in partial fulfilment of the requirements

for the degree of

Magister Legum

In the Faculty of Law

at the Nelson Mandela Metropolitan University

Supervisor: Prof JA van der Walt Date: January 2006

 CONTENTS

Page
SUMMARY .......................................................................................................... ii

CHAPTER 1: INTRODUCTION........................................................................... 1

CHAPTER 2: TYPES OF EMPLOYMENT CONTRACTS................................... 5

2.1 Fixed-term Employment Contracts ............................................................. 5
2.2 Indefinite Contracts of Employment ............................................................ 8

CHAPTER 3: CURRENT LAW ........................................................................... 10

3.1 The Definition of Dismissal ......................................................................... 10
3.2 Reasonable Expectation............................................................................. 14
3.3 Recent Case Law re: “Reasonable Expectation”: Buthelezi v Municipal
Demarcation Board..................................................................................... 21
3.3.1 The Facts ......................................................................................... 21
3.3.2 The Appeal ...................................................................................... 22
3.3.3 Important Aspects of Arguments...................................................... 23
3.3.4 Outcome of Appeal .......................................................................... 24
3.4 Conclusion.................................................................................................. 25

CHAPTER 4: EXPECTATION OF PERMANENT EMPLOYMENT..................... 27

4.1 General....................................................................................................... 27
4.2 Reason for Dismissal.................................................................................. 30
4.3 Expectation of Permanent Employment...................................................... 33

CHAPTER 5: CONCLUSION .............................................................................. 37

BIBLIOGRAPHY ................................................................................................. 42
Articles................................................................................................................. 42
Books .................................................................................................................. 42
List of Cases........................................................................................................ 43
Legislation ........................................................................................................... 45

i
 SUMMARY

In terms of the common law contract of employment an employee who is a party to a

fixed term contract, unlike an indefinite period contract, cannot be dismissed. The
contract terminates upon an agreed or ascertainable date determined by the parties
and the conclusion of the contract.

Section 186(1)(b) of the Labour Relations Act 1995, however, defines the failure to
renew a fixed term contract on the same or similar terms where the employee
reasonably expected the contract to be renewed, as a dismissal.

In this treatise the scope and content of this provision is considered with reference to
relevant case law.

The factors and considerations that establish a reasonable expectation are

highlighted and considered.

The question as to whether or not this provision also provides for the situation where
an employee expects indefinite employment is also considered and critically
discussed.

The author concludes that the provision should not be interpreted in such a manner
that an expectation of permanent employment is created.

ii
 CHAPTER 1
INTRODUCTION

In terms of the common law, a fixed-term contract of employment terminates at the

expiration of the term, or completion of the task, for which it was entered into.1 The
termination follows automatically and is not considered to be a dismissal. Therefore,
notice of the termination is not required.2 The way in which the Industrial Court and
the Labour Appeal Court have treated the issue, and in particular its regulation in the
Labour Relations Act,3 constitutes a major inroad in the common law position. When
interpreting the Labour Relations Act,4 the Act puts it beyond doubt that in certain
circumstances the employer will not be entitled to rely on the automatic termination
doctrine, at least where the employee had a reasonable expectation of renewal of
his/her fixed term contract of employment. In those cases the termination must be
regarded as a dismissal or termination at the initiative of the employer.5 However,
the common law is superceded by the provisions of section 186(b) of the Labour
Relations Act6 but only to the extent that such expectation of renewal is found to be
present.

For the reason that the contract is meant to subsist for a predetermined or
determinable duration, it follows that notice of premature termination is at common
law, as a rule, not permissible.7 The rule is, however, subject to a contrary
arrangement. For example, the parties may agree that prior notice may be given. It
is accepted that this does not affect the fixed-term nature of the contract.8 Under the
current dispensation, as discussed in paragraph 3.3 below, South Africa still follows
this rule.9 However, the implication under the current dispensation would be that the
employee concerned can still invoke the unfair dismissal provisions of the Labour

1
Olivier “Legal Constraints on the Termination of Fixed-term Contracts of Employment: an
Enquiry into Recent Developments” (1996) 17 ILJ 1001.
2
R v Bhana 1941 SR 186 and Tiopaizi v Bulawayo Municipality 1923 AD 317.
3
66 of 1995.
4
Ibid.
5
Olivier supra.
6
Supra.
7
Bon Accord Irrigation Board v Braine 1923 AD 480.
8
Dixon v BBC 1979 QB 546.
9
Buthelezi v Municipal Demarcation Board [2005] 2 BLLR 115 (LAC).

1
Relations Act,10 as long as it is clear that the employee had a reasonable expectation
that the contract would be renewed.

Parties may agree that the contract has to be automatically renewed, unless it had
been terminated by prior notice.11 In Cape Town Municipality v Minister of Labour12 it
was held that in such a case the contract should be treated as a contract for
indefinite duration. If either party elects to give notice, such notice amounts to a
termination of the contract at the initiative of the party who does so.13 In modern
parlance it would be assumed that the employment relationship continues to exist,
and that the automatic conclusion of a contract for the subsequent period entitles the
employee to view the unjustified termination thereof as unfair.14

In Ndamase v Fyfe-King15 it was held that if the parties were to agree that the fixed-
term employee is appointed on probation, the contract may in the event of
unsatisfactory performance at common law be terminated on reasonable notice
before expiry of the probationary period. Any prescribed procedures also needs to
be complied with.16

In Mackay v Comtec Holdings (Pty) Ltd17 it was held that if an employee does not
return to work after the expiration of his/her fixed-term contract of employment, one
would assume that the common law rule that the voluntary acceptance that the
contract has come to an end does not amount to a dismissal, would apply.

It is submitted that the common law perception regarding the nature of the contract of
employment allows for an approach which treats the contract as potentially extending
beyond the mere initial arrangement and qualified consensus reached by two
parties.18

10
66 of 1995.
11
Olivier supra.
12
1965 (4) SA 770 (C).
13
At 774E-F.
14
Jeffrey v Persetel (Pty) Ltd [1996] 1 BLLR 67 (IC).
15
1939 EDL 259.
16
Muzondo v University of Zimbabwe 1981 (4) SA 755 (2).
17
[1996] 7 BLLR 863 (IC).
18
Olivier supra.

2
In National Chemsearch (SA) v Borrowman19 the court dealt with the reasonable
ambit of a restraint of trade clause to which former employees were subject, the
Supreme Court gave legal recognition to the social phenomenon that employers and
employees foresee a lasting relationship.

Olivier20 has the view that the new Labour Relations Act21 builds on the notion of
contractual continuity as far as fixed-term contracts of employment are concerned,
even though it limits this to circumstances where a reasonable expectation of
renewal exists.

In this treatise, recent case law will be analysed as these recent decisions, mostly
involving universities and tertiary institutions, assess different aspects of the failure to
renew fixed-term contracts. The most important of these cases that will be dealt with
are Dierks v University of South Africa,22 McInnes v Technicon Natal23 and Auf der
Heyde v University of Cape Town.24

The above case law outlines the development of the law relating to the non-renewal
of fixed-term employment contracts. In this treatise, these cases will be dealt with to
the extent of the manner in which their outcomes contributed to the current law
relating to the issue in question.

In regard to its structure, this treatise commences with an explanation of the different
types of contracts used by employers within an employment arena in South Africa,
namely, indefinite period contracts and fixed-term employment contracts. The issue
with which this treatise deals, is the non-renewal of fixed-term employment contracts
and therefore, only the latter type of contract is important for our purposes.

19
1979 (3) SA 1092 (T).
20
Supra.
21
66 of 1995.
22
(1999) 20 ILJ 1227 (LC).
23
[2000] 6 BLLR 701 (LC).
24
[2000] 8 BLLR 877 (LC).

3
The treatise then proceeds to deal with and explain the different elements of the
definition of “dismissal” as it appears in section 186(1)(b) of the Labour Relations
Act.25

The controversial issue which surrounds the issue of non-renewal of fixed-term

employment contracts is the interpretation of section 186(1)(b) of the Labour
Relations Act. The main question, which has been the subject of many Labour Court
and Labour Appeal Court decisions as well as the topic of debate of various labour
law authors, is whether section 186(1)(b) relates to an expectation of renewal of a
fixed-term employment contract or whether it, in fact, relates also to an expectation of
permanent employment in the workplace.

The treatise, finally, then discusses the latter issue in detail, with reference to the
relevant case law and opinions of various authors.

25
66 of 1995.

4
 CHAPTER 2
TYPES OF EMPLOYMENT CONTRACTS

There are two types of employment contracts in South Africa namely fixed-term and
indefinite employment contracts.

2.1 FIXED-TERM EMPLOYMENT CONTRACTS

In terms of a fixed-term employment contract an employee places his/her labour

potential at the disposal of an employer, in return for remuneration, for a specific
period agreed upon between the latter parties. Such contract endures for the
specified period, unless it is terminated earlier by agreement or by fundamental
breach by either of the parties.26

The duration of the fixed-term contract may be determined by the parties by either
stipulating a date for termination thereof, or by stipulating a particular event the
occurrence of which will terminate the contract, or with reference to completion of a
specific task.27 Where the parties have agreed that the termination of the contract
will take place on the occurrence of a particular event or the completion of a
particular task, the onus rests on the employer to prove that the event has occurred
or the task was in fact completed.28 For example, in Böttger v Ben Nomoyi Film and
Video CC,29 the employer failed to discharge the onus and the employee was held to
have been unfairly retrenched prior to the expiry of the fixed-term contract.

