The legal protection of temporary employees

Full text

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THE LEGAL PROTECTION

OF TEMPORARY EMPLOYEES

by

NEIL GILLESPIE

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

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TABLE OF CONTENTS

Page

SUMMARY ... iii

CHAPTER 1: INTRODUCTION ... 1

CHAPTER 2: THE CONSTITUTION AND THE COMMON LAW ... 4

2.1 The constitutional imperative ... 4

2.2 The common law ... 5

CHAPTER 3: LABOUR LAWS IMPACTING ON TEMPORARY CONTRACTS ... 8

3.1 The Basic Conditions of Employment Act ... 8

3.2 Labour Relations Act ... 8

3.3 Employment Equity Act ... 9

3.4 Bargaining Council-Agreements ... 10

CHAPTER 4: THE CONTRACT OF EMPLOYMENT ... 11

4.1 Express terms ... 11 4.2 Tacit terms ... 12 4.3 Implied terms ... 13 4.4 Incorporated terms ... 14 4.5 Unlawful terms ... 14 4.6 Unfair terms ... 15

CHAPTER 5: TEMPORARY CONTRACTS ... 16

5.1 Fixed-term contracts ... 16

5.1.1 Date-specific fixed-term contracts ... 16

5.1.2 Fixed-term contracts terminating on the happening of an event ... 18

5.2 Maximum-duration contracts ... 21

CHAPTER 6: NON-RENEWAL OF FIXED-TERM CONTRACTS ... 22

6.1 Reasonable expectation ... 23

6.2 The expiry of fixed-term contracts ... 27

6.3 The nature of the termination ... 28

CHAPTER 7: THE CONVOLUTED PROGRESSION OF CASE LAW REGARDING “REASONABLE EXPECTATION”... 30

7.1 Dierks v University of South Africa (1999) 20 ILJ 1227 (LC) ... 30

7.2 McInnes v Technikon Natal (2000) 21 ILJ 1138 (LC) ... 31

7.3 University of Cape Town v Auf der Heyde (2001) 22 ILJ 2647 (LAC) ... 33

7.4 SA Rugby (Pty) Ltd v CCMA (2006) 27 ILJ 1041 (LC) ... 34

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CHAPTER 8: INTRODUCTION TO THE 2013 AMENDMENTS ... 39

CHAPTER 9: THE OBJECTIVES OF THE LABOUR RELATIONS AMENDMENT BILL ... 42

CHAPTER 10: DETERMINING WHO IS AN EMPLOYEE AND WHO AN INDEPENDENT CONTRACTOR ... 45

10.1 Who is an employee? ... 45

10.2 Who is an employer? ... 48

CHAPTER 11: THE MEANING OF DISMISSAL IN TERMS OF SECTION 186 ... 51

11.1 Fixed-term contract protections extended ... 51

11.2 Commentary ... 51

CHAPTER 12: FIXED-TERM CONTRACTS AND REASONABLE EXPECTATION ... 53

12.1 Section 198 as it currently stands ... 53

12.1.1 Commentary ... 54

12.2 Amendments to section 198 ... 56

12.2.1 Commentary ... 58

CHAPTER 13: ADDITIONAL PROTECTIONS PROVIDED TO ATYPICAL EMPLOYEES ... 60

13.1 Restrictions on temporary employment services in terms of section 198A ... 60

13.1.1 Commentary ... 61

13.1.2 A constitutional challenge ... 68

13.1.3 Alternatives ... 69

13.2 Additional protections offered to fixed-term employees in terms of section 198B ... 70

13.2.1 Commentary ... 72

13.3 Additional protections for part-time employees in terms of section 198C ... 75

13.3.1 Commentary ... 76

13.4 General provisions applicable to section 198A to 198C ... 76

CHAPTER 14: CONCLUSION ... 78

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SUMMARY

This paper is divided into two distinct sections. The first being an analysis of the legal protection of temporary employees as things currently stand. It deals with the various labour laws that currently regulate temporary employment as well as the temporary employment contract and the common-law. The second section summarises and analyses the provisions of the Labour Relations Amendment Bill and the Basic Conditions of Employment Bill as they apply to fixed-term employees.

Temporary employees are protected by the general protection extended to all employees in terms of section 23(1) of the Constitution of the Republic of South Africa, 1996, guaranteeing all employees the “right to fair labour practice”.

The Labour Relations Act has as one of its main objectives to give effect to and regulate the fundamental rights contained in the Constitution. Thus the Labour Relations Act must not only give effect to constitutional rights but it must also ensure that it in no way unreasonably or unjustly denies or limits constitutional rights.

Temporary employees have a number of labour laws protecting their interests. Where the provisions of the Basic Conditions of Employment Act, a Bargaining Council Agreement or a Sectoral Determination do not apply the employee will rely on the terms of the fixed-term employment contract and thereafter the common law for protection.

The only protection offered to temporary employees contained in the Labour Relations Act is in section 186(1)(b), where a dismissal is defined to include the non-renewal of temporary contracts of employment where there is a reasonable expectation of renewal on the same or similar terms. This provision has proved to be highly controversial in that it does not expressly cater for temporary employees who harbour reasonable expectations of indefinite employment. An analysis is made of the most important cases relating to section 186(1)(b).

The second section unpacks and critically analyses the Labour Relations Amendment Bill and the Basic Conditions of Employment Bill which have been long in the offing and when they are finally enacted, will bring with them sweeping changes for atypical employment . The amendments will drastically change the way employers make use of fixed-term

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employees as well as the way in which Temporary Employment Services may conduct business if they are in fact able to keep working at all.

There is very little literature of substance written about the Labour Relations Amendment Bill as it applies to atypical employment. The fact that the proposed amendments have changed so many times over such a long period of time might have deterred many writers from investing time and effort in attempts to analyse and summarise the amendments. Articles posted on the internet are in the main short and have very little content. No books were found with any discussion that pertains to the amendments.

The amendments divide employees involved in atypical employment into two different categories. These categories consist of employees earning above the threshold in terms of section 6(3) of the Basic Conditions of Employment Act and those earning below this threshold. All fixed-term employees may rely on the provisions of section 186 of the Labour Relations Act. Employees earning below the threshold are considered to be the most vulnerable and have been afforded additional protections in terms of sections 198(A), (B) and (C).

