Fixed term contracts and retrenchment: How does it work?

Our Client was an NGO. They employed ten Employees on fixed term contracts for a period of one year, being 1 October 2017 to 30 September 2018 for a particular project. The NGO was funded by various donors on various projects. When our Client was informed of the decision on 21 November 2017 to close out a particular programme as its donor was no longer able to fund that project, our Client thought it was correct to retrench these Employees as they could not afford to keep them on themselves. Note, our Client did not need to retrench the staff as they had secured their employment with the Organisation who would have had them sign new contracts by way of an informal transfer to the Organsation, as the new Employer. In other words, our Client was not obligated to pay retrenchment packages as the staff should not have been retrenched in the first place, due to the nature of their contracts. Our Client did however, pay retrenchment packages to all ten Employees.

The fact that the Employees’ contracts did not make reference to operational requirements being a valid reason for termination, the Employer (our Client) was not legally allowed to retrench them. They did so, unfortunately, prior to seeking our assistance. In terms of the Labour Relations Act 66 of 1995 (LRA), section 213 defines operational requirements as being: “Requirements based on the economic, technological, structural or similar needs of an employer”. Whilst being an economic reason, the fact that this was not included in its termination clause meant that such termination would not be valid in law. The fact that the new Organisation was in a position to employ eight of the affected staff was not our Client’s fault per se because they required very specific positions to be filled of which eight people were suitable. This left two Employees who were not hired by the Organisation. Both these Employees referred disputes to the CCMA claiming that they were unfairly dismissed based on operational requirements.

As attorneys are not allowed in at Conciliation phase, our Client attended both alone. The Client managed to settle one of the two disputes at the CCMA, however the remaining Employee did not want to settle at Conciliation and instead referred the matter to Arbitration after receiving a Certificate of Outcome reflecting that the matter remained unresolved.

The Certificate was faulty however, as the Commissioner referred the matter to Arbitration instead of the Labour Court because the Employee was one of ten people retrenched.

The LRA clearly explains in Section 191(12) that:

(12) An employee who is dismissed by reason of the employer’s operational requirements may elect to refer the dispute either to arbitration or to the Labour Court if-

(a) the employer followed a consultation procedure that applied to that employee only, irrespective of whether that procedure complied with section 189;

(b) the employer’s operational requirements lead to the dismissal of that employee only;

(c) The employer employs less than ten employees, irrespective of the number of employees who are dismissed.

The CCMA could accordingly not determine this dispute. Had the Employee been the only one dismissed for operational reasons, he could have elected whether to refer it to Arbitration at the CCMA or to the Labour Court for adjudication.

Attorneys are allowed to represent their Client at Arbitration. In this case however we, together with Counsel, argued that there were issues the Commissioner needed to deal with first, before proceeding to hear the Arbitration. These issues are referred to as points in limine. The CCMA explains it as follows:

In limine is a hearing on a specific legal point, which takes place before the actual case referred, can be heard. It is a process that addresses the technical legal points, which are raised prior to getting into the merits of the case, and relates to matters of jurisdiction.” Attorneys are always allowed to argue points in limine, as a lay person is not expected to know the law and how to apply it to the facts.

It is good to know that a Certificate of Outcome does not automatically determine jurisdiction for Arbitration. Said differently, the fact that the Certificate was issued by the Conciliating Commissioner does not automatically mean that the Arbitrating Commissioner has the necessary jurisdiction to hear the Arbitration. Arbitrating Commissioners are guided by Rule 22 of the CCMA Rules in this scenario as it allows him/her to determine a point regarding jurisdiction at Arbitration only if it was not raised before and dealt with by the Conciliating Commissioner. In other words, where a jurisdictional point has not been raised at Conciliation, the Arbitrating Commissioner must consider such point despite the fact that a Certificate of Non-Resolution has been issued. Applied to our Client’s case, the fact that jurisdiction was not discussed at the Conciliation meant that the Arbitrating Commissioner had to first consider that before she could proceed any further. Counsel’s points in limine were accepted by the Arbitrating Commissioner and we were successful in having the Applicant’s matter dismissed. Prior to the Arbitration being heard, we had addressed a letter to the Employee that served to eliminate his claim for compensation related to his unfair dismissal and therefore, this too was available as a further point to raise before the Commissioner, however, we had no need to rely on any further points as the first point sufficed to have the matter dismissed.

Leave a Comment