Continuing to work after a fixed-term contract ends

A fixed-term contract automatically ends on completion of a specified task or project, or on a fixed date.

What is the status of an employee if a fixed-term contract ends but the employee continues working and the employer continues to pay the employee? Does that mean that the fixed-term contract is renewed or is the employee now employed on an indefinite period contract?

Case law supports the view that if an employee continues working after the date of expiry of the fixed-term contract, this does not necessarily mean that he or she automatically becomes a “permanent” employee. The specific facts of the case will determine what the nature of the relationship is after the expiry of the contract.   

The Labour Relations Act, 1995 (“LRA”) provides that an employee will be deemed to have been unfairly dismissed if an employee party to a fixed-term contract has a reasonable expectation that the contract will be renewed on the same or similar terms, or that he or she will continue to be employed on an indefinite basis, but the employer does not renew the contract or does not offer to retain the employee.

Section 198B of the LRA states that an employer may only employ an employee (who earns less that the threshold amount per the Basic Conditions of Employment Act) on a fixed-term contract of more than three months if the nature of the work the employee will perform is of a limited or definite duration, or the employer can show any other justifiable reason for concluding a fixed-term contract.

In other words, an employer can’t employ someone for several fixed-term periods, thinking that it can end the employment relationship at the end of any one of those fixed-term contracts. Clearly the employee has a reasonable expectation that he or she is employed on an indefinite period contract and not that the original fixed-term contract was being renewed for fixed periods, from time to time.