Unfair Dismissal in Fixed-Term Contracts | Legal Rights Explained

Under section 186(1)(b) of the Labour Relations Act 66 of 1995 (LRA), expiry or non-renewal may be dismissal when an employee reasonably expected renewal on similar terms or indefinite retention, but the employer did not meet that expectation or offered less favourable terms. Section 198B separately restricts in-scope fixed-term employment beyond three months: without limited-duration work or another justifiable reason, the employment is deemed indefinite.

What Counts as a Fixed-Term Contract Under Section 198B

Section 198B(1) defines a fixed-term contract as employment ending on a specified event, completion of a specified task or project, or a fixed date other than the employee’s normal or agreed retirement age.

A genuine fixed-term contract ordinarily ends automatically at the agreed date or completion point, so natural expiry is not itself dismissal. The position changes if the employer ends it early, created a reasonable expectation of continued employment, or section 198B deems the employment indefinite.

When Expiry or Non-Renewal Becomes a Dismissal

Section 186(1)(b)(i) applies where an employee reasonably expected the employer to renew a fixed-term contract on the same or similar terms, but the employer either did not renew it or offered renewal on less favourable terms. Section 186(1)(b)(ii) extends protection to an employee who reasonably expected indefinite retention but was not retained, or was offered indefinite employment on less favourable terms.

What the employer does	Potential legal issue
Lets the contract expire without renewal	Section 186(1)(b)(i), if a reasonable expectation of renewal existed
Renews on less favourable terms	Section 186(1)(b)(i), if renewal on the same or similar terms was reasonably expected
Offers indefinite employment on less favourable terms	Section 186(1)(b)(ii), if indefinite retention on the same or similar terms was reasonably expected
Does not retain the employee indefinitely	Section 186(1)(b)(ii), if indefinite retention was reasonably expected

A natural expiry may not require dismissal notice under the LRA, but that is not a universal “no notice” rule. The contract, a collective agreement, established workplace practice or the employer’s conduct may impose advance-communication obligations or support an expectation claim.

The Reasonable-Expectation Test: What an Employee Must Prove

De Milander v MEC for Finance: Eastern Cape confirms a two-part enquiry: the employee must genuinely have expected renewal or indefinite retention, and that expectation must have been objectively reasonable in all the circumstances. A hope, assumption or preference is not enough.

The factors identified in SA Rugby (Pty) Ltd v CCMA are assessed together rather than as a mechanical checklist:

• the wording and duration of the agreement;
• the number, length and pattern of earlier renewals;
• the stated reason for using a fixed term;
• written or verbal assurances from someone with actual or apparent authority;
• whether the work continues and is also performed by permanent employees;
• conduct before expiry, such as approving leave or assigning work beyond the end date; and
• whether funding, project or operational circumstances genuinely changed.

Cases show how evidence changes the outcome. In Majambe v University of South Africa, two renewals and an ambiguous remark were insufficient where HR had received no renewal motivation. By contrast, Yebe v University of KwaZulu-Natal involved 20 renewals over roughly four-and-a-half years. In Ekurhuleni West College v Education Labour Relations Council, advice to apply for leave beyond expiry supported an expectation.

A standard “no expectation of renewal” clause remains relevant, but it is not automatically decisive. As Gubevu Security Group v Ruggiero illustrates, consistent assurances or conduct may outweigh boilerplate wording, although the employee’s evidentiary burden may be harder to discharge.

How Section 198B Limits Contracts Longer Than Three Months

Section 198B was introduced by the Labour Relations Amendment Act 6 of 2014 and took effect on 1 January 2015. Under section 198B(3), an employee within its scope may be employed on a fixed-term contract for longer than three months only if the work is genuinely of limited or definite duration or the employer can demonstrate another justifiable reason.

The section does not apply to:

• employees earning above the BCEA earnings threshold prescribed by the Minister from time to time;
• an employer with fewer than 10 employees;
• an employer with fewer than 50 employees whose business has operated for less than two years, subject to the statutory anti-avoidance exclusions; or
• a fixed-term contract permitted by legislation, a sectoral determination or a collective agreement.

An above-threshold employee who falls outside section 198B may still rely on section 186(1)(b) by proving a reasonable expectation of renewal or indefinite retention.

Justifiable Reasons for a Fixed Term Under Section 198B(4)

Section 198B(4) gives non-exhaustive examples of potentially justifiable fixed terms. The label used in the contract is not enough; the reason must be genuine and supported by the facts.