An employer may only terminate a fixed-term employment contract of an employee,

during the subsistence thereof, if he/she can show good cause for doing so or if the
parties have initially agreed otherwise. If the employer, however, fails to show good
cause for such termination, the termination will be regarded as unfair dismissal and
the employer will then be in breach of the employment contract.30 The employee will

26
Hutchinson “Premature Termination of Fixed-term and Temporary Employment Contracts”
(1998) SALJ 642-646.
27
Grogan Workplace Law (2005) 8th ed 44.
28
Bottgër v Ben Nomoyi Film and Video CC [1997] 5 BLLR 621 (CCMA).
29
Ibid.
30
Todd Contracts of Employment (2001) 63-64.

5
then be entitled to the common law remedies for breach of contract, namely, specific
performance and/or damages.

The contractual remedy of specific performance entails that the employee

approaches the court and prays for a court order to the effect that the employer
performs his obligations in accordance with the contract.31 Whether the employee
claims specific performance, or not, he/she will still be entitled to claim damages
which he/she suffered as a result of the employer’s breach.32

The previous Basic Conditions of Employment Act33 (hereinafter referred to as the

“BCEA”) did not expressly accept fixed-term contracts as it provided that any contract
of service could be terminated on the giving of the prescribed notice. These
provisions of the old BCEA were interpreted by the Industrial Court34 to mean that the
legislature had “effectively outlawed” such contracts. The Industrial Court conferred
on the parties the right to terminate such fixed-term contracts by notice, during the
currency thereof. The Industrial Court’s interpretation of these provisions of the old
BCEA was subsequently subjected to extensive debate as to the correctness thereof.
Section 37(1) of the current BCEA clarifies the intention of the legislature by stating
that the prescribed periods of notice must be given in the case of a contract of
employment “terminable at the instance of a party to the contract”. It is clear from
section 37(1) of the current BCEA35 that it was not the legislative intention to “outlaw”
fixed-term contracts. It was rather the intention of the legislature to protect the
parties against termination on notice periods shorter than those prescribed.36

A fixed-term contract of employment comes to an end once the agreed date for
termination is reached or upon completion of a specific agreed task. However, if the
employee remains in service of the employer and the employer continues to pay the
agreed remuneration, the contract is deemed to have been tacitly renewed. In these
circumstances, however, both parties must have the intention of renewal of the

31
Du Plessis, Fouché, Jordaan and Van Wyk A Practical Guide to Labour Law (1996) 2nd ed at
14.
32
Ibid.
33
Act 3 of 1983.
34
Penrose Holdings (Pty) Ltd v Clark (1993) 14 ILJ 1558 (IC) at 1562A-B.
35
Act 75 of 1997.
36
Grogan Workplace Law (2005) 44-45.

6
contract.37 In Braund v Baker, Baker & Co38 it was held that such a renewed contract
will continue on exactly the same terms and conditions as the initial fixed-term
contract. The only exception would be that the duration of the contract need not be
the same as that of the initial contract. The duration of such renewed contract must
be determined according to the circumstances of each particular case. Grogan39
submits that unless the contrary intention can be inferred from the facts, it will
generally be assumed that the parties intended the new contract to be of indefinite
duration, terminable by reasonable notice given by either party.

Section 186(1)(b) of the Labour Relations Act40 (hereinafter referred to as the “LRA”)
expressly provides that where an employee “reasonably expected” the employer to
renew a fixed-term contract on the same or similar terms but, instead, the employer
offered to renew it on less favourable terms or did not renew it, it would constitute a
41
dismissal. In the case of Cremark various employees had, after a take-over, been
required to sign a new fixed-term contract of one year’s duration, which was not then
renewed. The Labour Appeal Court held that whether non-renewal of a fixed-term
contract amounts to a dismissal depends on the circumstances, including, but not
limited to, the number of previous renewals. However, if a contract clearly states that
the contract is temporary in nature, or if sufficient notice is given for the termination
thereof, the termination will not be regarded as a dismissal.42

The current position regarding the non-renewal of fixed-term contracts is that fixed-
term employment contracts, unless the contrary intention can be inferred from the
facts, it will generally be assumed that the parties intended the new contract to be of
indefinite duration, terminable by reasonable notice given by either party.43

37
Redman v Colbeck 1917 EDL 35 at 38.
38
(1905) 19 EDC 54.
39
Workplace Law (2005) 45.
40
Act 66 of 1995.
41
Cremark a Division of Triple-P Chemical Ventures (Pty) Ltd v SA Chemical Workers Union
(1994) 15 ILJ 289 (LAC).
42
Malandoh v SA Broadcasting Corporation (1997) 18 ILJ 544 (LC) and Smith v American
International School of Johannesburg (1994) 15 ILJ 817 (IC).
43
Koyini v Strand Box (Pty) Ltd (1985) 6 ILJ 453 (IC).

7
As to what constitutes “reasonable notice” the Industrial Court held in the case of
Metal & Allied Workers Union v A Mauchle (Pty) Ltd t/a Precision Tools44 that failure
to renew a fixed-term contract without prior notice constituted an unfair labour
practice where the employers had created an expectation of renewal. In this case,
migrant workers who had been employed on fixed-term contracts were granted relief
even though their contracts had expired with the effluxion of time, because of the
expectation of renewal that the employer created. Subsequent to this case there
were various other cases which enforced this principle.45

2.2 INDEFINITE CONTRACTS OF EMPLOYMENT

In indefinite contracts of employment the parties do not agree on a specific date for
termination of the contract. Nor is it an agreement that the contract of employment
will terminate at the occurrence of a particular event or completion of a specific task,
as is the case in a fixed-term contract. In fact, in indefinite employment contracts, the
parties do not intend the contract to terminate at all, except in the obvious case of
death of the employee or agreed retirement age. An indefinite period contract of
employment is permanent in nature and may be terminated by giving reasonable or
contractually stipulated notice, which may not be less than the notice periods
prescribed by the current BCEA, or until either party elects to terminate the contract
on fundamental breach by the other party, or on retirement at the agreed age, or by
death of either party, or by insolvency of the employer, or by supervening
impossibility of performance, or by repudiation or by state action, or by mutual
agreement.

In Harris v Bakker & Steyger (Pty) Ltd46 it was held that parties are free to agree on a
mandatory retirement age. When the aforesaid retirement age is reached, the
employer is entitled to demand that the employee retire. In this situation the
employer will neither have an action for breach of contract nor will he/she have a
remedy for unfair dismissal.

44
(1980) 1 ILJ 227 (IC).
45
Koyini v Strand Box (Pty) Ltd (1985) 6 ILJ 453 (IC); Metal & Allied Workers Union of SA v
Screenex Wire Weaving Manufacturers (Pty) Ltd (1985) 6 ILJ 75 (IC) and Mtshamba v Boland
Houtnywerhede (1986) 7 ILJ 563 (IC).
46
(1993) 14 ILJ 1553 (IC).

8
Employees are obliged to work through a notice period, unless the employer exempts
them from this obligation in which case they must be paid in lieu of notice.47

At common law, indefinite period contracts traditionally regarded the parties’ right to
terminate on notice as unfettered. In Lamprecht v McNeillie48 the Appellate Division
held that the rules of natural justice are not impliedly incorporated into the common
law contract of service, and that the general disciplinary code does not confer
contractual rights unless expressly incorporated into the contract. Therefore, the
employer is not required to show good cause for terminating the contract, or to inform
the other party of such reasons as there may be, or to follow any special procedure
before termination. Neither fairness nor reasonableness is relevant to the legality of
a dismissal on notice.

Anderman49 states that the common law viewed employer and employee as free and
equal contracting parties, ignoring the obvious discrepancy in their bargaining power
and the fact that the employment relationship provided income to a family unit of one
party and provided a cost of production or service for the other. Therefore, he went
on further to state, that as long as contractual notice of termination was given, the
employee was free to dismiss an employee for any reason he wished, with no
obligation to reveal his reason for dismissal to the employee, much less to justify it.
Anderman makes the point that the employer’s unfettered power to terminate the
contract on notice is generally regarded as the central instrument by which power
over employees is preserved. In terms of the doctrine of freedom of contract, this
power of the employer is underpinned, in terms whereof the contracting parties are
deemed to have entered into the agreement as equals and with open eyes.

47
S 38 of the Basic Conditions of Employment Act 75 of 1997.
48
(1994) 15 ILJ 998 (A).
49
The Law of Unfair Dismissal (1978).

