Employers Beware: Update on Recent Regulations Governing Employees on Probation & Fixed-Term Contracts
Since the enactment of the Labour Amendment Act, 2015 which imposed a retrospective obligation on employers to compensate employees who were terminated on notice pursuant to the landmark Zuva judgment, we highlight yet another aspect in that amendment which employers need to be wary of, that is, the imposition of limits to the duration of fixed term contracts as fixed by the relevant national employment council (“the NEC”) or by the Minister.
What the Labour Act says
Section 12(3a)(a) and (b) of the Labour Act [Chapter 28:01] (“the Act”) as amended provides as follows –
“12 Duration, particulars and termination of employment contract
“(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.”
What this means for employers
The provision of the Act mentioned above provides the NEC or the Minister of Labour and Social Welfare with power to set a limit on the duration of fixed term contracts within a particular industry. Any renewal beyond that period automatically transforms the concerned employee into a permanent employee by operation of the law. It follows that benefits accorded to employees on contracts without limitation will be applicable to such employees from the first day beyond the set limit of the fixed term contracts. The employee is permanent by operation of the law and they become entitled to any rights and benefits which are available to permanent employees.
Industry time limits
We urge employers to look watch out for the limits which have been prescribed per each industry so that they are not found on the wrong side of the law. The following industries have since complied with section 12 (3a) (a) of the Act:
Agriculture: General Sector 4.5 yrs (6 x 9 months)
Agriculture: Kapenta Sector 22 months (2 x 11 months)
Agriculture: Tea & Coffee Sector 5 yrs 10 months (7 x 10 months)
Air Transport Industry 2 yrs continuous/aggregate of 2 yrs in 3 yrs
Battery Manufacturing Industry 5 yrs
Commercial Sectors 6 contracts
Engineering, Iron & Steel Industry 3 yrs
Funeral Industry 3 yrs
Furniture Manufacturing Industry 2 yrs
Grain Marketing Board 2 yrs
Lumber Milling, Timber Processing & Trading 12 months-plus
Plastics Manufacturing Industry 10 yrs
Printing, Packaging & Newspaper Industry 12 months-plus
Textile Industry 60 months
Tobacco Industry Manufacturing Sector 2 yrs
Tobacco Industry Miscellaneous Sector 5 yrs
Tourism Industry 4 yrs continuous service
How to navigate the minefield
Engaging employees beyond the stipulated periods can potentially expose the concerned employer to claims if the employees are not accorded rights and benefits of permanent employees. Employers can cover themselves by strictly adhering to the limits set by the NECs in terms of the Act. Once the limit is reached, the employer should only renew the contract if it is prepared to accord the concerned employees the rights and benefits of permanent employees.
For legal advice on how to deal with this issue, contact our Employment Law team.