Issues surrounding Temporary Employment Services and fixed-term employees have been very divisive and have been the topics of heated debate at all levels of Industrial Relations for a long time. Discussions regarding the use of the services of Temporary Employment Services can be highly emotive, with Temporary Employment Services being accused of committing widespread abuses of employees. At the highest level, the Congress of South African Trade Unions has for some time called for a ban on Temporary Employment Services. Government has heeded the call made by the Congress of South African Trade Unions and it seems has gone as far as possible to shut down the Temporary Employment Service industry without contravening section 22 of the Constitution of South Africa.

In conclusion, the amendments will add to the protections offered to all temporary employees but there will be fundamental changes for employees earning below the threshold in terms of section 6(3) of the Basic Conditions of Employment Act. It is debatable as to whether or not all the amendments will withstand scrutiny in the Constitutional Court.

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CHAPTER 1

INTRODUCTION

For a considerable length of time the relationship between an employee and an employer was considered as one of an individual nature. The regulation of the employment relationship was left to the contract entered into between the employer and the employee. Where the contract did not address certain issues, either expressly or implicitly, the common law would prevail. The “freedom to contract” and other residual provisions of the common law are inadequate in their provision of protections for employees in the modern employment relationship. One of the fundamental problems with the “freedom to contract” is the inherent unequal nature of the relationship which places the employee at a severe disadvantage form the outset. Whereas “freedom to contract” translates into ease of termination for the employer it conversely means that the employee will lack job security.1

The introduction of overriding legislation is the most efficient method of addressing the inadequacies of the common law. Legislation can be tailor-made in order to address specific issues while at the same time allowing for some flexibility.2 The Labour Relations Act3 (LRA) and the Basic Conditions of Employment Act4 (BCEA), the Employment Equity Act5 (EEA) were enacted in order to regulate the labour market and ensure fairness for employees. This paper will give an overview of the laws that impact on temporary employees as well as relevant legal principles.

Employers appreciated the difference between the terminating of a contract on the effluxion of time or the happening of an event and one having to be terminated as a result of misconduct, incapacity or operational requirements. The latter requires a difficult process where procedures need to be followed and substantive reason shown, whereas the former was a clean, neat parting of ways with no real risk attached. Employers simply issued endless fixed-term contracts and finally the contract was terminated on the effluxion of time when the real underlying reason was of a disciplinary nature.6

1 Basson, Christianson, Dekker, Garbers, Le Roux, Mischke and Strydom Essential Labour Law (2009) 8. 2 Ibid.

3 Act 66 of 1995. 4 Act 75 of 1997. 5 Act 55 of 1998.

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Where there was a reasonable expectation of renewal of the fixed-term contract the Industrial Court had little difficulty finding that an unfair dismissal had taken place after the contract was allowed to lapse after the effluxion of time.7

The LRA has specifically provided some protections for temporary employees who have an expectation of the renewal of a fixed-term contract on the same or similar terms at section 186(1)(b) of the LRA. The interpretation and application of this section has been very controversial and has led to a convoluted progression of case law over the recent past. Essentially the controversy has centered around whether or not this section can be read to include a fixed-term employee who has a reasonable expectation of indefinite employment, and not only the fixed-term employee who has a reasonable expectation of a renewal of the fixed-term contract. This paper will review some of the most important cases that have given rise to case law governing temporary employment.

The introduction of the amendments contained in the Labour Relations Amendment Bill8 (Labour Relations Amendment Bill) will bring sweeping changes to the legal protection of temporary employees. This paper will unpack the relevant amendments contained in the Labour Relations Amendment Bill as well as provide a critical analysis thereof.

The amendments have put an end to the controversy that has dogged section 186(1)(b) of the LRA for so long by introducing a generally applicable provision that caters for the protection of a fixed-term employee who has gained a reasonable expectation of being offered an indefinite contract on the same or similar terms.

Section 200A of the LRA provides a rebuttable legislative presumption of who an employee is, which has been largely left untouched.9 The introduction of section 200B of the LRA that broadly defines who may be cited as an employer and assumes a number of obligations on the part of the employer. This provision will prove to be highly controversial.

The amendments introduce a raft of changes for the more vulnerable employees in atypical employment at sections 198A, B and C.

7 See Olivier “Legal Constraints on the Termination of Fixed Term Contracts of Employment: An Enquiry into Recent Developments” (1996) 17 ILJ at 1001.

8 [B 16B-2012].

9

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Section 198A regulates employment by a Temporary Employment Service (TES) in such a way that it is doubtful that the industry will survive. The introduction of this provision is likely to lead to a constitutional challenge.

Sections 198B and C highly regulate fixed-term employees and part-time employees, however, the provisions exclude employees working for small employers with fewer than ten employees and new employers with fewer than fifty employees. Controversially these provisions also exclude employees earning in excess of the threshold contained in section 6(3) of the BCEA, and it is possible that this may also lead to a constitutional challenge.

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CHAPTER 2

THE CONSTITUTION AND THE COMMON LAW

2.1

THE CONSTITUTIONAL IMPERATIVE

The Constitution10 is the supreme law of the Republic of South Africa11 with all other laws being subordinate, effectively constraining legislation from inhibiting the rights of individuals. Chapter 2 of the Constitution contains the Bill of Rights, the main purpose of which is to ensure equality before the law and between individuals, as well as the prohibition of all forms of discrimination. Flowing therefrom are numerous more specific rights, some of which are specific to the employment relationship with others being more general, but impacting strongly on employment rights and consequently employment law.12

The Constitution ensures at section 23 that “everyone has the right to fair labour practices”13 which the courts have held affords the right to fair labour practices to both the employee and the employer.14 The Constitution further provides at section 33 that “everyone has the right to administrative action that is lawful, reasonable and procedurally fair”.15 Despite these rights being specific and enforceable,16 the BCEA, EEA and the LRA have been enacted in order to regulate the aforementioned as well as other constitutional rights.

