2 March 2010 by

Fixed term contracts: a clean break or a dismissal?

"The trouble with unemployment is that the minute you wake up in the morning, you are on the job." - Lena Horne, singer.

Did the employment relationship between David Sindane and Prestige Cleaning Services (Prestige) terminate because a Fixed Term Contract expired, or was he dismissed when the cleaning contract of Prestige was terminated by its client?

Prestige employed Mr Sindane on a "Fixed Term Eventuality Contract of Employment" in terms of which Prestige placed

Mr Sindane with a particular client to render cleaning services. In terms of his contract his services would terminate in the event that the contract between Prestige and its client expired or was terminated.

Before the expiry of the agreement with the client, the client requested Prestige to remove Mr Sindane from the premises and Prestige placed him with the new client, Menlyn Piazza. Prestige and Mr Sindane signed a similar contract in respect of his employment at Menlyn Piazza, recording that the agreement between them would terminate if and when the agreement between Prestige and Menlyn Piazza expired or was terminated.

Menlyn Piazza terminated the agreement with Prestige in respect of these services. In the Court, Mr Sindane contended that he was dismissed as contemplated in Section 186(1)(a) of the LRA in that Prestige had terminated his contract of employment with or without notice.

Prestige disputed the alleged dismissal saying that it was a fixed term contract that expired upon a future circumscribed or specific event, ie the termination of another contract, the one between Prestige and Menlyn Piazza.

The Court held that, apart from a resignation by an employee, an employment contract can be terminated in a number of ways, which do not constitute a dismissal as defined in Section 186(1). These circumstances include the death of the employee, the natural expiry of a fixed term employment contract entered into for a specific period, or upon the happening of a particular event, eg the conclusion of a project or contract between an employer and a third party.

The proximate cause of the termination of employment upon expiry of a fixed term contract is not an act by the employer and cannot constitute a dismissal. The Court held that it is quite common to have a fixed term contract that will expire when the contract will be completed, such as a project or a building contract where it is not possible in advance to fix a date for the completion of the project.

The Court held that Prestige did not dismiss Mr Sindane and that his services terminated because the fixed term contract expired, when the contract between Menlyn Piazza and Prestige terminated.

The Court considered the SA Post Office Limited v Manpeule (2009) 8 BLLR (LC) matter (SAPO), where the Court held that an automatic termination clause in the employment contract of Mr Manpeule was not permissible. SAPO dismissed him when it conveyed to him that his contract automatically terminated when he was removed as a Director. Prior to the expiry of the fixed term the Minister in terms of the Companies Act, removed him from the Board pursuant to allegations of misconduct. His employment contract was for a five year fixed term. Relying on such removal by the Minister, SAPO informed him of the expiry of his contract, relying on the provision in the employment contract and the Articles of Association of SAPO providing that his contract terminates when he is removed as a director.

The Court held that the case was distinguishable on the basis that there was no fixed term linked to an event (such as his removal from the Board) and that the proximate cause of the termination of his employment was the Minister's conduct in removing him from the Board for misconduct. The case was distinguished as one with an automatic termination clause rather than a fixed term contract.

Faan Coetzee, Director, Employment

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