Piet Wes Civils CC and Another v AMCU and Others [2018] 12 BLLR 1164 (LAC); (2019) 40 ILJ 130 (LAC)

Principle:

A contract duration linked to the supply of work contracts by clients cannot be construed to equate to the occurrence of a "specified event", "the completion of a specified task or project" or "a fixed date", as contemplated by s198B(1).

Facts:

When a fixed-term contract expires, the contract comes to an end automatically - there is no dismissal. A 'fixed term contract' is defined in section198B(1) of the LRA to mean a contract of employment that terminates on (a) the occurrence of a specified event, or (b) the completion of a specified task or project. In addition section 198B(4)(d) of the LRA provides that the conclusion of a fixed term contract will be justified if the employee is employed to work exclusively on a specific project that has a limited or defined duration.

Is the term "specific project" wide enough to cover the situation where a client cancels a service contract? That was the question in this case where two employers - Piet Wes Civils CC and Waterkloof Skoonmaakdienste CC - provided services to Exxaro coal mine as contractors to perform certain tasks.

When Exxaro terminated their contracts on one month's notice, they terminated the employees' contracts as a direct result of losing the Exxaro contracts. The employers claimed that the workers were not dismissed, as they were employed on fixed term contracts that had expired and their employment terminated 'by operation of law'.

The employees' union brought an urgent application in terms of s189A(13) of the LRA. It was alleged that the employees had been dismissed for operational requirements; that it was a large scale retrenchment contemplated by s 189A; and that there was no consultation. They sought reinstatement pending a proper consultation process in terms of s 189A(13).

The Labour Court granted the interdict, ordering the reinstatement of the employees pending retrenchment consultations. The Court held that there is a dismissal when a service provider terminates the contracts of employment because the client has terminated its contract with the service provider.

The Court said that to interpret termination on a 'specified event' to include the cancellation of the contract by the client goes beyond the intention of the legislature. The Court said the onus is on the employer to prove that there was a justifiable reason for fixing the term of the contract and that the term was agreed. But in this case it was not a genuine fixed term contract contemplated by s198B(4)(d); therefore, it was in contravention of s198B(3) and therefore deemed to be of indefinite duration. The clause on which the employers relied was against public policy.

The Labour Appeal Court dismissed the employer's appeal against the LC judgment. The LAC confirmed that a contract duration linked to the supply of work contracts by clients cannot be construed to equate to the occurrence of a "specified event", "the completion of a specified task or project" or "a fixed date", as contemplated by s198B(1). The reason for this is that a "specified event", "the completion of a specified task or project" or a "fixed date" does not constitute a possibility that future contracts may not be supplied by an employer's clients. This remains a possibility and nothing more than that. It is by no means a specified event which in future will arise, nor is it related to the completion of a task or project or a fixed date, but is an operational risk which may occur under which the business operates.

This case is a reminder that our law requires the employer to bear the risk of operational changes during a fixed term contract. The case confirms that terminating a fixed term contract before the ending date or the completion of a project is likely to constitute a dismissal.

Extract from the judgment:

(Savage AJA:)

[20]   It was submitted for the appellants on appeal that the employment contracts entered into with the employees were for a limited duration linked to the completion of the tasks for which the appellants had been contracted by Exxaro to undertake and were therefore subject to, and determined by, the subsistence of agreements with Exxaro. The employment contracts, it was argued, were neither unlawful or invalid and it was a clear term that they would end on the termination of the agreement with Exxaro. This was so even though they were clumsily drafted. Since proof was provided to the respondents that Exxaro terminated the contracts entered into between it and the appellants, and the employment contracts were not constructed so as to circumvent the provisions of the LRA, it was argued that the Labour Court had erred in concluding that the contracts with the respondents were not intended to endure for a limited duration or terminate on completion of a specified event, task or project, as contemplated in s 198B(1). A legitimate reason existed to fix the term of the contracts as contemplated in s 198B(3)(b), and the appellants were not the proximate cause for the legitimate termination of the contracts. It followed therefore that the respondents were not dismissed and that they were therefore not entitled to reinstatement or to the relief envisaged in s189A(13). The appellants accordingly seek that the appeal be upheld with costs and that the order of the Labour Court be set aside and replaced with an order dismissing the consolidated applications in terms of s189A(13).