9
 CHAPTER 3
CURRENT LAW

3.1 THE DEFINITION OF DISMISSAL

Only employees can be dismissed. Therefore, to determine whether a person was

unfairly dismissed one first needs to determine whether that applicant was in fact an
employee. Even if the applicant is an employee as defined by the Labour Relations
Act,50 one still needs to determine whether the termination of the contract was in fact
a dismissal. There may have, for example, been a resignation by the employee or
the employee may have repudiated the contract of service by absconding. A
dismissal takes place when the contract is terminated at the instance of the
employer. Dismissal entails some communication in the form of words or conduct, by
the employer to the employee that the contract has come to an end.51

“Dismissal” is defined by section 186(1) of the Labour Relations Act52 as:

(a) the termination of a contract of employment with or without notice (section

186(1)(a));

(b) failure to renew a fixed-term contract on the same or similar terms where the
employee “reasonably expected” the employer to do so (section 186(1)(b));

(c) refusal to allow a female employee to resume work after taking maternity leave
in terms of law, contract or collective agreement (section 186(1)(c));

(d) refusal to re-employ an employee who has been dismissed, together with other
employees, for the same or similar reasons but offered to re-employ only some
of the other dismissed employees (section 186(1)(d));

50
Act 66 of 1995.
51
Grogan Workplace Law (2005) 106.
52
Supra.

10
(e) resignation of an employment contract, by an employee, where the employer
has made continued employment intolerable (section 186(1)(e)); or

(f) termination of a contract of employment by an employee, with or without notice,

for the reason that the “new” employer, after a transfer of a business in terms of
section 197 or section 197A,53 provided the employee with conditions or
circumstances at work that are substantially less favourable than those
provided by the “old” employer (section 186(1)(f)).

The common law only recognized two forms of dismissal, namely, those with notice
and those without notice. The Labour Relations Act has extended the concept to
include other forms of dismissal, as set out above.

Section 186(1)(b) of the Act54 deals with dismissal in the form of non-renewal of a
fixed-term contract, where there exists a reasonable expectation for renewal thereof
and reads as follows:

“Dismissal means that –

(b) 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; …”

By the enactment of the above definition, the legislature gives effect to the protection
that the Industrial Court had extended to temporary employees under certain
circumstances.55 Such protection, however, is limited to situations where such
employees have a reasonable expectation that their contracts will be renewed on
“the same or similar terms”. This issue regarding protection has been the subject-
matter in numerous cases. In much of these cases, such protection was said to be
afforded only to employees who expected the contracts to be renewed and where
such expectation was reasonable.56

53
Act 66 of 1995.
54
Act 66 of 1995.
55
Olivier 1001.
56
University of Cape Town v Auf der Heyde [2001] 12 BLLR 1316 (LAC); Sithole v Lipton SA
(Pty) Ltd (1992) 1 LCD 257 (IC); Mtshamba v Boland Houtnywerhede supra.

11
When employees “reasonably expected” their employers to renew a fixed-term
contract of employment on the same or similar terms, they are deemed to be
dismissed. At common law, a fixed-term contract automatically expires on the arrival
of the date or the occurrence of the event on which the parties agreed that the
contract would terminate. In terms of section 186(1)(b) of the Labour Relations Act
the termination of a fixed-term contract may now constitute dismissal.

The terms of a contract of employment remains relevant when determining whether

or not the non-renewal of a fixed-term contract constitutes dismissal. The contract
itself is an important indication that the parties did, in fact, intend the contract and
relationship to terminate on the date mentioned therein or upon the occurrence of the
specified event.57

A promise by an employer that the employee will be retained on a permanent basis is

a good ground for the employee to have an expectation of permanent employment.
Such a promise may be implied or express. Where an employer made such a
promise to the employee, that the contract would be renewed or extended, the
employee may have a contractual claim for renewal, as well as a claim for unfair
dismissal in terms of the Labour Relations Act.58

The onus of proving a reasonable expectation rests on the employee.59 The test to
be used in order to determine whether a reasonable expectation existed or not, is an
objective test. The employee must prove the existence of facts that would, in the
ordinary course, lead a reasonable person to anticipate renewal of the fixed-term
contract. Whether there was a reasonable expectation of renewal must be
determined from the perspective of both the employer and the employee. There are
many factors to be taken into account when making this determination, for example,
where a fixed-term contract had been renewed on more than one occasion, it would
be indicative of the existence of a reasonable expectation of permanent employment.

57
Foster v Stewart Scott Inc (1997) 18 ILJ 367 (LAC); Malandoh v SA Broadcasting Corporation
supra.
58
Fedlife Assurance Ltd v Wolfaardt (2001) 22 ILJ 2407 (SCA).
59
Ferrant v Key Delta (1993) 14 ILJ 464 (IC).

12
The following principles, regarding the definition in section 186(1)(b)( of the Labour
Relations Act, can be gleaned from the cases, namely:

(a) The reasonable expectation of renewal need not be shared by the employer. It
is sufficient that it is entertained by the employee.60 In terms of Malandoh,61 the
employee must be able to demonstrate an objective basis for it.

(b) In establishing whether a reasonable expectation exists, it is important to

determine the reason for entering into a fixed-term contract. Where the reason
was uncertainty over continued funding, it was held that there existed a
reasonable expectation that employment would continue as long as there were
funds available.62 However, where the employer entered into a fixed-term
contract to replace an employee who was on leave, it was held that there was
no reasonable expectation of renewal.63

(c) The wording of the contract is important, but not conclusive.64 In Foster v
65
Stewart Scott Inc it was held that, although agreement on the duration of the
contract did not necessarily denote agreement between the parties that it would
come to an end on expiry of the period, it was an important indication that the
parties did have such an intention. Subsequent conduct may give rise to a
reasonable expectation, notwithstanding the declared intent of the parties.66

(d) The factors that play an important role in determining a reasonable expectation
include the number of times that the contract has been renewed and the
conduct of the employer, both at the time of concluding the contract and during
the employment relationship.67

60
Dierks v University of South Africa supra.
61
Malandoh v SA Broadcasting Corporation supra at 547D.
62
Bronn v University of Cape Town (1999) 20 ILJ 951 (CCMA).
63
Dierks v University of South Africa supra.
64
Malandoh v SA Broadcasting Corporation supra.
65
[1997] 2 BLLR 117 (LAC).
66
SACTWU v Mediterranean Woollen Mills (Pty) Ltd (1995) 16 ILJ 366 (LAC).
67
Zwane v Elegance Jerseys (1998) 19 ILJ 969 (CCMA).

13
3.2 REASONABLE EXPECTATION

The concept of reasonable expectation is essentially subjective in nature, vesting in

the employee. In order to determine whether the expectation is a reasonable one,
the courts apply an objective test and consider such criteria as the significance of
contractual terms, agreements or undertakings by the employer, practice and
custom, the purpose for concluding the fixed-term contract and the nature of the
employer’s business.68

In Malandoh v South African Broadcasting Corporation,69 the applicant was

employed on a renewable fixed-term contract by the respondent, as a television
licence inspector. The contract characterized the applicant as a temporary employee
and provided that it could be terminated by either party on four weeks’ notice. On the
expiration of the contract it was renewed by the respondent eight times for monthly
periods before the applicant was informed that it would not be renewed again. The
applicant alleged that, during the course of his temporary employment, he had been
offered a permanent position and had thus become a permanent employee. He
further alleged that, in any event, he had a reasonable expectation that if the
respondent wished to terminate his services, it would be bound by the Act, in
particular to consult with him before terminating his services for operational
requirements.

Regarding the applicant’s claim that he had a reasonable expectation of continued

employment, the court noted that it was common cause that the people who allegedly
made promises of a permanent position, had no authority to do so. Furthermore, the
applicant had been unsuccessful in an application for a permanent position. The
respondent had also entered into an agreement with trade unions, which included an
elaborate recruitment and selection procedure for permanent employees, but which
did not make provision for the conduct relied upon by the applicant in support of the
allegation that he had been granted a permanent position. There was no factual
basis for the other grounds upon which the applicant relied.

68
Dierks v University of South Africa [1999] 4 BLLR 304 (LC).
69
Supra.

14
The court concluded that there existed no reasonable expectation of renewal of
employment, therefore, the employer was not bound to follow pre-retrenchment
procedures when terminating the employment of the employee on fixed-term contract
who has no reasonable expectation of renewal. The application was accordingly
dismissed. The court in this case was of the view that where the contract expressly
states that a person is a temporary employee and that no expectation is created, the
employee cannot claim a reasonable expectation. The court, in Dierks v University of
South Africa,70 relying on Mediterranean Woollen Mills (Pty) Ltd v SA Clothing &
Textile Workers Union,71 held that the wording of a contract is not sufficient to
exclude an expectation.

In Dierks v University of South Africa72 the court held that the failure to renew a fixed-
term contract amounts to a dismissal within the statutory meaning73 only if the
employee can show that he reasonably expected to enter into a fixed-term contract.
It further stated that the employee is required to prove that his expectation of renewal
was reasonable and that, apart from a subjective perception, there is an objective,
factual basis for such an expectation. The court enumerated the criteria that have to
be considered in an attempt to establish whether a reasonable expectation has come
into existence on an objective basis:

- the evaluation of all surrounding circumstances;

- the significance otherwise of the contractual stipulations;

- agreements or undertakings by the employer;

- practice or custom in regard to renewal or re-employment;

- the availability of the post;

- the purpose of or reason for concluding the fixed-term contract;

70
Supra.
71
(1998) 19 ILJ 731 (SCA) at 734C.
72
Supra.
73
S 186(b) of the Labour Relations Act 66 of 1995.

15
- inconsistent conduct;

- failure to give reasonable notice; and

- the nature of the employer’s business.