Statutory example	Evidence relevant to justification
Replacing a temporarily absent employee	The absent employee’s role and expected return
Temporary workload increase not expected beyond 12 months	Workload data, forecasts and a defined end point
Student or recent graduate engaged for training or experience	The training purpose, programme and duration
A specific project of limited or defined duration	Project scope, milestones, funding and completion event
Non-citizen employed for a defined work-permit period	The permit and lawful employment period
Seasonal work	The seasonal cycle and operational records
Official public-works or similar job-creation scheme	Scheme rules and authorised duration
Position funded externally for a limited period	The funding agreement and end date
Employee at normal or agreed retirement age	The applicable policy or agreement

Under section 198B(6), the offer or renewal must be in writing and state the reason relied upon for fixing the term. If that justification becomes relevant in proceedings, section 198B(7) places the burden on the employer to prove both the justifiable reason and the agreed term.

Deemed Indefinite Employment, Equal Treatment, and Severance

A contract concluded or renewed for longer than three months in breach of section 198B(3) is deemed indefinite under section 198B(5). This is a distinct claim from a reasonable-expectation dismissal under section 186(1)(b), although the same history may raise both issues. In Loliwe v Hanover Cleaning Services, successive monthly contracts over more than three years were found non-compliant; the employee was declared indefinitely employed and reinstated.

Section 198B also provides that an in-scope employee working longer than three months:

• may not be treated less favourably than a permanent employee doing the same or similar work unless the difference is justifiable; and
• must receive equal access to opportunities to apply for vacancies.

A qualifying employee engaged exclusively on a defined-duration project for longer than 24 months may receive one week’s remuneration per completed year when the contract expires, calculated under section 35 of the Basic Conditions of Employment Act. Under sections 198B(10) and (11), this does not apply where suitable employment on the same or similar terms is offered or procured before expiry. This project-specific payment is not severance for every fixed-term employee.

Early Termination Before the Agreed Expiry Date

Early termination is different from non-renewal. Where the employer actively ends employment before the agreed date or completion event, section 186(1)(a) and the ordinary fairness requirements are likely to be central. Misconduct, incapacity or operational requirements still require a fair reason and fair procedure under section 188. Fixed-term status does not remove disciplinary, performance-management or consultation duties.

Rolling short contracts should not be used as disguised probation to avoid proper dismissal procedures, as illustrated by Abrahams v Rapitrade and Gubevu. Constructive dismissal under section 186(1)(e), where an employee resigns because the employer made continued employment intolerable, is a separate claim with its own demanding test.

Automatic-Termination Clauses Linked to a Client Contract or Project

A client-linked automatic-termination clause is neither automatically valid nor invalid. Sindane v Prestige Cleaning Services, Mahlamu v CCMA, SATAWU obo Dube v Fidelity Supercare Cleaning Services Group and Enforce Security Group v Fikile require examination of the true cause of termination.

Relevant factors include the wording, genuine commercial purpose, who selected or removed the employee, whether the clause targeted an individual, and who caused the underlying arrangement to end. Section 5 prevents parties from contracting out of LRA protection by labelling an employer-driven termination “automatic”.

Which Legal Route Fits the Facts?

Situation	Likely issue to investigate	Key provision
Genuine contract expires without a reasonable expectation	Natural expiry; ordinarily no dismissal	Section 198B(1) and the contract
Contract expires despite a reasonable expectation of renewal	Non-renewal dismissal	Section 186(1)(b)(i)
Employer does not provide reasonably expected indefinite retention	Indefinite-retention dismissal	Section 186(1)(b)(ii)
In-scope contract exceeds three months without justification	Deemed indefinite employment	Sections 198B(3) and (5)
Employer ends the contract early	Ordinary dismissal requiring fairness	Sections 186(1)(a) and 188
Client-linked clause causes termination	True cause and validity of the clause	Sections 5, 185 and 186
Employee resigns because work is intolerable	Possible constructive dismissal	Section 186(1)(e)