[21]   The respondents opposed the appeal on the basis that the employment contracts were not valid and enforceable limited duration contracts but indefinite duration contracts in terms of s198B(5). The appellants were therefore not entitled to terminate such contracts in terms of an automatic termination clause, when such a clause was intended to circumvent the fair dismissal obligations imposed on the appellants by the LRA and Constitution of the Republic of South Africa, 1996. Since no justifiable reason was shown to exist for fixing the term of the contracts, it was submitted that the Labour Court properly ordered the reinstatement of the employees. Consequently, it was submitted that the appeal should be dismissed with costs.

Discussion

[22]   In Enforce Security Group v Fikile and Others (Enforce),this Court had regard to fixed term employment contracts which had been entered into prior to s 198B having been brought into operation on 1 January 2015. In the current matter, s 198B finds application.

[23]   An offer to employ an employee on a fixed term contract, or to renew or extent that contract must, in terms of s198B(6) be in writing; with a fixed term contract, in terms of s198B(1), required to state expressly that it is to terminate on the occurrence of a specified event, on the completion of a specified task or project or a fixed date, subject to s198B(3). The requirement that a written offer of employment is made to an employee is for compelling reason in that it seeks to prevent any later dispute arising as to the terms, scope or duration of the fixed term or limited duration contract entered into. On the appellants' own version, no written employment contract was entered into with a number of employees employed by both Piet Wes and Waterkloof, with the basis of employment apparently having been agreed verbally with those employees. No evidence was put up that employees were provided with a written offer of employment, as required by s198B(6). It follows that the appellants failed to show, in respect of those employees with whom no written contract had been concluded, that the provisions of s198B had been complied with. Consequently, those employees were not employed on the basis of a limited duration contract but rather for an unlimited duration.

[24]   Turning to the employees with whom the appellants state that a written employment contract was entered into, the duration of that contract was made subject to the "supply of work contracts" by Piet Wes' clients, and the supply of the "same work contracts" by Waterkloof's clients.

[25]   A contract duration linked to the supply of work contracts by clients cannot be construed to equate to the occurrence of a "specified event", "the completion of a specified task or project" or "a fixed date", as contemplated by s198B(1). This is so in that a "specified event", "the completion of a specified task or project" or a "fixed date" does not constitute a possibility that future contracts may not be supplied in future by an employer's clients. This remains a possibility and nothing more than that. It is by no means a specified event which in future will arise, nor is it related to the completion of a task or project or a fixed date, but is an operational risk which may occur, one under which the business operates.

[26]   The purpose of s 198B is to provide security of employment, except in circumstances where a fixed term or limited duration contract is clearly justified. The Labour Court was correct in finding that to place a construction of the words "specified event" on the cancellation of the Exxaro contract went beyond the intention of the legislature. From a plain reading of the contract that was concluded between the appellants and certain of the employees, no limited duration or fixed term can be read into what was is clearly, from its terms, an unlimited duration employment contract entered into between the parties.

[27]   Since all of the employment contracts entered into were of an indefinite duration, as contemplated by s 198B(5), such contracts could not be terminated on notice by the appellants without adherence to the fair dismissal procedures set out in the LRA. The respondents were consequently entitled to approach the Labour Court to seek relief as provided in s189A(13), which, as was stated by the Constitutional Court, in Steenkamp v Edcon Ltd, grants "special protection for the rights of employees... to protect the integrity of the procedural requirements of dismissals governed by section 189A".

[28]   The Labour Court correctly stated that, after Exxaro terminated its contracts with the appellants, there may exist "justifiable and fair reason for dismissing the employees for operational requirements" but that that issue would only be capable of being ascertained through a proper consultation process as contemplated in s 189 and s 189A. I agree. It follows for these reasons, that the Labour Correct was correct in granting the relief sought by the respondents in terms of s189A(13) and in reinstating the respondent employees to enable the appellants to follow a fair pre-dismissal procedure in accordance with s189A.

[29]   Given the dispute of fact which arose on the papers as to whether the contracts of employment of 18 of 43 affected Piet Wes employees had been terminated at the end of August 2016 or the beginning of September 2016, as was contended by the appellants, or on 11 November 2016, as is contended by the respondents, the Labour Court properly referred that dispute to the hearing of oral evidence.

[30]   It follows for these reasons that there is no merit in the appeal, which cannot succeed. Having regard to considerations of law and fairness, there is no reason as to why the costs of this appeal should not follow the result. Costs were not granted in the Labour Court and there is no reason to interfere with that order.

Order

[31]   For these reasons, the following order is made:

  1. The appeal is dismissed with costs.