The court found, having regard to these criteria, that the applicant had failed to prove
that he had a reasonable expectation of renewal of his contract. A letter received by
the applicant after an unsuccessful application for a permanent position, which
advised him that he was “appointable”, rumours and the fact that other temporary
staff members’ contracts had been renewed or had been permanently appointed,
were not sufficient to establish a reasonable expectation.

In Morag v Dortech (Pty) Ltd74 a managing director on a two-year contract of

employment claimed unfair dismissal when his contract was not renewed. Five
weeks before expiration of the applicant’s contract the respondent notified him that
his contract would not be renewed because the respondent was not happy with the
applicant’s work performance. The applicant relied on a provision in the contract in
an attempt to prove that he expected his contract to be renewed, despite the
applicant knowing of the respondent’s unhappiness. The relevant clause in the
contract stated that the parties would, during the final six months of the applicant’s
employment, “discuss and, if possible, agree” on the renewal of the contract. The
court held that the provision to discuss renewal created no more than a possibility
that the contract would be renewed. If that possibility did not materialize, initial
period would remain the only period of employment. The relevant clause was not
sufficient to create a reasonable expectation of renewal.

In terms of section 186(b)75 a dismissal occurs where the employer fails to renew a
fixed-term contract in circumstances where the employee reasonably expects a
renewal. In this context the question arose as to whether section 186(b)76 includes a

74
[2001] 8 BLLR 917 (LC).
75
Labour Relations Act 66 of 1995.
76
Ibid.

16
reasonable expectation of permanent employment. The main thrust of the
applicant’s case in Dierks v University of South Africa77 was based on a reasonable
expectation of permanent employment as opposed to renewal of a fixed-term
contract. The court noted that, while section 186(b)78 covered situations in which
employees claimed that they expected the renewal of a further fixed-term contract, it
was not clear whether it covered situations in which the reasonable expectation was
for permanent employment.

The court, further, noted that certain considerations lead one to believe that section
186(b)79 should be confined to the renewal of fixed-term contracts only and an
expectation of permanent employment is not to be included.

Such considerations include the clear wording of the section and the patent
unfairness of the indefinite renewals of fixed-term contracts. In the latter instance the
exploitative employer is dealt with, according to the court, because “a renewal … will
endure for the same period as the previous contract. That seems fair, given that a
reasonable expectation is a principle of equity falling short of a right”. The court
concluded, having regard to these considerations, that section 186(b) does not
include an expectation for permanent employment. Consequently, the Labour Court
does not have the jurisdiction to decide the issue insofar as it concerns the
reasonable expectation of permanent employment.

In McInnes v Technikon Natal80 the court rejected the notion that section 186(b)
excludes an expectation of permanent employment. In this case, the applicant was
employed as a lecturer in 1996 on a one-year contract. Her contract was then
renewed three times before the post was advertised on a permanent basis. The
applicant applied for the position, was short listed and recommended for the post by
the selection committee. On request of the respondent’s vice-chancellor, the
selection committee reconsidered its recommendation in the light of the affirmative
action policy. The committee reaffirmed its preference for the applicant, but
recommended a black male candidate, who was appointed at a salary much higher

77
Supra.
78
Labour Relations Act 66 of 1995.
79
Ibid.
80
Supra.

17
than that which had been advertised. The applicant’s contract was not renewed.
The applicant claimed that she had been unfairly dismissed, alternatively, unfairly
discriminated against on the basis of race and/or gender. The respondent denied
that the applicant had been dismissed.

The court noted that the enquiry into the applicant’s alleged dismissal entailed two
stages: firstly, it had to be determined whether the applicant had an expectation that
she would be appointed and, secondly, it had to be determined whether the
expectation of appointment was reasonable in the circumstances. In the first enquiry,
the app was required to prove that she subjectively believed that her contract would
be renewed on the same or similar terms. The applicant had pleaded in this regard
that she expected her contract to be renewed on a permanent basis, alternatively,
that it would be renewed for a further period of one year. The court noted that it was
not possible to hold two subjective expectations at the same time. However,
although the app was somewhat vague about the details of what she expected, the
crux of her evidence was that she had expected to continue doing the same work
after the date on which her employment was terminated, on a permanent basis.

The court rejected the respondent’s contention that an expectation of the renewal of
a fixed-term contract of employment on a permanent basis did not amount to a
reasonable expectation of renewal for purposes of the Labour Relations Act.81 The
court consequently held that the decision in Dierks v University of South Africa82 was
wrong. The court stated that what section 186(b) seeks to address is the situation
where an employer fails to renew a fixed-term employment contract where there is a
reasonable expectation that it would be renewed. It further stated that if the
employer creates such an expectation then the employee would be given the
protection under this section.

The court held that the applicant had been unfairly dismissed and added that
affirmative action cannot constitute a fair basis for dismissing, as opposed to
appointing, an employee.

81
66 of 1995.
82
Supra.

18
In Auf der Heyde v University of Cape Town83 the applicant responded to an
advertisement for a position as senior lecturer in chemistry, the duration of which was
stipulated as “initially for three years with a possible extension to five years”. He was
subsequently appointed in terms of a “three-year contract”, which stated that the
appointment was for the period specified and “does not carry any commitment to a
permanent appointment”. Two other lecturers, both black, were appointed at the
same time on similar terms. About three years later, the respondent advertised a
permanent position and the applicant applied but was not appointed. Both black
incumbents were, however, appointed as permanent lecturers. The applicant
contended that the respondent’s failure to appoint him or to renew his fixed-term
contract amounted to an automatically unfair dismissal, alternatively, that his
dismissal was unfair due to the respondent’s failure to comply with the requirements
for a fair dismissal on operational grounds. The respondent denied that the applicant
had been dismissed. However, it conceded that, if the applicant were found to have
been dismissed on the grounds of operational requirements, the dismissal would be
procedurally unfair.

Jammy AJ held that an employee cannot rely on an expectation that he will be

permanently appointed to a position in order to substantiate a claim that he has been
dismissed as a result of the termination of a fixed-term contract of employment.

In regard to the issue of reasonable expectation, the court held that, although the
expectation of renewal was expressly negated by the disclaimer that the contract did
not give rise to “any commitment to a permanent appointment”, the applicant had
proved that he had a reasonable expectation of the renewal or extension of his fixed-
term contract. It could reasonably be inferred, from the advertisement for the
position, that a further extension for a two-year period was dependent on the
performance of the incumbent. The applicant’s work had been of a high standard but
had, nevertheless, effectively been excluded from applying for one of the position to
which his black colleagues had been appointed. The court was of the opinion that
the applicant’s dismissal could only have been for operational reasons. In the light of
the respondent’s concessions that the appropriate retrenchment procedures had not

83
Supra.

19
been followed, the could held the applicant’s dismissal to be procedurally unfair and
ordered compensation to the applicant equivalent to 12 months remuneration.

On appeal,84 the Labour Appeal Court did not express a view on whether section
186(b) is sufficiently broad in order to cover an expectation of permanent
employment. The court, instead, concluded on the facts. The court held that the
employee did not have a reasonable expectation for either permanent employment or
an extension of its fixed-term contract. Consequently, he had not been dismissed
and the decision of the court a quo was overturned.

In terms of Böttger v Ben Nomoyi Film and Video CC85 if an employee concludes a
fixed-term contract with the sole purpose of having a particular job completed, the
contract is terminated upon completion of that specific job. Such termination does
not amount to a dismissal provided the employer can prove that the purpose of the
contract had been achieved. The employer is not required to follow a pre-
retrenchment procedure on expiration of the contract.

Despite the actual wording of a fixed-term contract, the following aspects should be
considered in terms of South African case law in order to determine whether a
reasonable expectation of renewal has been created,86 despite the wording of the
contract.

(i) The reasonable expectation must be created by a person with the necessary
authority to bind the employer.

(ii) A reasonable expectation will be created if an employee is permitted, by

default, to continue in employment after the fixed term has expired.

(iii) If an employer can prove that operational requirements have necessitated

continuous renewal of fixed-term contracts, and the employees are aware of
this, a reasonable expectation will not have been created.

84
University of Cape Town v Auf der Heyde supra.
85
Supra.
86
De Villiers “Fixed-term Contracts: When is an Employee Entitled to have a Reasonable
Expectation of Renewal?” (2000) ILJ 10:4 31-40.

20
(iv) A reasonable expectation of continued employment may still be present even if
certain conditions of employment in the contract are to be reviewed after a
certain period.

(v) If the employer states that certain renewals are subject to good behaviour and
proper work performance, the failure to inform an employee of poor work
performance prior to the expiry of the fixed term may lead to a reasonable
expectation of renewal.

(vi) Where contracts are renewable on the occurrence of a certain event,

employees have a reasonable expectation of renewal on the occurrence of the
event.