The Constitutional Court has found that where legislation has been enacted in order to regulate more specifically any constitutional right, any aggrieved party must seek relief in terms of the statute. The grievant may, however, simultaneously assail the legislation that fails to adequately protect a constitutional right.17 Employees who are protected by the Labour Relations Act must approach the Commission for Conciliation, Mediation and Arbitration (CCMA) or the Labour Courts for relief. Those falling outside the protection of relevant labour legislation are required to seek relief in the High Court with a common-law or constitutional action.18 Employees who fall outside the scope of application of the Labour

10 Constitution of the Republic of South Africa, 1996. 11 See s 2 of the Constitution.

12 Grogan Employment Rights (2010) 3. 13 See s 23 of the Constitution.

14 Grogan Employment Rights 4. 15 See s 33 of the Constitution. 16 Grogan Employment Rights 4.

17 See SA National Defence Union v Minister of Defence & Another (2007) 28 ILJ 1909 (CC) at 51. 18 See Gcaba v Minister of Safety and Security & Others (2009) 30 ILJ 2623 (CC).

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Relations Act and other labour legislation therefore rely entirely on their constitutional rights for protection from unfair labour practices.19

The Constitution fails to become extraneous to employment law despite the fact that an employee may not rely on a constitutional provision directly. This is as a consequence of the requirement by the Bill of Rights that “[w]hen interpreting any legislation, and when developing the common law or customary law, every court, tribunal or forum must promote the spirit, purport and objectives of the Bill of Rights”.20 This means that when interpreting legislation where the legislation is unclear or ambiguous, a determination must be made that supports or promotes the Bill of Rights as opposed to undermining it. Judgments handed down by the Constitutional Court that clarify the meaning and determine how constitutional provisions are to be applied impact directly on decisions made by the lower courts in making determinations on how similar legislative provisions are to be interpreted and applied.21

2.2

THE COMMON LAW

The employment relationship has historically been based on a contract of employment concluded in terms of a well-established common-law tradition of freedom to contract. The principle of “freedom to contract” states that the terms of a contract are freely concluded by the contracting parties and reflect their mutual intentions.22 Concluding of the contract was left to the parties concerned and the employment relationship was regulated by the provisions of the employment contract. The principle of “sanctity of contract” would apply which states that the parties are bound by their undertaking in terms of the contract, the terms of which should be applied without outside interference.23 In the event that the parties failed to address issues expressly or by implication, the common law would be relied on to make a determination.24 This system had inherent weaknesses though that needed addressing.

Two of the main concerns relating to the use of the established common-law system of “freedom to contract” are particularly pertinent in the concluding of employment contracts. The primary concern is the inherently unequal relationship between the employer and the employee, not only at the time of the conclusion of the agreement, but there is a risk of

19 Grogan Employment Rights 4. 20 See s 39.

21 Grogan, Employment Rights 5.

22 Van der Walt, Le Roux and Govindjee Labour Law in Context (2012) 17. 23 Ibid 17.

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exploitation during the currency of the agreement. Then, bearing in mind the employee’s concern for stability and security of employment, there are serious concerns relating to the ease with which an employer can terminate a contract of employment on notice given in terms of the principle of “freedom to contract”.25 One must bear in mind that the common law did not recognise fairness as an element of the contract of employment save for a requirement that the parties act in good faith. The parties were bound by the terms of the employment contract no matter how one sided it may have been.26

In order to address the inadequacies of the common law pertaining to the employment contract and the resultant employment relationship, the legislature has enacted a number of acts that were designed specifically to address employment-related concerns. The Acts include the LRA, the BCEA and the EEA. The LRA deals primarily with fairness in the workplace, the most important of which is the prohibition of unfair dismissals, which in itself goes a long way in addressing concerns relating to job security. The BCEA sets certain minimum and maximum terms and conditions under which someone may be employed such as the minimum annual leave that an employee may receive and the maximum number of working hours that may be required of an employee. Finally the EEA deals primarily with the prohibition of unfair discrimination of any kind in the workplace as well as promoting and facilitating affirmative action.27

Notwithstanding the labour legislation that now regulates the employment relationship, where the labour legislation does not singularly provide an answer to a legal question, the common-law contract of employment must be consulted and the agreed terms thereof enforced. Where the contract of employment in turn fails to provide the answer the common law will prevail.28

It was decided that since the common law was insufficient and ineffective in the regulation of the modern employment relationship, the ordinary courts, which were steeped in the common law tradition that might adversely affect the level of its dealings in labour matters were also inadequate. There were also serious concerns over the length of time that matters take to be decided in the ordinary courts and the damage that this might cause to the ongoing employment relationship. For these reasons, specialist tribunals with tailor-made procedures have been established to oversee the enforcement of the labour legislation. To

25 Basson, Christianson, Dekker, Garbers, Le Roux, Mischke and Strydom Essential Labour Law 8. 26 Grogan Employment Rights 5.

27 Basson, Christianson, Dekker, Garbers, Le Roux. Mischke and Strydom Essential Labour Law 9. 28 Van der Walt, Le Roux and Govindjee Labour Law in Context 18.

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this end the CCMA and the Labour Courts were established in order to ensure the swift and effective enforcement as was intended by the legislation.29

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CHAPTER 3

LABOUR LAWS IMPACTING ON TEMPORARY CONTRACTS

3.1

THE BASIC CONDITIONS OF EMPLOYMENT ACT

The BCEA sets out the minimum and maximum terms and conditions under which an employee falling within its scope of application can work. The BCEA does not go so far as to set wage levels but it does regulate most of the terms and conditions of employment without which an employee may be exploited. It prescribes the minimums for the amounts paid for overtime and Sunday work as well as length of tea breaks, meal intervals, annual leave, paid sick leave, severance pay and so on. At the same time maximums are set for hours of work, overtime and the like. Essentially the BCEA sets parameters within which the parties wishing to conclude an employment contract must agree.30

The BCEA further allows for the Minister of Labour to make sectoral determinations in terms of which minimum wages may be prescribed.31 The BCEA expressly provides in section 4 that the provisions of the act are to be implied into all employment contracts unless a clause that is more favourable is contained in the employment agreement.

