The most common form of dismissal – as defined under section 186(1)(a) of the Labour Relations Act (LRA) - is one where the employer terminates an employee's employment contract with or without notice. The dismissed employee then has the right to challenge the fairness of the dismissal by referring an unfair dismissal claim to the CCMA or relevant industry bargaining council. According to section 192(2) of the LRA, the employer carries the onus of proving that the dismissal was effected for a fair reason and in accordance with a fair procedure. If the employer fails to prove this, the employee may be reinstated (with or without backpay) or awarded compensation.
To mitigate these risks, certain employers employ employees on fixed term contracts of a relatively short duration with the intended effect that the employee's employment will terminate automatically, without the employee being 'dismissed' within the meaning of section 186(1)(a) of the LRA, when the fixed term contract expires. Such fixed term contracts, so the logic goes, may be 'rolled over' a number of times until the employer decides not to renew the contract again. And, when the latest fixed term contract expires, the employee's employment will have terminated due to the expiry of the contract, as opposed to a unilateral termination (dismissal) of the employee by the employer.
However, where the fixed term contract of an employee is repeatedly renewed, that employee may, quite reasonably, acquire an expectation that the employer will continue to renew the contract on the same or similar terms. For this reason, section 186(1)(b)(i) of the LRA expands the traditional definition of "dismissal" to include the situation where an employee reasonably expects the employer to renew a fixed term contract of employment on the same or similar terms, but the employer offers to renew it on less favourable terms or does not renew it at all. This was the category of alleged dismissal which the Labour Court was called upon to consider in the recent case of Saldanha Bay Municipality v South African Local Government Bargaining Council and Others (C302/2020) [2024] ZALCCT 9 (31 January 2024).
In that case, Mr Mouton had been employed as a strategic adviser to the executive mayor of the Saldanha Bay Municipality during 2016 on a 12 month fixed term contract. The contract was renewed in 2017 and 2018. In 2019, Mr Mouton's contract was renewed on a month-to-month basis until November 2019, when the post was advertised for a fixed term appointment of 12 months, but at a lower salary scale. The reason the contract was not renewed on an annual basis in 2019 was because of a report from the auditor general's office that the municipality had not been complying with its statutory duty to follow a recruitment and selection process when making such appointments.
Mr Mouton did not apply for the post by the application deadline of 28 November 2019. Mr Mouton said that he did not have a problem with the post being advertised but had a problem with the lower salary. On 28 November 2019, the municipality issued Mr Mouton with a letter stating that his contract would terminate on 30 November 2019 (at the end of his latest one month contract).
Mr Mouton then referred an unfair dismissal dispute to the South African Local Government Bargaining Council in terms of which he claimed that, despite the monthly renewals of his employment contract from July to November 2019, he had a reasonable expectation that he would remain in his position until the municipal manager vacated his post. Mr Mouton therefore claimed that he had been dismissed within the meaning of section 186(1)(b)(i) of the LRA.
The arbitrator in the bargaining council found that it was reasonable for Mr Mouton to expect that his employment would be extended until the municipal manager vacated his post because Mr Mouton's contract had been continuously renewed seven times, the post was still funded, the functions of the post still needed to be performed and the municipal manager that Mr Mouton had been appointed to assist was still in the post in November 2019.
The arbitrator concluded that even though Mr Mouton had not applied for the advertised post, since that post was advertised at a salary lower than his existing one, if he had been offered a renewal at that salary it would have been tantamount to an offer of appointment on less favourable terms than he had previously enjoyed and therefore would also have amounted to a dismissal in terms of section 186(1)(b)(i) of the LRA. On that basis, the arbitrator concluded that Mr Mouton had been dismissed on 30 November 2019.
The arbitrator also found that it was unfair of the municipality to require Mr Mouton to re-apply and participate in a competitive process for the same position he was already appointed in, instead of simply renewing his fixed term contract. The termination of his contract was not for a legitimate reason such as misconduct, incapacity or operational requirements and was accordingly unfair. The arbitrator awarded Mr Mouton's retrospective reinstatement on a 12 month contract on the same terms that existed prior to the termination of his employment.