3.3 RECENT CASE LAW RE: “REASONABLE EXPECTATION”: BUTHELEZI v

MUNICIPAL DEMARCATION BOARD87

In the case of Buthelezi v Municipal Demarcation Board88 the court dealt with the
issue of whether an employee, on a fixed-term contract, may be retrenched before
expiration of the contract of employment. The Labour Appeal Court held that
notwithstanding the provisions of the Labour Relations Act,89 such retrenchments are
unfair per se, even if the employer has valid grounds, in terms of the operational
requirements of his business, for dismissing the employee.

3.3.1 THE FACTS

On 24 January 2000, Mr Buthelezi (the “applicant”) was appointed deputy manager,

in charge of financial operations of the Municipal Demarcation Board (the
“respondent”). Approximately a year later the applicant was handed a retrenchment
notice, informing him his post had become redundant, in terms of a restructuring
process. After further consultations, the applicant and another redundant employee

87
[2005] 2 BLLR 115 (LAC).
88
Ibid.
89
66 of 1995.

21
were invited to apply for a post in the new structure. Mr Buthelezi’s application was
unsuccessful and he was retrenched.

On the fact of it, the respondent had an operational reason for retrenching Buthelezi.
It also appeared as if the respondent followed, or at least attempted to follow, the
retrenchment procedures prescribed by the Labour Relations Act.90 There were,
however, two differences between Mr Buthelezi and the other employees who sought
to challenge their retrenchments in the Labour Court, namely:

(i) Mr Buthelezi had been appointed on a fixed-term employment contract for five
years; and

(ii) Mr Buthelezi had only been employed for one year by the respondent.

The Labour Court, subsequently, ruled the applicant’s dismissal to be unfair. The
Labour Court found that despite the respondent’s denials, the applicant had indeed
been appointed on a fixed-term contract and, furthermore, that its termination was
substantively unfair because the contract had not run its course. The Labour Court
also found that the applicant’s dismissal was also procedurally unfair, for the reason
that the applicant’s dignity had been impaired by the manner in which he had been
treated by the respondent. However, the Labour Court held that, soon after his
dismissal, the applicant had made “scurrilous accusations” against the respondent
which would have justified his dismissal. Since the applicant had been paid to date,
due to these accusations, the court ruled that he was not entitled to any
compensation. Accordingly, Buthelezi’s application was dismissed with costs.

3.3.2 THE APPEAL

On appeal91 Buthelezi challenged every finding of the Labour Court other than the
ruling that his dismissal before the termination of his fixed-term contract rendered it
substantively unfair.

90
Ibid.
91
Buthelezi v Municipal Demarcation Board supra.

22
The Labour Appeal Court began setting out the requirements of the common law,
stating:

“There is no doubt that at common law a party to a fixed-term contract has no

right to terminate such contract in the absence of repudiation or a material
breach of the contract by the other party. In other words there is no right to
terminate such contract even on notice unless its terms provide for such
termination.”

The court went further to explain the reason for the common law principle, stating:

“When parties agree that their contract will endure for a certain period as
opposed to a contract for an indefinite period, they bind themselves to honour
and perform their respective obligations in terms of that contract for the duration
of the contract and they plan, as they are entitled to in the light of their
agreement, their lives on the basis that the obligations of the contract will be
performed for the duration of that contract in the absence of a material breach
of the contract. Each party is entitled to expect that the other has carefully
looked into the future and has satisfied itself that it can meet its obligations for
the entire term in the absence of any material breach. Accordingly, no party is
entitled to later seek to escape its obligations in terms of the contract on the
basis that its assessment of the future had been erroneous or had overlooked
certain things. Under the common law there is no right to terminate a fixed-term
contract of employment prematurely in the absence of a material breach of such
contract by the other party.”

The main question before the Labour Appeal Court was whether the common law
should apply without qualification in the current labour dispensation, in which
employers are expressly permitted to dismiss employees for reasons relating to their
operational requirements.

3.3.3 IMPORTANT ASPECTS OF ARGUMENTS

The Municipal Demarcation Board (the respondent) argued that the common law had
been altered, or, if not, that it should be “developed” in the light of this dispensation,
as reinforced by the Constitution. In backing up their argument, the respondent
referred the Labour Appeal Court to the case of National Automobile & Allied
Workers’ Union v Borg-Warner SA (Pty) Ltd,92 in which it was held that the 1956
Labour Relations Act had altered the common law by recognizing that the
relationship between employers and employees could endure beyond the termination

92
(1994) 15 ILJ 509 (A).

23
of the contract, at least in cases where employees who had been dismissed and the
employer promised to re-employ and for no justifiable reason did not.

In terms of section 186(2)(c) of the current Labour Relations Act93 that form of
dismissal is now recognized as unfair labour practice. By referring to the
aforementioned case, the respondent sought to invoke the constitutional guarantee
of equality.

The Labour Appeal Court dismissed the respondent’s submissions as being “without
merit”. The court invoked the presumption that, if the legislature wanted to change
the common law, it would say so expressly or by necessary implication. It went on,
further, to say that the fact that the legislature may have chosen to amend the
common law in other respects did not mean that it had intended to change that
particular common law principle. In regard to the respondent’s argument that the
common law should be “developed” to bring it into line with the Constitution, the court
could not find anything unconstitutional about the common law principle, that parties
to fixed-term contracts should be held to their terms as agreed therein.

3.3.4 OUTCOME OF APPEAL

On appeal, the court held that the trial judge’s finding, that Buthelezi might have been
dismissed was “mere speculation” which had never been relied on by the
respondent. However, the Labour Appeal court confirmed that the trial judge had
correctly limited compensation to the date on which Buthelezi found another job. The
Labour Appeal Court stated that such limitation is justified by the common law
principle, that employees whose services are unlawfully terminated must attempt to
mitigate their damages. Mr Buthelezi, subsequent to his dismissal, acquired a better
paid post within three months of his dismissal.

In the end, the Labour Appeal Court granted Mr Buthelezi compensation equivalent
to three months’ pay.

93
66 of 1995.

24
3.4 CONCLUSION

In order to determine whether a person was unfairly dismissed, one needs to

determine the following:

(i) whether the person was, in fact, an employee, as defined by the Labour
Relations Act;94

(ii) whether the termination of the contract was, in fact, a dismissal. Section 186(1)
of the Labour Relations Act95 outlines circumstances when the termination of a
contract of employment will constitute a dismissal; and

(iii) whether such dismissal was fair, in the circumstances. This aspect will be
discussed in more dtail in paragraph 4.2 below.

For purposes of this paper, section 186(1)(b) is relevant. In terms of the aforesaid
provision, failure to renew a fixed-term contract on the same or similar terms where
the employee “reasonably expected” the employer to do so, is regarded as a
dismissal.

However, whether the phrase “reasonable expectation of renewal” includes a

reasonable expectation of permanent employment is uncertain. Various authors and
various cases seem to share conflicting views on the issue. The issue whether a
reasonable expectation of renewal includes a reasonable expectation of permanent
employment will be discussed in more detail in chapter 5 below.

With regard to the issue of whether an employee, on fixed-term contract, may be

retrenched before the expiration of the contract of employment, it is respectfully
submitted that the Labour Appeal Court in Buthelezi v Municipal Demarcation
Board96 was correct in its finding. The Labour Appeal Court upheld the common law
principle that a party to a fixed-term contract has no right to terminate such contract

94
66 of 1995.
95
Ibid.
96
Supra.

25
in the absence of repudiation or material breach by the other party. It is further
submitted that the Labour Appeal Court, correctly, rejected the Municipal
Demarcation Board’s argument that the common law had been altered in order to
bring the principle in line with the Constitution. It is finally submitted that the Labour
Appeal Court was correct in stating that there was nothing unconstitutional about the
aforesaid common law principle.

26
 CHAPTER 4
EXPECTATION OF PERMANENT EMPLOYMENT

4.1 GENERAL

In the past, fixed-term contracts were predominantly linked to influx control under the
apartheid system.97 In terms of these policies, black persons were to exercise their
political and other rights in the so-called homelands established in the rural areas of
South Africa. Even though many acquired the legal rights to live and work
permanently in the “white” urban industralised areas of South Africa, most were
denied this right.98

The entitlement of “migrant workers” from the homelands to live and work in the
industrialized areas was a temporary right, linked to a fixed-term contract of one year
and entered into their employers.99 Once this contract expired, employees were
expected to return to the areas from which they came.

However, if their services were still needed by their employers, and if the influx
control authorities approved, they could enter into a further fixed-term contract. In
practice, employees built up long periods of service with an employer in terms of a
series of fixed-term contracts that were renewed on an annual basis.100

Nowadays, temporary employees do not enjoy the same rights as permanent

employees. For example, the termination of temporary employment at the expiry of a
stipulated fixed period is not subject to the same notice requirements or requirements
of substantive and procedural fairness as are applicable to the termination of
permanent employment contracts. Nor will an employer be obliged to pay a
severance package to a temporary employee at the expiry of a fixed period.101
Temporary employees are also not entitled to certain benefits to permanent
employees, such as medical aid and pension benefits.

97
De Villiers 31.
98
Ibid.
99
Ibid.
100
Ibid.
101
Janisch “Fixed-Term Contracts: How Fixed are They Really?” (1997) People Dynamics 50.