3.2

LABOUR RELATIONS ACT

The LRA performs a number of vital functions in order to give effect to the constitutional imperative to ensure the protection of a number of rights including everyone’s right to fair labour practice. The LRA very importantly prohibits unfair dismissals, requiring the employer to follow a fair procedure and have substantive reason for any dismissal. With respect to fixed-term contracts the LRA at section 186(1)(b) specifically includes in the unfair dismissal definition situations in which there was a “reasonable expectation of renewal of a fixed-term contract on the same or similar terms, however, the employer failed to renew the contract”. This provision has its origins in the equity jurisprudence of the Industrial Court based on the concept of “legitimate expectation”.32

30 Grogan Employment Rights 6. 31 Ibid.

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Employers were quick to note the differences between a contract that terminates on a given date or on the completion of a specific task and contracts that terminate as a result of misconduct, incapacity or operational requirements. The latter required a difficult process dictating some expertise and involving the use of a fair procedure and the substance in order to effect the termination, while the former was clinical and fairly painless. The net result was that employers simply continued issuing fixed-term contracts which at some point the employer would be able to fail to renew on the expiry of one of the contracts. However, one of the underlying reasons would often relate to misconduct, poor performance, slackness of trade or the like. This was seen as a method of creating labour flexibility, cutting costs and reducing the risk of having to defend an allegation of an “unfair labour practice”.33 These methods were clearly employed by employers as procedure of circumventing the unfair labour-practice provisions contained in the labour legislation. It is against this background that the Industrial Court established jurisprudence whereby an employer who was found to have unfairly dismissed if the employer failed to renew a fixed-term contract that an employee reasonably expected would be renewed.34

The legislature sought to address this mischief in the LRA by ensuring fairness for employees.35 The LRA formalised to some extent jurisprudence established by the Industrial Court by regarding omissions or specific acts committed by the employer in regard to renewal of temporary contracts of employment as a category of “statutory dismissal” as contained in section 186 of the LRA.36

3.3

EMPLOYMENT EQUITY ACT

The EEA has two primary but seemingly contradictory functions, those being the elimination of unfair discrimination in the workplace and the promotion of affirmative action. The EEA strictly prohibits any form of unfair discrimination in the workplace on any basis, including sex, race, gender, marital status, disability, religion, age, family responsibility and pregnancy. Medical testing as well as psychological testing is also prohibited by the EEA. Chapter 3 of the EEA provides legislation that promotes affirmative action in an attempt to redress the both racially and gender skewed workforce with a disproportionately high number of white males employed in senior positions.37

33 Dierks v University of South Africa supra 1245 par 120. 34 Dierks v University of South Africa supra 1245 par 121. 35 Dierks v University of South Africa supra 1245 par 123. 36 Dierks v University of South Africa supra 1245 par 122. 37 Employment Equity Act Act 55 of 1998.

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3.4

BARGAINING COUNCIL-AGREEMENTS

Bargaining councils are made up of organised labour and employers who negotiate the terms of collective agreements that are binding on all employers falling within their jurisdiction. These agreements typically include similar provisions to those contained in the BCEA, but significantly will include grading systems and minimum wages.38 The LRA at section 23(3) guarantees that the provisions of collective agreements are read into all employment contracts of all employers who fall within its scope of application. It is important to note that employers do not have to belong to an employer’s organisation that is party to a bargaining council to be bound by a bargaining-council agreement. Bargaining-council agreements are often extended to include all employers in a certain industry. Similarly to the BCEA the provisions will take precedence where the terms of the employment agreement are less favourable than those contained in the collective agreement. To the extent that the collective agreement has provisions that duplicate those contained in the BCEA, the provisions of the collective agreement will prevail.

38 Grogan Employment Rights 8.

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CHAPTER 4

THE CONTRACT OF EMPLOYMENT

The contract of employment forms the basis for the employment relationship, despite the limitations imposed on it by labour legislation and the various forums subjecting the relationship to scrutiny on the basis of equity. In order for an employment relationship to exist however the parties need to have freely and voluntarily entered into an agreement that satisfies the requirements for a contract of employment. In terms of the contract the employee agrees to perform certain specified and implied duties for an indefinite or agreed period of time and in return the employer agrees to remunerate the employee in an amount that is fixed or ascertainable. An essential part of the agreement is that the employee agrees to be subordinate to the employer and in so doing be subject to instruction and discipline issued by the employer.39

4.1

EXPRESS TERMS

The express terms in a contract are the stated terms, and the parties are free to include in the contract any provisions that they wish, provided they do not do so in conflict with current legislation or public policy.40 The contracts may be as complicated or as simple as the parties wish them to be and may incorporate documents such as grievance and disciplinary procedures by reference thereto. Certain contracts may include statutory provisions and collective agreements by reference or by restating certain of the provisions they contain. Where these provisions are incorporated, the provisions will be fully enforceable by the courts in terms of the contract itself. The Basic Conditions of Employment Act sets out certain particulars of employment that the employer is required to provide in writing to the employee on commencement of work,41 which includes:

 the full name and address of the employer;

 the name and occupation of the employee accompanied by a job description;

 the date the contract commenced;

39 Grogan, Employment Rights 49.

40 Van der Walt, Le Roux and Govindjee Labour Law in Context 24. 41 Grogan Employment Rights 49.

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 the ordinary hours of work;

 the employees’ remuneration (including cash and payment in kind), the method of calculation thereof as well as the frequency with which the employee will be paid;

 the rate at which overtime will be remunerated;

 any deductions to be made;

 the leave to which the employee is entitled;

 the length of the contract and the notice period;

 a brief description of the bargaining-council agreement or sectoral determination with jurisdiction.

The employer is required to ensure that the particulars of employment are explained to and understood by the employee.

4.2

TACIT TERMS

A term that is tacit in a contract is an “unexpressed provision of the contract which derives from the common intention of the parties, as inferred by the court from the express terms of the contract and the surrounding circumstances”.42 Tacit terms, despite not having been expressly incorporated into the agreement at the outset are read into the contract as the parties would have included the terms in the initial contract, had they thought about it at the time. The test employed in order to establish the existence of a tacit term is “whether it can confidently be said that if at the time the contract was being negotiated someone had said to both parties, ‘what will happen in such a case?’, they would both have replied, ‘Of course so and so will happen; we did not trouble to say that; it is far too clear’”.43 In practice these terms will be read into a contract in order to give efficacy to the contract and make it workable. A long-standing practice within the employer may render the practice tacit, however, this will not always be the case.44

42 Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) 531. 43 Reigate v Union Manufacturing Co (Ramsbottom) 1918 1 KB 592 609.

