Automatic permanent employment without rendering services.

Section 198B of the Labour Relations Act, 66 of 1995, as amended (“the LRA”), in essence provides that when an employee performs duties of an indefinite nature (depending on the surrounding facts and the nature of the function), with earnings below the prescribed threshold, and employed on a fixed term contract for longer than 3 months, that employee may be deemed to be permanently employed.  This provision applies to employees who earn below the earnings threshold that is set by the minister of Labour in terms of section 6(3) of the Basic Conditions of Employment Act, 75 of 1997, (“the BCEA”). The current earnings threshold is R 254 371,67 per year (R 21 197,64 per month) with effect from 1 April 2024.

Employees misinterpret this provision to mean:

• fixed term contracts are a thing of the past; and
• all employees must be made permanent immediately after three months - which is not the case.

Section 198B(3) and (4) of the LRA sets out exceptions to the above provision. Which, amongst other things, is that if an employer can demonstrate any justifiable reason for fixing the term of the contract, the fixed term contract may be renewed successively and for longer than three months.

An interesting question that may arise is how the nature of the position is determined.  Does the section apply to employees who were employed on a fixed term contract and yet never, not for a single day, provided any duties to the employer. 

In the Labour Appeal Court case of Amalungelo Worker’s Union obo Mayisela and others v CCMA (2022) (LAC), the court held that employees had to refer a dispute within six months after the act, or omission of making an employee automatically permanent, that gave rise to the dispute. The crucial date to consider referring such a dispute to the relevant forums would thus be the date which the act/omission arose – which is three months after an employee is engaged by the employer.

If an employee refers the dispute when the contract ends (for example when the contract expires after a year), the employees would need to file a condonation application explaining the reasons for the delay in referring the dispute. This is, for a lay person, obviously not common knowledge and may as well lead to many condonation applications and unfair dismissals before the CCMA/South African Local Government Bargaining Council and the Labour Court dealing with the same issue with more or less similar reasons.

Many opinions arose from the questions above, for instance:

• Covid-19 resulted in the supervening impossibility for the employees to perform duties. That cannot be attributed to any fault on the part of the employees. Therefore the employer was obligated to permanentize their employment;
• The employee’s did not perform any work for the employer and cannot claim reasonable expectation to be permanently employed;
• Section 198B of the LRA is a deeming clause irrespective of any situation that may arise outside the bowl of section 198(3) and (4) of the LRA.
• Due to the fact that employees never performed any work prior to Covid, and that the employees were unutilised after the termination of the contract, and that the employees were not regarded as essential services during the lockdown by the employer, more so, may not even be on the structure of the employer, then reasonable expectation and section 198B of the LRA provisions cannot be apply to such employees.
• Reinstating unutilised employees to an employer’s workplace is generally an impractical remedy.

In our view, although the incorporation of this provision was to eliminate the exploitation of employees. It was also not incorporated to abuse employers to permanentize every employee they hire for more than three months. The exceptions raised in section 198B(4) of the LRA do not cover the event where the employees are remunerated while not performing, on a probation period, or when an employer wishes to continue evaluating the employees post 3-6 months probation. These are issues arising from employees referrals daily at the CCMA and Labour Courts.

Another interesting provision is section 198B (4) (g) of the LRA which prevents section 198B’s application for employees hired under the public works program. Many employees under that program work for many years, predominantly at clinics and municipalities for very low wages and are forever striking for permanent employment. Their contracts, according to this provision, can be renewed even if they work 15 years under that programme. This, in our view can justify the triggering of permanent employment and the clause would be justified, but is now prevented by this provision.

Under normal circumstances, in terms of section 198B of the LRA, if an employee is performing duties of an indefinite nature, earning under the threshold prescribed by the Minister in terms of section 6(3) of the BCEA, works for over three months, that employee will be deemed a permanent employee in terms of section 198B of the LRA.

It is widely understood that Labour Law is in its developmental stages. The question is whether section 198B of the LRA ought to be revisited for purposes of and extending the period in which employees can claim permanent employment? Or should section 198B(4) of the LRA include a situation where even if the employees were remunerated, they cannot claim permanent employment if they were not performing any work for the employer? In our view, when an employee does not provide any work for the employer, it cannot be said that they find protection under section 198B of the LRA. This is so because the nature of the employee’s duty must always be assessed from the work that the employee actually did.