27
Employers have since attempted to use fixed-term contracts in order to avoid
obligations they would otherwise have towards permanent employees, particularly in
regard to substantive and procedural fairness upon termination of employment.102

The law regarding the non-renewal of fixed-term employment contracts has

developed increasingly to recognize the true nature of an employment relationship,
irrespective of any fixed period formally agreed to. The Labour Relations Act, 1956
did not have a definition of dismissal, therefore, the courts instead relied on the wide
definition of unfair labour practice.103 This definition of unfair labour practice was the
cornerstone of individual labour law and the law of unfair dismissal in pre-1995
jurisprudence.104 If an act or omission did not fall within the definition of an unfair
labour practice, the Industrial Court did not usually have jurisdiction to intervene.

The new Labour Relations Act105 has extended the common law concept of dismissal
to the extent that it rendered dismissals, for certain reasons, impermissible in any
circumstances and confined permissible reasons for dismissal.106

Section 186107 lists five specific forms of dismissal. Section 186(b) states 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.”

Therefore, section 186(b)108 supercedes the common law but only to the extent that
such an expectation is found to be present. In the absence thereof the employer
would generally still be entitled to rely on the normal common law rule that a fixed-
term employment contract has terminated at the expiration of the period
concerned.109

102
Ibid.
103
Basson Essential Labour Law (2000) 106.
104
Ibid.
105
66 of 1995.
106
Grogan Workplace Law (2001) 103.
107
Labour Relations Act 66 of 1995.
108
Ibid.
109
Olivier 1013.

28
Since the inception of the unfair labour practice regime, it is no longer unconditionally
accepted that a fixed-term contract of employment automatically terminates at the
effluxion of the contract.110

In terms of the decision of the Appellate Division in NAAWU (now NUMSA) v Borg-
Warner SA (Pty) Ltd111 the law is now settled, that the employment relationship does
not necessarily terminate at the formal expiry of the contract of employment.

In South Africa, the fixed-term contract of employment is regarded as a form of a

typical employment, which differs from the continuous form of employment. The
Labour Relations Act112 makes no distinction, in terms of its coverage, between
temporary and permanent employees.

At common law, a fixed-term contract of employment automatically terminates at the

expiry of the period of the contract. No premature termination of the employment
contract is permissible, except if there is an agreement between the parties to the
contrary.

In terms of section 186(b) of the Labour Relations Act,113 the refusal or failure to
renew a fixed-term contract on the same or similar terms is subjected to a two-fold
enquiry, namely:

(i) Firstly, the court has to establish whether a reasonable expectation, that the
contract would be renewed on the same or similar terms, existed on the part of
the employee concerned. If an expectation is found to be present, the failure or
refusal to renew would constitute a dismissal.

(ii) Secondly, the court has to establish whether the refusal or failure to meet the
expectation of renewal is fair with reference to misconduct or incapacity on the
part of the employee or with reference to the employer’s operational

110
Olivier 1005.
111
Supra.
112
66 of 1995.
113
Ibid.

29
 requirements. Furthermore, the employer also has to follow a fair procedure
before dismissing the employee concerned.

Section 186(b) of the Labour Relations Act114 does not include an expectation of a
permanent or indefinite term relationship on an ongoing basis.

In terms of section 192(1) of the Labour Relations Act115 the employee has the onus
of proving that the dismissal occurred. Once the employee has disposed of this
burden of proof, the employer will have to prove the following:116

(a) Firstly, the reason for the dismissal, which should relate to the employee’s
misconduct or incapacity or to the employer’s operational requirements; and

(b) secondly, that it is fair to rely on the reasons concerned for purposes of the
dismissal, both from a substantive and procedural point of view.

4.2 REASON FOR DISMISSAL

When determining the reason for terminating the contract, two distinct matters need
to be canvassed.

Firstly, where the actual reason for terminating the employee’s services is not the
alleged expiry of the term of the contract, but relates to other considerations, such as
the misconduct or incapacity of the employee or the employer’s operational
requirements, reliance on the automatic termination of the contract will not be
counternanced.117

Secondly, apart from enquiring into the existence of another reason for terminating
the contract, the fairness of relying on that reason must be scrutinized.118

114
Ibid.
115
Ibid.
116
S 192(1) of the Labour Relations Act 66 of 1995.
117
Olivier 1010.
118
Ibid.

30
In Zank v Natal Fire Protection Association119 the employer sought to justify the non-
renewal of the contract of employment on the basis that the employee, a spotter pilot,
had piloted an aircraft without a valid licence and on another occasion arrived late
when required to take off at first light.

The Industrial Court found that the employee had already been disciplined for the first
infraction. As for the second matter, it was opined that if it was so serious, the
employer would have taken immediate disciplinary action and afforded the employee
a proper hearing. It was accordingly held that the termination of the employee’s
services was unfair.

Prior to Zank v Natal Fire Protection Association120 there was a similar case, namely
FGWU v Lanko Co-operative Ltd.121 In this case, the employer who had previously
followed a practice of re-employing seasonal workers, decided to replace some of
them with “new” workers, who were allegedly better qualified. There was no
evidence that any of the applicants were poor workers and/or that the new
employees had superior skills. The court found that the employer was not justified in
refusing to re-employ them on that basis.

In Price Club v SACCAWU122 the arbitrator held that an employer has an obligation
to follow retrenchment procedures where it was found that fixed-term employment
contracts had been prematurely terminated.

The arbitrator had to consider whether the retrenchment of the four employees, by
the company, was fair. These employees had been employed on a fixed-term
contract for a period of three months. Shortly after the expiration of the contract, the
employees were informed that the employer no longer required their services.

The arbitrator held that the sole motivation for terminating the contracts was the
shortfall in turnover in the company’s business. The employer argued that it was not
obliged to follow retrenchment procedures, giving the reason that the employees

119
[1995] 16 BLLR 110 (IC).
120
Ibid.
121
(1994) 15 ILJ 876 (IC).
122
(1990) 1 ARB 5.1.3.

31
were employed on temporary contracts. The arbitrator rejected this argument of the
employer on the following grounds:123

(i) Article 3 of the International Labour Organisation’s Convention 158 provides

that:

“Adequate safeguards shall be provided against recourse to contracts of

employment for a specified period of time, the aim of which is to avoid the
protection resulting from this Convention.”

(ii) The employer was not obliged to follow fair retrenchment procedures as
employees stayed on after the formal date of expiry of their contracts.

The termination of the four employees were, therefore, held to be unfair.

In Khumalo v Supercare Cleaning124 the arbitrator found that the employees were not
entitled to severance pay after their contracts were terminated because of the
cancellation of the contracts for which they were employed.

In Mkhiva v BCS Joint Venture125 the applicant’s services as a checker were

terminated while work was still available beyond that date, albeit on a reduced level.
Another checker, in the workplace, who was also employed in a temporary capacity,
had been retained for purposes of completing the work. The employer cited that the
reason the second employee was retained was because his timekeeping was better.

The respondent’s argument was that the applicant’s services were terminated as a
natural consequence of the project for which he was employed and accordingly no
dismissal had occurred.

The court rejected the respondent’s argument and concluded that the respondent
had unfairly dismissed the applicant for operational reasons. This approach has

123
Ibid.
124
2000 9 CCMA 5.5.2.
125
[1997] 8 BLLR 1014 (LC).

32
been criticised as overprotective and prescriptive by virtue of the manifestly onerous
duty on employees who enter into genuine temporary contracts of employment.126

A further question was raised, whether it was the intention of the legislature to confer
protection of fixed-term employees where the project exceeded the period for which
the employee had specifically been employed. This approach is seen as not
conducive to meeting the challenges posed by globalization, with the necessity to
introduce flexibility in the labour market and to overcome excessive bureaucratic
regulation.127

4.3 EXPECTATION OF PERMANENT EMPLOYMENT

Fixed-term contracts are usually entered into because the task to be performed is a
limited or specific one. Usually, the contract terminates upon the fulfillment of an
objective condition, for example, completing a specific task or the occurrence of a
specific event.128

Conflicting policy goals are inherent in the use of fixed-term contracts. On the one
hand, there is a fear that their use will undermine statutory unfair dismissal protection
and on the other hand, the desire to foster flexibility in the labour market.129

The case law which follows contributed to the development of the law, relating to the
expectation of permanent employment, in South Africa as it currently stands.

In Wood v Nestlé (Pty) Ltd130 the court found that the employer had committed an
unfair labour practice by not offering the applicant a permanent position.131 The
employer led the applicant to understand that she would receive a permanent post.
The applicant had formed a reasonable expectation that she would continue to work
on the employee assistance programme and receive permanent status in the

126
Hutchinson “Premature Termination of Fixed-Term and Temporary Employment Contracts” 644.
127
Ibid.
128
Hutchinson “Uncertainties Surrounding the Renewal of Fixed-term Contracts” (2000) 21 ILJ
2188 at 2188.
129
Ibid.
130
(1996) 17 ILJ 184 (IC).
131
Hutchinson “Uncertainties Surrounding the Renewal of Fixed-term Contracts”supra.

33
workplace. The decision of the employer was described as “unreasonable, arbitrary
and capricious”, as no account was taken of the employee’s legitimate expectation to
be permanently employed.