How to Refer a Fixed-Term Unfair-Dismissal Dispute to the CCMA

1. Identify the dispute and dismissal date. For non-renewal, this is usually the expiry date or the date less favourable renewal or retention takes effect. Separate the section 186(1)(b) dismissal allegation from any section 198B issue.
2. Refer within the statutory period. Under section 191, an unfair-dismissal dispute generally must reach the CCMA or bargaining council with jurisdiction within 30 days. A late referral needs a condonation application, which is not automatically granted.
3. Complete and serve LRA Form 7.11. State the outcome sought, serve the employer, file proof of service and organise the contract and chronology. Confirm the latest CCMA Rules, form and filing method.
4. Attend conciliation. A commissioner attempts to resolve the dispute. If it remains unresolved, the certificate of outcome or expiry of the statutory conciliation period enables the next appropriate step.
5. Request arbitration where applicable. LRA Form 7.13 is generally due within 90 days after the certificate of non-resolution or, where applicable, expiry of the conciliation period. Confirm whether the bargaining council, CCMA, Labour Court or a distinct section 198B process has jurisdiction.
6. Present evidence on dismissal and fairness. Under section 192(1), the employee first proves that a dismissal occurred. Once established, section 192(2) requires the employer to prove fairness.

Evidence to Preserve and Take to a Legal Consultation

• Every fixed-term agreement, addendum, extension and job description.
• A timeline of renewal dates, contract lengths, expiry discussions and changed terms.
• Emails, messages, meeting notes, performance reviews, leave approvals, rosters and recorded assurances.
• Names and positions of managers or HR representatives who discussed renewal or post-expiry work.
• Evidence that the role continued, including vacancies, replacements, project records and comparisons with permanent colleagues.
• Payslips and remuneration information relevant to the current BCEA threshold.
• Disciplinary, performance, operational, client-contract or funding records relied upon by the employer.
• Proof of when the employee learned that renewal would not occur, so the referral deadline can be calculated.

Remedies if the Dismissal Is Unfair

Section 193 permits reinstatement, re-employment or compensation where appropriate; the remedy depends on the evidence and relief sought.

Section 194 caps compensation at 12 months’ remuneration for ordinary unfair dismissal and 24 months for automatically unfair dismissal. These are ceilings, not standard payouts. A section 198B(5) declaration of indefinite employment is different from compensation.

Get advice on the contract and the correct forum. Burger Huyser Attorneys’ Labour Law practice assists employees and employers with CCMA disputes, disciplinary hearings, employment contracts and Labour Court matters. Contact the Linden/Randburg head office at 49 First Avenue, Linden, Randburg, on 011 888 0246, Monday to Friday from 7:30am to 4:30pm. The firm follows a personalised, plain-spoken approach and holds a 4.8/5 average across 250+ Google reviews.

Frequently Asked Questions

Is the expiry of every fixed-term contract an unfair dismissal?

No. A genuine fixed-term contract ordinarily ends by operation of law on its agreed date, event or project completion. It may become a dismissal under section 186(1)(b) where the employee proves a reasonable expectation of renewal or indefinite retention that the employer did not meet, or where another LRA protection changes the legal position.

What makes an expectation of renewal legally reasonable?

The employee must actually expect renewal, and that expectation must be objectively reasonable. Contract wording, repeated renewals, authorised assurances, continuing work, comparable permanent employees and conduct before expiry are relevant; no single factor decides every case.

Does a “no expectation of renewal” clause prevent a claim?

Not necessarily. The clause is relevant and may make the claim harder to prove, but consistent renewals, authorised assurances or employer conduct may outweigh standard wording. The full factual history must be considered.

Does section 198B protect an employee earning above the BCEA threshold?

Section 198B excludes employees earning above the ministerially prescribed threshold, which changes over time. That exclusion does not remove section 186(1)(b), so an above-threshold employee may still prove a dismissal based on a reasonable expectation of renewal or indefinite retention.

How long does an employee have to challenge non-renewal?

An unfair-dismissal dispute generally must be referred to the CCMA or relevant bargaining council within 30 days under section 191 of the LRA. A late referral requires condonation, and prompt advice is important because the correct date and forum depend on the facts.

Can an employer terminate a fixed-term employee early for misconduct or poor performance?

An employer may act for a fair reason, but fixed-term status does not remove ordinary fairness requirements. The employer must follow an appropriate disciplinary or performance process and prove substantive and procedural fairness under section 188.

What compensation can the CCMA award?

Section 193 allows reinstatement, re-employment or compensation where appropriate. Section 194 caps compensation at 12 months’ remuneration for an ordinary unfair dismissal and 24 months for an automatically unfair dismissal, but these ceilings are not guaranteed awards.