Fixed-Term Employment Contracts: Critical Case Law Developments and Section 198B LRA Compliance

Recent Labour Court judgments are tightening the screws on employers who rely on long-running fixed-term contracts under s 198B of the Labour Relations Act, 66 of 1995 (“the LRA”).

Two decisions handed down in 2024 – 2025 are particularly important:

1 NEHAWU obo Members v Bracks N.O. & Others (JR 1452/21, 23 January 2025)

Community Health Workers (“CHWs”) at the National Department of Health were kept on successive 12-month contracts financed by a Treasury “conditional grant”. The employer argued that the posts were “funded by an external source for a limited period” – the justification contemplated in s 198B(4)(h).

Acting Judge Cook disagreed. Because the grant still came from the National Treasury, “the funding source is internal to the State; only the allocation is conditional”; the posts were therefore not genuinely temporary. With no valid justification, the Court declared the CHWs permanent by operation of s 198B(5) and set aside the commissioner’s contrary award. saflii.orgsaflii.org

Key takeaway

External funding will only save a fixed-term contract if the money really is external and the work is intrinsically short-term. Conditional or ring-fenced State funding will not do.

2 Piet Wes Civils CC & Waterkloof Skoonmaakdienste CC v AMCU & Others (LAC, JA 37/2017, 10 March 2018)

The employers provided services to a mine under a client contract that could be cancelled on 30 days’ notice. Their employees were hired on “fixed-term” contracts that would automatically end when the client contract ended. The Labour Appeal Court held that such a clause “makes the workers’ employment contingent upon the whims of a third party… [which] does not fit the purpose of s 198B.” Because the employers could not show a genuine project of limited duration, the contracts were deemed indefinite, and the termination triggered an ordinary operational-requirements dismissal process. saflii.org

Key takeaway

Mere reference to a client contract or service-level agreement is not a “project” justification under s 198B(4)(d). The employer must prove that the work itself will objectively cease on a defined date.

3 Takenote Trading (Pty) Ltd v CCMA & Others [2024] ZALCJHB 197

Although mainly about an unfair-dismissal review, the Labour Court confirmed two procedural pillars of s 198B:

• the written contract must be produced; and

• it must spell out the justification for the time-limit.
  Failure on either score “triggers the deeming provision of s 198B(5).” saflii.org

Practical implications for employers

1. Audit every fixed-term contract longer than three months for employees who earn below the BCEA earnings threshold (currently R241 110.59 p.a.).

2. Record the justification in writing and link it to one of the eight grounds in s 198B(4).

3. External-funding defence? Keep the donor or grant agreement on file and diarise the funding expiry. Treasury-allocated funds will not suffice.

4. Project-based defence? Define the project’s scope, deliverables and end-date; do not rely on the fickle duration of a client contract.

5. Equal treatment – once an FTC runs beyond three months the incumbent must enjoy the same basic benefits and opportunity to apply for vacancies as permanent staff (s 198B(8)–(9)).

6. Where no airtight justification exists, convert the role to permanent or start a compliant operational-requirements process.

Need help?

Laboured South Africa undertakes fixed-term-contract audits, drafts compliant agreements and represents employers in s 198B disputes nationwide.

Tel 082 330 3939 Email info@laboured.org.za Web www.laboured.org.za

Stay on the right side of the latest case law – before your “temporary” staff become permanent overnight.