The unfair labour practice that had been committed was not that the employee had
been unfairly dismissed, but rather that the employer failed to appoint the applicant to
permanent employment, thereby depriving her of benefits to which she would have
been entitled.132 The applicant was awarded compensation on this basis. This was
possible under the 1956 Labour Relations Act, in terms of the wide scope of the
definition of unfair labour practice.

In Dierks v University of South Africa133 the Labour Court defined “reasonable

expectation” as expressed in section 186(b) of the Labour Relations Act134 to include
the following considerations:

• It is essentially an equity criterion, ensuring relief to a party on the basis of

fairness in circumstances where the strict principles of the law would not
foresee a remedy.

• The Labour Relations Act135 envisages the existence of a substantive

expectation, to the extent that the expectation must relate to the renewal of the
fixed-term contract.

• The expectation is seen to be essentially subjective in nature and, therefore,

vests in the person of the employee. The employer need not share the same
expectation.

• The courts must apply an objective test to determine whether continued

employment had indeed become permanent and whether the employee could
hold the alleged reasonable expectation of continued employment.

132
Ibid.
133
Supra.
134
66 of 1995.
135
Ibid.

34
In SACTWU v Mediterranean Woollen Mills136 the Labour Appeal Court held that the
relationship between the employer and employee could be construed as aiming at a
permanent duration, despite an official description to the contrary. The employees
who had resorted to illegal strike action and associated misconduct, were initially
dismissed and thereafter re-employed on fixed-term contracts. The court held that
the arrangement was akin to a probationary period and that the employees should
have been given the same protection afforded to probationary employees.

It is clear that an employee engaged in a fixed-term contract and having a

reasonable expectation of renewal of that contract will prove section 186(b) statutory
“dismissal” if the employer refuses to renew or offers less favourable terms.
However, it is not so clear what will ensue if the reasonable expectation is one of
permanent employment. Section 186(b) requires an expectation that a fixed-term
contract would be renewed on the same or similar terms. The Act does not,
however, require that or regulate the position where the expectation implies a
permanent or indefinite relationship on an ongoing basis.137

Section 186(b) apparently envisages that an employer should not be allowed not to
continue with fixed-term employment in circumstances where an expectation of
renewal is justified.138

In terms of Dierks v University of South Africa139 it does not seem logical that if a
reasonable expectation can lead to a renewal of a fixed-term contract, the same
expectation should lead to appropriate relief for permanent employment by
implication, particularly if there is no provision in the Act to address the apparent
lacuna.

In Dierks v University of South Africa140 the judge concluded that where the
employee alleges that a reasonable expectation has been created for permanent
employment or that a fixed-term contract has been converted into one of

136
Supra.
137
Zwane v Elegance Jerseys (1998) 7 CCMA 4.3.2.
138
Colavita v Sun International Bophuthatswana Ltd [1995] 9 BLLR 88 (IC).
139
Supra.
140
Ibid.

35
permanence, the employee might seek to rely on unfair labour practice jurisdiction as
opposed to the defined unfair labour practice.

The court, accordingly, found that section 186(b) does not include a reasonable
expectation of permanent employment and that the court does not have the
jurisdiction to decide the issue insofar as it concerns the reasonable expectation of
permanent employment.

The court, however, pointed out that where the period of temporary employment
appears to be excessive in length, the court should be prepared to investigate
whether the use of temporary employees is merely a method of avoiding the court’s
scrutiny of the fairness of the termination of the contract.141

In this case, it was found that “the balance of probability” does not favour a finding
that the grievants’ contracts were genuinely fixed-term contracts. It seems also fair
and reasonable of the employees to have expected that their contracts should at best
be made permanent or be renewed on the same basis as it was before
termination.142

In terms of South African labour law, a “reasonable expectation” does not include a
reasonable expectation of permanent employment. There is an apparent lacuna in
the Labour Relations Act143 and where an employee alleges a reasonable
expectation of permanent employment, that employees must proceed under
schedule 7 item 2(1)(d) of the above-mentioned Act.144

141
Alfred Teves Technology v NUMSA 1996 5 ARB 8.2.8.1.
142
Supra.
143
66 of 1995.
144
Du Toit Labour Relations Law (2000) 341 and Basson Essential Labour Law supra 113.

36
 CHAPTER 5
CONCLUSION

It is submitted that the common law remedies available to fixed-term employees still
play a role, to the extent that these remedies are applicable, despite the peculiar
regime created by the Labour Relations Act.145 In circumstances where the
employee does not have a right to the renewal of the contract, the common law
would not provide a remedy. In cases where there is such an expectation, the
Labour Relations Act146 provides remedies for the employee, if it can be shown that
the non-renewal amounted to an unfair dismissal. However, the aforementioned
Labour Relations Act’s regulation of compensation, as a remedy, is rather a restricted
one, especially when it comes to the position of fixed-term employees.147

The Labour Relations Act148 prescribes the remedies available in the event of an
unfair dismissal. In terms thereof the fixed-term employee who had a reasonable
expectation that his/her contract of employment would be renewed on the same or
similar terms, and whose termination of service did not match the Act’s fairness
criteria, will primarily be entitled to an order of reinstatement or re-employment.149
Reinstatement implies continuity of employment on the same terms and condition
from a date not earlier than the date of dismissal. Re-employment suggests that the
employee be placed in the same or other reasonably suitable work on any terms from
a date not earlier than the date of dismissal.150

According to Du Toit151 this means that the employee must be placed in a position
which is no longer a fixed-term one, one would think that the emphasis put in section
186(b) on the renewal of a fixed-term contract on the same or similar basis would
normally imply the continuation of the relationship on a fixed-term basis. However,

145
Olivier supra.
146
66 of 1995.
147
Olivier supra.
148
66 of 1995.
149
S 193 of the Labour Relations Act 66 of 1995.
150
S 193(1)(a)-(b) of the Labour Relations Act 66 of 1995.
151
Du Toit, Bosch, Woolfrey, Godfrey, Rossouw, Christie, Cooper, Giles and Bosch The Labour
Relations Act of 1995 (1996) at 387.

37
where the relationship has matured into a permanent one, it would be apposite to
order the re-employment of the employee on a permanent basis.152

In regard to the nature of the expectation required by section 186(b) of the Labour
Relations Act,153 the following case law contributed substantially in the development
of the law relating thereto:

(i) Dierks v University of South Africa154

In this case the employee had been employed by means of a series of fixed-term
contracts. The employee argued that he had been unfairly retrenched, and that he
was entitled to a permanent position. Here the employee sought to secure a
permanent position by using section 186(1)(b)155 and was not merely claiming unfair
dismissal.

The main question here was whether one could use section 186(1)(b) to secure a
permanent position. The Labour Court held that the provision only provides for the
expectation of renewal of the contract on “the same or similar terms” and not to the
expectation of permanent employment. Therefore, the court declined the argument
by the applicant and accordingly held that an employee may not use the provision to
secure permanent employment.

(ii) McInnes v Technikon Natal156

In this case, the Labour Court held that the decision in Dierks was incorrect and took
the view that the focus should be on the nature of the expectation and whether in the
circumstances that expectation is reasonable. The court stated the issue to be
determined is whether the expectation, in the words of the section, is an expectation
that her employment would be renewed on “similar terms”.

152
Olivier supra.
153
66 of 1995.
154
(1999) 20 ILJ 1227 (LC).
155
Labour Relations Act 66 of 1995.
156
[2000] 6 BLLR 701 (LC).

38
Here the employee genuinely thought that she would be doing the same work as
before but only on a permanent basis in future.

In determining the reasonableness of the employee’s expectation, the Labour Court

stated that it was quite clear that, had it not been for the affirmative action policy, the
employee would have continued to be employed. The Labour Court further stated
that the respondent failed to discharge the onus resting upon it in terms of section
192(2), to show that the dismissal was fair.157

(iii) Auf der Heyde v University of Cape Town158

In this case the Labour Court followed the decision in Dierks v University of South
Africa159 and held that s 186(1)(b) did not include a reasonable expectation of
permanent employment.

On appeal160 the Labour Appeal Court upheld the decision of the court a quo, and
stated that if the expectation existed and if such expectation was reasonable, then
such termination of the contract would amount to unfair dismissal.

Grogan161 argues that there is no reason why an expectation of permanent

employment should not also provide a basis for a claim of dismissal in terms of
section 186(1)(b). Grogan views the purpose of section 186(1)(b) to prevent
employers from keeping employees on fixed-term employment contracts for an
extended period of time.

The criteria to be considered in order to establish whether a reasonable expectation

has come into existence are:162

- the evaluation of all the surrounding circumstances;

- the significance of the contractual stipulations;

157
At 710.
158
[2000] 8 BLLR 877 (LC).
159
Supra.
160
University of Cape Town v Auf der Heyde (2001) 22 ILJ 2647 (LAC).
161
Workplace Law (2003) 7th ed 107.
162
Dierks v University of South Africa supra.

39
- agreements or undertakings by the employer;
- practice or custom in regard to renewal or re-employment;
- the availability of the post;
- the purpose of or reason for concluding the fixed-term contract;
- inconsistent conduct;
- failure to give reasonable notice; and
- the nature of the employer’s business.