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4.3

IMPLIED TERMS

Implied terms are deemed by law to form part of the terms of a contract, even if the parties to the contract are unaware of them. These terms are read into the contract regardless of the intentions of the contracting parties.45 Implied terms are significant when examining or establishing the true extent of the rights and obligations of the parties.46 Most implied terms that are deemed to form part of the employment contract flow from the widely held assumption that every employee on entering into the employment undertakes to serve the employer in good faith and as such, honestly and faithfully. Within limits the parties may exclude certain implied rights by agreement; however, this is not possible where the result would be contra bonos mores. Exclusion is further prohibited where it excludes a term vital to the contract is excluded as well as in respect of core rights in terms of the BCEA or where fundamental Constitution rights may be infringed upon.47

The Constitution requires the common law to be developed so that it is brought into line with the Bill of Rights. In line with this requirement, there were three important judgments made by the Supreme Court of Appeal, namely Boxer Superstores Mthatha v Mbenya,48Old Mutual

Life Assurance Co SA Ltd v Gumbi49 and Murray v Minister of Defence50 (Murray), that implied right should not to be unfairly dismissed in contracts of employment. The court in fact extended this implied right in Murray to a general duty to treat employees fairly. The development of the common law to include the right to include general right to fair dealings had significant jurisdictional implications for both the High Courts and the Labour Courts in that it allowed for redress to be sought in either or both.51

The Supreme Court of Appeal severely limited the developments made in common law with reference to the general duty to treat employees fairly in Maritime Safety Authority v McKenzie,52 where the court ruled that without express reference to the LRA, the provisions of that act could not be implied into employment contracts. The judgment held that the judgments in which it appeared that common law had been developed to imply fair labour practices into common law either had not in fact done so or they were in that respect

45 Grogan Employment Rights 51. 46 Grogan Workplace Law 34. 47 Grogan Employment Rights 52. 48 (2007) 28 ILJ 2209 (SCA). 49 (2007) 28 ILJ 1499 (SCA). 50 (2008) 29 ILJ 1369 (SCA). 51 Grogan Employment Rights 53. 52 (2010) 31 ILJ 529 (SCA).

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orbiter.53 Individuals who feel that their constitutional rights have been infringed upon may approach a competent court in order to have their rights enforced. However, the courts have found that where legislation exists that is designed to comprehensively regulate a constitutional right that the complaining party had to first seek relief under the statute. Should it be felt, however, by the complaining party that the statute fails to protect adequately the constitutional right that is being invoked, a simultaneous attack can be made on the statute.54

4.4

INCORPORATED TERMS

Terms and conditions that are read into contracts of employment by law are said to be incorporated into the contracts. Where contracts of employment are silent with regard to terms and conditions that are provided for in applicable legislation such as the BCEA or a collective agreement, the provisions of the BCEA or the collective agreement will be read into the contract as if they had been agreed to between the parties. An example of this may be that if an employment contract is silent on the matter of annual leave where the employer falls within the jurisdiction of a bargaining-council agreement by which the employee will be entitled to annual leave as provided for in terms of the applicable bargaining council agreement.55

4.5

UNLAWFUL TERMS

Employment contracts are prohibited from containing any provision that is contrary to any law or is contrary to public policy. Employers may not contract out of any legislative provisions designed to protect the employee nor can an employee agree to waive or give up any protections conferred by law.56

Employment contracts cannot contain clauses requiring an employee to forgo annual leave or requiring an employee to work more normal hours than are prescribed in the BCEA, an arbitration award, a bargaining council agreement or a sectoral determination. Terms and conditions more favourable that those prescribed are of course permitted. As such, an employer may agree to an employee getting twenty days’ annual leave per annum when a

53 Grogan Employment Rights 53.

54 See SA National Defence Union v Minister of Defence and Others supra par 51. 55 Grogan Workplace Law 35.

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bargaining-council agreement with jurisdiction provides for a minimum of fifteen days’ annual leave.57

4.6

UNFAIR TERMS

Employment contracts will at times include provisions that are unfair and as such in conflict with the common law or the LRA. Only express terms that are fair and reasonable will be enforceable. Terms that fall short of this will be subject to replacement by considerations that are fair and reasonable implied into the contract.58

57 Ibid.

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CHAPTER 5

TEMPORARY CONTRACTS

There are essentially two types of temporary contracts, those being fixed-term contracts and maximum duration contracts.59 Current legislation allows for both though it also provides protections for employees on the expiry of these types of contracts.

The LRA provides protection at section 186(1)(b) against the termination of an employee’s services on the expiry of a fixed-term contact. Essentially disputes regarding the termination of a fixed-term contract entail an argument on the part of the employee that the termination constituted a dismissal as defined in section 186(1)(b) of the LRA, and the employer arguing that the termination took place as a result of the contract not constituting a dismissal. The reason this is important is that, if the employee is able to show that a dismissal took place, the employee would be entitled to claim an unfair dismissal and the employer would have to show that the dismissal was fair in terms of section 192(2) of the LRA. Conversely, if it is found that no dismissal took place, the employee would be unable to satisfy the requirements of the provisions of section 192(1) of the LRA and as such an unfair-dismissal application would be fatally defective leaving the employer with no case to answer.

5.1

FIXED-TERM CONTRACTS

Fixed-term contracts can be divided into those that are date specific, which will terminate on a pre-determined date stipulated in the contract of employment and those that will terminate on the completion of a project or on the happening of a particular event.60

5.1.1 DATE-SPECIFIC FIXED-TERM CONTRACTS

A fixed-term contract exists where the parties clearly specify the duration of employment in the employment contract. The contract will endure for the time specified in the agreement, unless or until the contract reaches its natural expiry date, the parties mutually agreed to terminate the agreement prematurely or the agreement is terminated as a result of fundamental breach.61

59 Grogan Employment Rights 61. 60 Grogan Employment Rights 62. 61 Grogan Workplace Law 41.

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Should an employer allege that an employee is in breach of a contract, the employer will be required to follow a fair procedure prior to terminating a contract prematurely. A fixed-term contract cannot be unilaterally terminated during its currency without good cause shown.62 This was demonstrated in Fedlife Assurance Ltd v Wolfhaardt63 in which the employer repudiated the fixed-term contract prematurely claiming that the employee’s position had become redundant. Nugent, AJA held that “[a] contract of employment for a fixed-term is enforceable in accordance with its terms and an employer is liable for damages if it is breached on ordinary principles of the common law”.64 Nugent expounded on the absence of reference to the unilateral premature termination of a fixed-term contract in the LRA by concluding that:

“It is significant that although the legislature dealt specifically with fixed-term contracts in this definition it did not include the premature termination of such a contract notwithstanding that such a termination would be manifestly unfair. The reason for that is plain: The common law right to enforce such a term remained intact and it was thus not necessary to declare a premature termination to be an unfair dismissal. The very reference to fixed-term contracts makes it clear that the legislature recognized their continued enforceability and any other construction

would render the definition absurd.”65

This decision was upheld by the Labour Appeal Court in the matter between Buthelezi v Municipal Demarcation Board66 in which Jafta AJA ruled that, despite the fact that the employer might have had substantive operational reason for the termination of the employee’s services, this did not justify the termination of the fixed-term contract before its natural expiry date. The termination was accordingly found to be unlawful and unfair. Essentially the ruling held that, notwithstanding the provisions of the LRA relating to the termination of contracts of employment due to operational requirements, the common-law principle that an employer had to comply with the terms of a contract of employment had to be upheld. The employer may not terminate the fixed-term contract prematurely without good cause unless provision is made therefor in the terms of the contract.67

62 Grogan Employment Rights 62. 63 (2001) 22 ILJ 2407 (SCA). 64 Par 22.

65 Par 18.

66 (2004) 25 ILJ 2317 (LAC).

67 http://www.deloitte.com/assets/Dcom-SouthAfrica/Local%20Assets/Documents/Terminating% 20Fixed%20Term%20Employment%20Contracts.doc.pdf (accessed on 20 October 2013).

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5.1.2 FIXED-TERM CONTRACTS TERMINATING ON THE HAPPENING OF AN

EVENT

Fixed-term contracts may be terminated by the inclusion of a fixed-term eventuality clause, which allows for the termination of the contract to be triggered by the happening of a particular event.68 Where the contract is terminated on the happening of an event or the completion of a project, the onus of proving that the event has occurred rests with the employer. Fixed-term contracts whereby the contract terminates on the conclusion of a particular project such as the completion of the building of a bridge, a power plant or the like are permissible.

Contracts terminating automatically on the happening of an event are however controversial.69 This is demonstrated in the matter between South African Post Office Ltd v

Mampuele,70 where there was an automatic-termination clause in Mampuele’s employment contract which was triggered by his removal as a director of the company.71 Delivering judgment in the Labour Court Ngalwana AJ held that the automatic termination clause amounted to contracting out of the provisions of the LRA and as such is impermissible and contrary to public policy.72 In this regard, Ngalwana AJ found that “statutory rights conferred on employees are for the benefit of all employees and not just an individual, [and as such] are incapable of consensual validation between parties to a contract by way of waiver of the rights so conferred”.73

The Labour Appeal Court in South African Post Office Ltd v Mampuele74 (SAPO) upheld the decision of the Labour Court. The Labour Appeal Court’s judgment went further though, establishing that any party wishing to contract out of the LRA would have a heavy onus to contend with in terms to section 5 of the LRA.75 The judgment further confirmed that the employee

“enjoyed the right not to be unfairly dismissed or more appropriately unfairly removed. This is more since the Act was enacted to give effect to the right to fair labour practices guaranteed in s 23(1) of the Constitution of the Republic of South Africa Act 108 of 1996. The right not to be unfairly dismissed is not only essential to the enjoyment of this constitutional imperative but is one of the most important

68 Van der Walt, Le Roux and Govindjee Labour Law in Context 28. 69 Grogan Employment Rights 62.

70 (2009) 30 ILJ 664 (LC). 71 Par 3.

72 South African Post Office Ltd v Mampuele (2009) 30 ILJ 664 (LC) par 46. 73 Par 46.

74 (2010) 31 ILJ 2051 (LAC). 75 Par 23.

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manifestations thereof and further forms the foundation upon which the relevant

sections of the Act are erected and is constant with the letter of the Act”.76

However, in Sindane v Prestige Cleaning Services77 (Sindane), a judgment rendered soon after SAPO, the court was satisfied with the notion that “there was no ‘dismissal’ when an

employee was engaged in terms of a contract that provided for its termination on the happening of a future specific event”.78 Contracts terminating on the completion of a project for example in situations where at the time of signing the employment contract the exact timing pertaining to the completion thereof was unknown have been referred to as fixed-term contracts.79

The court reasoned that due to the provisions of section 186(1)(a) of the LRA defining a dismissal requires that “an employer has terminated a contract of employment …”80 and accordingly that there is no dismissal where a contract is terminated by a specific event rather than an act by the employer.81 The court found the SAPO matter distinguishable due to the fact that the termination in that matter was linked to the employee’s misconduct and not to the occurrence of a specific event.82

The fact that the Sindane termination was triggered by the act of a client and not by the actions of the employer the court found determinative. Since the employer was not the cause of the termination the court found that there was no dismissal for the purposes of the LRA.83

Mahlamu v the Commission for Conciliation Mediation and Arbitration and Others84 (Mahlamu) is an authoritative, detailed judgment that was decided based on very similar facts to those contained in SAPO with both courts being asked to adjudicate matters pertaining to automatic-termination clauses being triggered at the insistence of a third party. Van Niekerk AJ’s point of departure for his analysis were the provisions of section 185 of the LRA affording “every employee the right not to be unfairly dismissed”85 and in doing so giving effect to section 23(1) of the Constitution guaranteeing the right to fair labour practice to

76 Par 23.

77 (2009) 12 BLLR 1249 (LC).

78 Mahlamu v the Commission for Conciliation, Mediation and Arbitration and Others 30-11-2010 Case No JR 1702/09 par 7.

79 Par 7.

80 Labour Relations Act 66 of 1995 s 196(a).

81 Mahlamu v the Commission for Conciliation, Mediation and Arbitration and Others supra par 7. 82 Grogan Employment Rights 62.

