Understanding fixed term contracts

It is not uncommon for employers to give employees fixed term contracts.
In fact this has been a topical area amongst trade unions and employers’ organisations. In this week’s instalment we want to look at the law that governs fixed term contracts. What is a fixed term contract?

Why do employers resort to fixed term contracts? How is this contract terminated should things come to that. Let us look into some of these questions and also the effects of the amendment of the Labour Act, especially the provisions of Section 12(3a) of the Labour Act.

What is a fixed term contract?

A fixed term contract of employment is one which specifies its period of duration. The beginning and end of that contract is provided for in terms of the contract itself. The opposite of a fixed term contract is one that does not speak to its duration. If a contract is silent on its duration it is deemed by operation of the law to be a contract without limit of time.

The law in Zimbabwe allows parties to enter into fixed term contracts. There are many reasons why employers resort to fixed term contracts;

For many employers, it is important to have flexibility in their workforce

It may also cover a job where funding has been provided to undertake a specific task. A fixed term contract may cover some seasonal work.

It can work also as a probationary period of sorts to see how the employee works, what they bring to the table and how they fit into their organisation.

They can also be great when an employer has a strict budget as they can predict labour costs more easily.

The law also recognises that these contracts can be renewed even repeatedly. In UZ-UCSF Collaborative Research Programme in Women’s Health v Shamuyarira 2010 (1) ZLR 127 (S) the Supreme Court held that the continued renewal of fixed term contracts over a period of time does not create a legitimate expectation of re-employment or permanent employment.

This position of the law was repeated in the case of Magodora & Ors v Care International Zimbabwe SC 24/14 where the court held that the plain meaning of Section 12B (3) (b) is that the employee on a contract of fixed duration must have had a legitimate expectation of being re-engaged upon its termination and that he or she was replaced by another person who was engaged in his stead.

There had been complaints about contracts that are repeatedly renewed and the argument from employee circles was that this amounted to casualisation of labour.

Section 12(3a) of the Labour Act

In 2015, the lawmaker came through with an amendment of the Labour Act through Section which provides that;

“(3a) A contract of employment that specifies its duration or date of termination, including a contract for casual work or seasonal work or for the performance of some specific service, shall, despite such specification, be deemed to be a contract of employment without limitation of time upon the expiry of such period of continuous service as is—

(a) fixed by the appropriate employment council; or ?

(b) prescribed by the Minister, if there is no employment council for the undertaking concerned?, or where the employment council fixes no such period?; and thereupon the employee concerned shall be afforded the same benefits as are in this Act or any collective bargaining agreement provided for those employees who engaged without limit of time.”

Fixed term contracts have their challenges especially on employees who are on such a contract. For example, employees who are on such contracts would not be entitled to annual paid leave. This is due to the duration of the contract itself, which may be shorter and not permissive of annual leave to be taken.

For example, an employee is on a fixed term contract for a year, there is no real possibility of annual leave being taken in such circumstances.

There is also exposure for pregnant employees. In a bid to avoid paying maternity leave, the employer could simply decide not to extend the fixed term contract. Section 18 of the Labour Act (Chapter 28:01) only entitles paid maternity leave to an employee who had served the employer for at least one year.

Section 12 (3a) of the Labour Act was introduced by Section 4 of Act 5 of 2015 which amended the Labour Act. This amendment came through at a time when the lawmaker was also confronted with the realities of the Zuva judgment. The section also came through against a background of complaints of casualisation of Labour. The Bill that later become the Amendment Act stated thus on Clause 4;
“This clause sets out to protect employees from employers who perpetually renew “fixed term contracts”, so has to avoid obligations that come with permanent employees, such as longer notice periods, retrenchment packages and pensions.

After a period of continuous service determined by the employment council, a “fixed term contract” employee shall be deemed to be a permanent employee who will be afforded the same obligations or entitlement by the employer.”

The purpose stated in the Bill speaks to what the legislature wants to see in contracts of a fixed nature, in particular that after a period of continuous service determined by the employment council, a “fixed term contract” an employee shall be deemed to be a permanent employee who will be afforded the same obligations or entitlement by the employer.