In terms of the case law, discussed above, it is apparent that there exists some
confusion in regard to whether or not a fixed term employee can have a reasonable
expectation of permanent employment, and that such expectation will fall within the
ambit of the Labour Relations Act.163 Generally, there are two conflicting views.
Firstly, there is the view that section 186(b) only refers to a reasonable expectation of
the renewal of the fixed-term employment contract on the same or similar terms as
the initial contract.164 Secondly, there is the view that section 186(b) does not only
refer to an expectation of the renewal of the contract but that it also refers to an
expectation of permanent employment, in certain cases.165

The authors Grogan166 and Du Toit et al167 both favour the view of McInnes v
Technikon Natal.168 Du Toit briefly submitted, in his reasoning, that on a purposive
reading of section 186(1)(b), there is no reason for excluding the non-appointment of
a temporary employee with a reasonable expectation of continued employment from
the definition of “dismissal” merely because the post in question has been converted
to a permanent one. He goes on further to say that the right to fair labour practices
of an employee in this position is no less worthy of protection than that of an
employee expecting a further temporary contract. On this basis, Du Toit preferred
the ruling of McInnes v Technikon Natal.169

163
66 of 1995.
164
Dierks v University of South Africa supra.
165
McInnes v Technikon Natal supra.
166
Workplace Law (2005) 45.
167
Labour Relations Law (2003) 4th ed at 369.
168
Supra.
169
Supra.

40
It is respectfully submitted that the views of the authors, Grogan and Du Toit, are not
sufficiently justified. It is further submitted that the ruling in McInnes v Technikon
Natal170 is incorrect. What is required in order to activate the provisions of section
186(1)(b) is an expectation that the fixed-term contract in question would be renewed
on the same or similar terms. It is evident that the Labour Relations Act171 does not
require that or regulate the position where the expectation implies a permanent or
indefinite relationship on an ongoing basis. The reference to “renewal” on the “same”
or “similar terms” supports that this is the inference to be drawn from the wording of
the subsection. It is further submitted that if the legislature intended this provision to
provide for an expectation of permanent employment, then it would have inserted
terms to that effect into the provision. What section 186(10(b) apparently envisages
is that an employer should not be allowed not to continue with fixed-term employment
in circumstances where an expectation of renewal is justified. The implication is that
the remedy to be granted in this case, if the termination is found to be unfair, is that
of reinstatement or re-employment on the same or similar terms, but not that the
employee has to be reappointed as a permanent employee or on an indefinite basis.
This also seems to be the approach followed in the case of FGWU v Lanko Co-
operative Ltd.172

Therefore, it is finally submitted, that the correct view to be followed is that of the
ruling of Dierks v University of South Africa.173

170
Supra.
171
66 of 1995.
172
(1994) 15 ILJ 876 (IC) at 885H-886A.
173
Supra.

41
 BIBLIOGRAPHY

ARTICLES
De Villiers, I “Fixed-term Contracts: When is an Employee Entitled to have a
Reasonable Expectation of Renewal?” (2000) ILJ 10:4 31-40

Hutchinson, W “Premature Termination of Fixed-term and Temporary Employment

Contracts” (1998) SALJ 642-646

Hutchinson, W “Uncertainties Surrounding the Renewal of Fixed-term Contracts”

(2000) 21 ILJ 2188

Janisch, H “Fixed-Term Contracts: How Fixed are They Really?” (1997) People
Dynamics 50

Olivier, MP “Legal Constraints on the Termination of Fixed-term Contracts of

Employment: An Enquiry into Recent Developments” (1996) 17 ILJ 1001

BOOKS
Anderman, SD The Law of Unfair Dismissal (1978) Butterworths, Durban

Basson, A Essential Labour Law (2000) Groenkloof Labour Law Publishers

Du Plessis, JV; Fouché, MA; Jordaan, B and Van Wyk, MW A Practical Guide to
Labour Law (1996) 2nd ed Butterworths, Durban

Du Toit, D Labour Relations Law (2000) Butterworths, Durban

Du Toit, D; Bosch, D; Woolfrey, D; Godfrey, S; Rossouw, J; Christie, S; Cooper, C;

Giles, G and Bosch, C The Labour Relations Act of 1995 (1996) Butterworths,
Durban

Du Toit, D; Bosch, D; Woolfrey, D; Godfrey, S; Rossouw, J; Christie, S; Cooper, C;

Giles, G and Bosch, C Labour Relations Law (2003) 4th ed LexisNexis Butterworths,
Durban

Grogan, J Workplace Law (2001) Juta Law, Lansdowne, Cape Town

Grogan, J Workplace Law (2003) 7th ed, Juta and Co Ltd, Cape Town

Grogan, J Workplace Law (2005) 8th ed Juta Law, Lansdowne, Cape Town

Todd, C Contracts of Employment (2001) Siber Ink

42
LIST OF CASES
Alfred Teves Technology v NUMSA 1996 5 ARB 8.2.8.1

Auf der Heyde v University of Cape Town [2000] 8 BLLR 877 (LC)

Bon Accord Irrigation Board v Braine 1923 AD 480

Bottgër v Ben Nomoyi Film and Video CC [1997] 5 BLLR 621 (CCMA)

Braund v Baker, Baker & Co (1905) 19 EDC 54

Bronn v University of Cape Town (1999) 20 ILJ 951 (CCMA)

Buthelezi v Municipal Demarcation Board [2005] 2 BLLR 115 (LAC)

Cape Town Municipality v Minister of Labour 1965 (4) SA 770 (C)

Colavita v Sun International Bophuthatswana Ltd [1995] 9 BLLR 88 (IC)

Cremark a Division of Triple-P Chemical Ventures (Pty) Ltd v SA Chemical Workers

Union (1994) 15 ILJ 289 (LAC)

Dierks v University of South Africa (1999) 20 ILJ 1227 (LC) / [1999] 4 BLLR 304 (LC)

Dixon v BBC 1979 QB 546

FGWU v Lanko Co-operative Ltd (1994) 15 ILJ 876 (IC)

Fedlife Assurance Ltd v Wolfaardt (2001) 22 ILJ 2407 (SCA)

Ferrant v Key Delta (1993) 14 ILJ 464 (IC)

Foster v Stewart Scott Inc (1997) 18 ILJ 367 (LAC)

Harris v Bakker & Steyger (Pty) Ltd (1993) 14 ILJ 1553 (IC)

Jeffrey v Persetel (Pty) Ltd [1996] 1 BLLR 67 (IC)

Khumalo v Supercare Cleaning 2000 9 CCMA 5.5.2

Koyini v Strand Box (Pty) Ltd (1985) 6 ILJ 453 (IC)

Lamprecht v McNeillie (1994) 15 ILJ 998 (A)

Mackay v Comtec Holdings (Pty) Ltd [1996] 7 BLLR 863 (IC)

Malandoh v SA Broadcasting Corporation (1997) 18 ILJ 544 (LC)

McInnes v Technikon Natal [2000] 6 BLLR 701 (LC)

43
Mediterranean Woollen Mills (Pty) Ltd v SA Clothing & Textile Workers Union (1998)
19 ILJ 731 (SCA)

Metal & Allied Workers Union v A Mauchle (Pty) Ltd t/a Precision Tools (1980) 1 ILJ
227 (IC)

Metal & Allied Workers Union of SA v Screenex Wire Weaving Manufacturers (Pty)
Ltd (1985) 6 ILJ 75 (IC)

Mkhiva v BCS Joint Venture [1997] 8 BLLR 1014 (LC)

Morag v Dortech (Pty) Ltd [2001] 8 BLLR 917 (LC)

Mtshamba v Boland Houtnywerhede (1986) 7 ILJ 563 (IC)

Muzondo v University of Zimbabwe 1981 (4) SA 755 (2)

National Automobile & Allied Workers’ Union v Borg-Warner SA (Pty) Ltd (1994) 15
ILJ 509 (A)

National Chemsearch (SA) v Borrowman 1979 (3) SA 1092 (T)

Ndamase v Fyfe-King 1939 EDL 259

Penrose Holdings (Pty) Ltd v Clark (1993) 14 ILJ 1558 (IC)

Price Club v SACCAWU (1990) 1 ARB 5.1.3

R v Bhana 1941 SR 186

Redman v Colbeck 1917 EDL 35

SACTWU v Mediterranean Woollen Mills (Pty) Ltd (1995) 16 ILJ 366 (LAC)

Sithole v Lipton SA (Pty) Ltd (1992) 1 LCD 257 (IC)

Smith v American International School of Johannesburg (1994) 15 ILJ 817 (IC)

Tiopaizi v Bulawayo Municipality 1923 AD 317

University of Cape Town v Auf der Heyde [2001] 12 BLLR 1316 (LAC) / (2001) 22 ILJ
2647 (LAC)

Wood v Nestlé (Pty) Ltd (1996) 17 ILJ 184 (IC)

Zank v Natal Fire Protection Association [1995] 16 BLLR 110 (IC)

Zwane v Elegance Jerseys (1998) 19 ILJ 969 (CCMA)

Zwane v Elegance Jerseys (1998) 7 CCMA 4.3.2

44
LEGISLATION
Basic Conditions of Employment Act 3 of 1983

Basic Conditions of Employment Act 75 of 1997

Labour Relations Act 66 of 1995

45