83 Van der Walt, Le Roux and Govindjee Labour Law in Context 29. 84 30-11-2010 Case no. JR 1702/09.

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everyone.86 The Mahlamu judgment focuses largely on the provisions of sections 5(2)(b) and 5(4) of the LRA and the protections afforded by the LRA to employees and asks whether or not the “automatic termination” clauses are invalidated thereby.87 Section 5(2)b provides that “no person may do, or threaten to do any of the following … prevent an employee … from exercising any right conferred by this Act or from participating in any proceedings in terms of this Act”. Van Niekerk AJ held that the automatic termination provisions contained in employment contracts fell within the scope of section 5(2)(b) of the LRA.88

Van Niekerk then turns his attention to whether or not the employer can escape the injunction by virtue of the provisions of section 5(4) of the LRA by showing that the limiting contractual provisions are permitted by the LRA.89 Section 5(4) provides in turn that “[a] provision in any contract … that directly or indirectly contradicts or limits any provisions of … this section is invalid, unless the contractual provision is permitted in this Act”. One of the primary objectives of the constitutional right to fair labour practice is the protection of employees against unfair dismissal and as such Van Niekerk AJ contended that employees had to enjoy the benefit of any doubt when properly interpreting the provisions of section 5 of the LRA.90

In essence in order to show that automatic terminations are permitted, an employer must show that the LRA allows parties to a contract to contract out of the provisions of the LRA.91 Issues concerning automatic terminations as in this Mahlamu do not simply affect the parties concerned but are in fact significant for a large number of people; therefore impacting on public policy92 and as such the courts will not allow the parties to an employment contract to waive statutory rights.93

Van Niekerk accordingly found that it was not permissible to contract out of the provisions of the LRA by way of an automatic-termination provision in an employment contract, as this is not permitted by the LRA94 and accordingly found that a dismissal had taken place.95 In short the ruling renders impermissible the denial of any rights conferred on an employee in terms

86 Mahlamu v the Commission for Conciliation, Mediation and Arbitration and Others supra par 11. 87 Mahlamu v the Commission for Conciliation, Mediation and Arbitration and Others supra par 14. 88 Par 19. 89 Ibid. 90 Par 12. 91 Par 19. 92 Par 14. 93 Par 19. 94 Par 22. 95 Par 25.

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of section 188 of the LRA by a contractual term that renders the termination of a contract as something other than a dismissal.96

5.2

MAXIMUM-DURATION CONTRACTS

A maximum duration contract is simply a fixed term contract with the option to terminate before its natural expiry date. This is done by carefully drafting the contract to make provision for the early termination under clearly specified circumstances. Typically the limited duration contracts include clauses that enable early termination due to operational requirements, but these contracts may also include similar clauses for incapacity, incompatibility or the like. As the possibility of early termination formed part of the initial agreement, termination in terms thereof will accordingly not be unlawful.97

The fact that the termination may be lawful does not give the employer an unfettered right to terminate the contract mid-term without the use of a fair procedure and substantive reason for the termination as the employee can still claim unfair dismissal. In addition, should it be found that the employer has breached the employee’s implied common-law right to “fair dealing”, the employee may be compensated in the amount that he would have earned had the contract run its course.98

Employers who wish to enter into a fixed-term contract but at the same time require the flexibility in order to be able to terminate the contract prematurely should make use of the maximum-duration contract.

96 Van der Walt, Le Roux and Govindjee Labour Law in Context 29.

97 http://www.deloitte.com/assets/Dcom-SouthAfrica/Local%20Assets/Documents/Terminating% 20Fixed%20Term%20Employment%20Contracts.doc.pdf (accessed on 20 October 2013). 98 Grogan Employment Rights 64.

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CHAPTER 6

NON-RENEWAL OF FIXED-TERM CONTRACTS

Fixed-term contracts are used as a legal instruments by parties that wish to engage in an employment contract within a framework of predictability and freedom to control the duration of their contractual relationship. Consensus and a mutual understanding of the limitations of the contract between the parties are vital to avoid misunderstandings and unreasonable expectations on the part of the employee as regards the termination and possible renewal of the contract. On the commencement of a fixed-term contract the parties need to be ad idem

that the employment relationship will terminate on a specific date or on the completion of a specific project. It must be the mutual intention of the parties that the contract be of finite duration unlike employment contracts of indefinite periods.99

When a fixed-term contract reaches its natural end, either determined by reference to a specific date or the completion of a specific task, the contract will expire in accordance with the contract of employment entered into at the outset. The contract of employment would have reached its natural end and in accordance with the parties’ initial intentions terminated, meaning that no dismissal has taken place.100 The consequence of situations where there is no dismissal is that the employee would not be able to enjoy any of the protections provided for in the LRA as the employee would not be able to fulfill the requirements of section 192(1) of the LRA in that the employee would be unable to “establish the existence of a dismissal”.101

However where the employee is able to show that the employer’s conduct could reasonably have given rise to an expectation on the part of the employee that the contract would be renewed on the same or similar terms, the termination would constitute a dismissal.102 In situations where an employee is able to show reasonable expectation of renewal of a contract on the same or similar terms and the contract was not renewed on those terms, the employee can seek the redress at section 186(1)(b) of the LRA which reads:

99 http://www.saflii.org/za/journals/PER/2011/4.pdf pg 1 (accessed on 27 October 2013). 100 Grogan Dismissal 39.

101 Labour Relations Act 66 of 1995 s 192(1).

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“186 Meaning of dismissal and unfair labour practice

(1) ‘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.”103

Whether or not a dismissal has occurred on the termination of a contract depends on the circumstances surrounding it. The requirement that the termination of a fixed-term contract will be deemed a dismissal only if the employee can show an objectively reasonable expectation that the contract would be renewed on the same or similar terms permits a court or arbitrator to examine the circumstances under which the termination took place.

The primary objective of the examination will be to find out whether or not the termination was a disguise for a dismissal. The examination goes beyond the normal principles of contract law in that it is consistent with the idea that a dismissal is not merely predicated by the termination of the employment contract but also regards the termination of the employment relationship.