The municipality then took the arbitration award on review in the Labour Court. The municipality's main criticism of the award was that the arbitrator misconstrued the length of the fixed term contract against which any expectation of renewal had to be evaluated. The municipality argued that Mr Mouton did not claim that he had been dismissed at the end of June 2019 when his last 12 month contract expired. According to the municipality, Mr Mouton could only argue that he had a legitimate expectation of a renewal of a 12 month contract, if he had expected that renewal to have occurred on 1 July 2019 and, in that case, he would have been required to refer an unfair dismissal dispute to the bargaining council at that point, which he did not do. Instead, Mr Mouton entered into five successive one month contracts after the expiry of the 12 month contract on 30 June 2019. It was only when the last of the five subsequent one month contracts ended on 30 November 2019 that Mr Mouton claimed that he had been dismissed in circumstances where he still had an expectation of the renewal of his previous 12 month contract (which had expired on 30 June 2019).
The Labour Court commented that the arbitrator's reasoning in relation to the actual date of Mr Mouton's dismissal did seem somewhat strained. The arbitrator's logic suggested that when an employee already knows that their expectation of a regular renewal of a contract has not been met, they have an election not to invoke the provisions of section 186(1)(b)(i) at the time the original fixed term contract is not renewed, even though the requirements of a deemed dismissal under section 186(1)(b)(i) might have been met at that point. Rather, they may do so later when a subsequent fixed term contract expires, not because they were expecting that later contract to be renewed, but because the employer did not revert to the original fixed term contract which the employee was still expecting their employment to be renewed on despite that contract having lapsed some time ago.
Nevertheless, the Labour Court went on to consider that, in this case, Mr Mouton had accepted the one month renewals of his appointment from July 2019 onwards, not because he had abandoned any expectation of a renewal of the contract on a 12 month basis, but as at temporary measure pending the municipality's decision on what process would be followed in making appointments to the strategic advisor's post in future. In that regard, the municipality accepted that the incumbents of the strategic advisor posts were advised that they would be employed on monthly contracts pending the finalisation of the auditor general's report on the legality of the appointments.
On that basis, the Labour Court reasoned that it was quite probable that Mr Mouton would have assumed that he would be re-appointed on another 12 month contract once these technicalities had been resolved, particularly given that the political incumbent, on whose appointment his own depended, was still in office. For that reason, the Labour Court was prepared to accept that, in such a scenario, the time when the employee justifiably anticipates that their expectation of renewal will be realised may not coincide with the expiry date of the contract in question, but they may still rely on section 186(1)(b)(i) of the LRA provided that they can justify why the reasonable expectation of renewal only fully materialised at a later date.
Based on this rationale, the Labour Court concluded that Mr Mouton had a genuine and objectively justifiable expectation that he would be reappointed in accordance with his 12 month contract after a temporary interval during which the technicalities of how he and his fellow strategic advisers could be re-appointed would be resolved by the municipality. As a result, the municipality's failure to reappoint Mr Mouton on those or very similar terms when his last monthly contract ended amounted to a dismissal in terms of section 186(1)(b)(i) of the LRA.
Because the municipality maintained that the termination of Mr Mouton's employment was not a dismissal, the municipality did not furnish the bargaining council with a legitimate reason for the dismissal. The Labour Court therefore agreed with the arbitrator's conclusion that Mr Mouton's dismissal was substantively and procedurally unfair. However, given that the review application was only decided more than 12 months after Mr Mouton's date of dismissal, Mr Mouton could not be retrospectively reinstated from 1 December 2019 as per his proven expectation. The Labour Court therefore ordered the municipality to pay Mr Mouton compensation of 12 months' remuneration, calculated at the rate he was earning on 30 November 2019.
The net effect of this judgment is that a fixed term employee whose latest fixed term employment contract has expired may invoke the terms of a previously expired fixed term contract - despite subsequent renewals of their fixed term employment on different terms - provided that the employee can demonstrate that they maintained a reasonable expectation that the employer would revert to employing them on the terms of their previously expired fixed term contract.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