The period of continuous service is to be determined by the Minister of Public Service Labour and Social Welfare or various sectors of industry to agree through Collective Bargaining Agreements to the maximum period of renewal of a fixed term contract before it becomes a contract without limit of time.

Once the period of continuous service is fixed, and the employees meet the period, their contract becomes permanent by operation of the law. Whether or not the contract is written is irrelevant because the law is the one that creates that contract.

Once the period of continuous service of is met, the contract is deemed to be permanent one. The employer will not be at liberty to terminate that contract as if it were terminating a fixed term contract.

The position of the law on fixed term contracts generally is that it comes to an end on the date that is provided for in the contract of employment (Chikonye & Anor v Peterhouse 1999 (2) ZLR 329 (S)).

The Minister is yet to fix the period of continuous service but some sectors have already fixed the periods through Collective Bargaining Agreements. The NEC for Welfare and Educational Institutions has fixed the duration of contracts of employment for the industry as follows-

“These contracts apply to all sectors in the industry:

(a) a contract of a period of one month or more but less than three months is renewable three times;

(b) a contract of a period of three months or more but less than one year is renewable four times;

(c) a contract of a period of one year or more but less than four years is renewable three times;

(d) a contract of a period of four years to five years is renewable two times.”.

The provisions of the law are quite settled by virtue of the Collective Bargaining Agreement, once these periods are met the employees automatically become permanent employees.

There are other industries that have followed suit in fixing the period for continuous service. Some of these include the following examples:

Statutory Instrument 67 of 2017 that is the Collective Bargaining Agreement: Agricultural Industry, which states that a fixed term contract should be fixed at nine months and when renewed for six times continuously the worker shall become a permanent employee;

Statutory Instrument 125 of 2018 that is the Collective Bargaining Agreement: Tobacco (Miscellaneous Sector) Industry, which states that a fixed term contract employee will be deemed to be permanent on continuous service of five years;

Statutory Instrument 54 of 2016 that is the Collective Bargaining Agreement: Tourism Industry which states that a fixed-term contract shall be deemed to be an indefinite contract upon the expiry of four years of continuous service; and Statutory Instrument 27 of 2018 that is the Collective Bargaining Agreement: Chemicals and Fertilizers Manufacturing Industry; which states that a fixed-term contract employee will be deemed to be a permanent one on continuous service of five years.

Following the amendment of section 12 of the Labour Act (Chapter 28:01) in amendment No. 5 of 2015, on Section 4, the NEC for Welfare and Educational Institutions has fixed the duration of contracts of employment for the industry as follows-

“These contracts apply to all sectors in the industry:

(a) a contract of a period of one month or more but less than three months is renewable three times;

(b) a contract of a period of three months or more but less than one year is renewable four times;

(c) a contract of a period of one year or more but less than four years is renewable three times;

(d) a contract of a period of four years to five years is renewable two times.”.

The question therefore is how do organization handle issues of contract renewals as per the SI200 of 2018.

Termination of a fixed term contract

A fixed term contract can be terminated just like any other contract of employment.

The law has provided remedies for each particular situation that an employer may be experiencing in their line of business in particular that is connected to human resources.

Termination on notice remains an available remedy for fixed term contracts

In case of misconduct, an employer can still proceed with a disciplinary hearing

In case of incapacity — The Labour Act answers this as well.

LEGAL DISCLAIMER: The material contained in this post is set out in good faith for general guidance in the spirit of raising legal awareness on topical interests that affect most people on a daily basis. They are not meant to create an attorney-client relationship or constitute solicitation. No liability can be accepted for loss or expense incurred as a result of relying in particular circumstances on statements made in the post. Laws and regulations are complex and liable to change, and readers should check the current position with the relevant authorities before making personal arrangements.

Arthur Marara is a corporate law attorney practicing law in Harare, Zimbabwe. He is also a notary public and conveyancer. He is also passionate about labour law, commercial law, family law and promoting legal awareness and access to justice. You can follow him on social media (Facebook Attorney Arthur Marara), or WhatsApp him on +263780055152 or email attorneyarthurmarara@gmail.com-ebusinessweekly