Essentially what a court finds when a ruling is made that the termination of a fixed-term contract is a dismissal, is that the employment relationship would have been sustained were it not for the employer’s failure to renew the contract. The implication is that the decision not to renew the contract was a pretext for the termination of the employment contract.104

6.1

REASONABLE EXPECTATION

In the past the old Industrial Courts, the CCMA and Labour Courts applied the principles of fairness and reasonableness when determining as to whether such a reasonable expectation in fact exists. In King Sabata Dalinyebo Municipality v Commission for Conciliation, Mediation & Arbitration105 the court ruled that certain of the factors that should have been considered in determining whether or not a legitimate expectation existed or not, included:

 the fact that work that was being done was necessary;

 money was available to pay for the renewal of the fixed-term contract;

103 Labour Relations Act 66 of 1995 s 186. 104 Grogan Dismissal 43.

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 the fact that the fixed-term employees had performed their jobs well and in terms of their fixed-term contracts;

 the renewal of fixed-term contracts in the past; and

 the representations made by the employer. 106

In Dierks v University of South Africa,107 it was held that as there was no definition in the act for “reasonable expectation” and that the concept “… essentially is 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 court further held that an evaluation of all the surrounding circumstances had to be considered when establishing objectively whether there was a reasonable expectation of renewal on “the same or similar terms” which included:

 the significance or otherwise of the contractual stipulation;  agreements reached with the employer;

 undertakings made by the employer;

 practice or custom in regard to renewal of the employment;  the availability of the post;

 the purpose of or the reason for concluding the fixed-term contract;  conduct inconsistent with the intention not to renew the contract ;  failure to give reasonable notice of non-renewal; and

 the nature of the employer's business.108

This list is not exhaustive and any other factors that may be deemed to be relevant may be taken into account. In essence what is required in the establishment of a reasonable expectation requires a value judgment in the light of all of the surrounding circumstances. The judge or arbitrator in coming to his decision will have to pay due regard to all of the surrounding circumstances and then decide whether a reasonable person, given the situation of the employee would harbour a reasonable expectation of renewal. The enquiry into whether or not the expectation as contained in section 186(1)(b) is reasonable, is an

106 http://repository.up.ac.za/bitstream/handle/2263/10090/Vettori_Fixed(2008)a.pdf?sequence=1(accessed) on 27 October 2013).

107 (1999) 20 ILJ 1227 (LC) at 1146F-G.

108 http://www.labourguide.co.za/most-recent-publications/fixed-term-contracts-and-the-expectation-of-permanent-employment (pg 1) (accessed on 25 October 2013).

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objective one.109 Accordingly the provision requires that reasonable expectation must be proved objectively. In other words the employee must show that a reasonable person in the same position would expect that the contract would be renewed.110

The LRA does not provide a definition of the concept of “reasonable expectation”, however, in Dierks v University of South Africa111 Oosthuizen AJ held that the definition includes considerations such as:

 equity and fairness;

 the existence of substantive expectation that the fixed-term contract would be renewed;

 a subjective expectation on the part of the employee expecting that the contract would be renewed or extended (importantly it is not required that the same expectation is shared by the employer); and

 objective factors that support the notion that the employee hold a reasonable expectation.112

It has become apparent from case law that there are certain circumstances that mitigate in favour of acceptance of the employee’s assertion that there is a reasonable expectation of the renewal of a fixed-term contract. In this respect the most obvious considerations are past practice and past promise.113 The more often that a fixed-term contract is renewed, the more reasonable an employee’s expectation that his/her contract will be renewed.

This does not preclude employers from renewing fixed-term contracts; however, the continued renewal of the contracts lends itself to reinforcing the notion that the employment relationship has de facto become permanent, lending credence to the employee’s claim that he legitimately viewed the contract as permanent.114 A series of renewals of the employee’s

109 Auf der Heyde v University of Cape Town (2000) 8 BLLR 877 (LC); Dierks v University of South Africa (1999) 4 BLLR 304 (LC); SA Rugby (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration

(2006) ILJ 1041 (LC) 1045.

110 http://repository.up.ac.za/bitstream/handle/2263/10090/Vettori_Fixed(2008)a.pdf?sequence=1 (accessed on 27 October 2013).

111 (1999) 20 ILJ 1227 (LC) at 1245 par 130.

112 Pik-it-Up Johannesburg (Pty) Ltd v SALGBC (Case No JR 1834/09) 28 June 2011.

113 These considerations are implicit in the judgment that entrenched the doctrine of legitimate expectation in South African Law: Administrator of the Transvaal & Others v Traub & Others (1989) 10 ILJ 823 (A). 114 Grogan Dismissal 44.

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fixed-term contract by the employer, rather than offering the employee an indefinite contract where the employer is in a position to do so and where the employer’s repeated renewals of the contract have led to a reasonable expectation on the part of the employee of the renewal thereof has been the subject of many disputes,115 some of which will be explored later in this paper.

Many employers include an express term in the fixed-term contract that states that “the employee will not gain any expectation that this contract will be renewed or prolonged beyond the termination date”. The insertion of this term has become fairly standard practice albeit of very limited value. The practice of inserting disclaimers that state that an employee is not to gain any expectation of renewal or a term requiring that an employer give the employee written notice of any intention to renew the contract is better to have in the contract than not, despite its limited value. Such a disclaimer may have value to the extent that it indicates that an employee could not reasonably have expected the renewal of a contract.116

The mere insertion of this term into the contract will, however, not preclude the employee from claiming that reasonable expectation of renewal as circumstances may well change during the currency of the agreement. The problem with the term is that it is not conclusive proof that the employee did not gain a reasonable expectation of renewal. The Labour Appeal Court held that the inclusion of a term stating that the employee would have “no expectation of renewal” in a fixed-term contract would require the employee to provide more compelling proof of a reasonable expectation that might have otherwise been required.117 Although the bar has been set a little higher in terms of the burden of proof to be shown by the employee, it is certainly not insurmountable.118

Employers can create reasonable expectation of renewal of a fixed-term contract in numerous ways. Reasonable expectation is often created by the issuing work schedules that include the employee for dates after the expiry of the contract or by giving other indications that the employee will still be employed after the contract is due to expire.119 An implied assurance given by an employer that the contract will be renewed can be given in many different ways, including by omission, where an employer is silent. If an employer fails to give an employee notice timeously that a contract will not be renewed where the contract has

115 http://repository.up.ac.za/bitstream/handle/2263/10090/Vettori_Fixed(2008)a.pdf?sequence=1 (accessed on 27 October 2013).

116 See, for example, Malandoh v SA Broadcasting Corporation (1997) 18 ILJ 544 (LC).

117 SA Rugby Players’ Association & Others v SA Rugby (Pty) (Ltd) & Others (2008) 29 ILJ 2218 (LAC). 118 Grogan Dismissal 44.

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