Ivan Israelstam | Chief Executive | Labour Law Management Consulting | mail me |
In South Africa, labour law is designed to protect employees from unfair dismissal. The Commission for Conciliation, Mediation and Arbitration (CCMA) requires employers to tread carefully, especially when navigating fixed-term contract terms.
Chapter 8 of the Labour Relations Act (LRA), supported by Schedule 8, ensures that dismissals carried out for invalid reasons or using improper methods are unlikely to hold up in legal proceedings.
What happens if a dismissal is found unfair?
Under sections 193 and 194 of the LRA, the following remedies can be imposed by the CCMA or the Labour Court:
Reinstatement:
- The employer must reinstate the dismissed employee, restoring their job and benefits.
- Back pay must be provided from the date of dismissal.
Re-employment:
- In some cases, the employee is rehired but not necessarily in their previous role.
Compensation:
- If the employer is not required to reinstate the employee, they may still need to pay up to 12 months’ salary.
- For automatically unfair dismissals, compensation can reach 24 months’ salary.
These payments are in addition to other entitlements like notice pay, leave pay, or payment for the remainder of a fixed-term contract.
The risks of misusing fixed-term contracts
To sidestep these requirements, some employers use fixed-term contracts, allowing them to let the contract expire rather than formally dismiss an employee. However, labour law has tightened regulations around fixed-term contracts, making this approach risky and often illegal.
Converting permanent contracts into fixed-term ones to dismiss employees is also prohibited. Employers attempting this can face significant legal consequences.
Navigating fixed-term contracts – a case in point
In a recent Labour Appeal Court case, Johannesburg Roads Agency vs Makhari (JA 146/21), the Johannesburg Roads Agency (JRA) hired Mr. Makhari as a permanent IT Technician. Three months later, the JRA claimed his contract was fixed-term and had ended.
The court found that Makhari had been permanently employed and ruled the dismissal unfair. The JRA was ordered to reinstate him with 7.6 years’ back pay, potentially costing R2.73 million.
This case underscores the importance of understanding the distinction between permanent and fixed-term contracts. Missteps in contract management can lead to costly outcomes.