The Labour Appeal Court has reaffirmed that employers cannot indefinitely rely on successive fixed-term employment contracts to avoid creating permanent employment relationships.
In New Model Private College v Maphosa and Others, the Court confirmed that employees who remain on fixed-term contracts beyond the period permitted by section 198B of the Labour Relations Act 66 of 1995 (LRA) may, by operation of law, be deemed to be employed on an indefinite basis. This decision provides important guidance for both employers and employees regarding the use of fixed-term contracts in South Africa.
Background
The employees were employed by a private educational institution as educators on a series of fixed-term contracts, some extending over a period of approximately ten years.
At the end of 2020, the employer informed the employees that their contracts would expire and invited them to apply for new positions. Shortly thereafter, allegations emerged that they had participated in an unlawful strike.
Although the employees denied any misconduct, they were:
- prevented from returning to work when the school reopened;
- not paid after December 2020; and
- effectively excluded from the workplace.
The employees referred an unfair suspension dispute to the CCMA.
CCMA Ruling
The CCMA commissioner found that the employees had a reasonable expectation that their contracts would be renewed and therefore remained employees.
The commissioner held that the employer had unfairly suspended them and awarded compensation equal to 12 months’ remuneration.
Labour Court Decision
The employer successfully reviewed the arbitration award in the Labour Court.
The Labour Court held that:
- a reasonable expectation of renewal does not automatically mean an employment relationship continues;
- the fixed-term contracts had expired by the passage of time; and
- because the employment relationship had ended, no unfair suspension could have occurred.
The arbitration award was accordingly set aside.
Labour Appeal Court Judgment
The Labour Appeal Court overturned the Labour Court’s decision.
Importantly, the Court found that the Labour Court failed to consider section 198B of the Labour Relations Act, which regulates the use of fixed-term employment contracts.
Section 198B generally provides that employees earning below the statutory earnings threshold who are employed on fixed-term contracts for longer than three months without a justifiable reason are deemed to be employed indefinitely.
The Court noted that the educators had worked continuously on successive fixed-term contracts for several years, with some employed in this manner for almost a decade.
The employer presented no evidence to justify the prolonged use of fixed-term contracts.
Section 198B Creates Permanent Employment by Operation of Law
A key aspect of the judgment is the Court’s confirmation that the deeming provisions contained in section 198B operate automatically.
Accordingly, the employer could not rely on the alleged expiry of the fixed-term contracts as a defence.
Unfair Suspension Upheld
Although the Labour Appeal Court acknowledged that the CCMA commissioner had incorrectly relied on the employees’ reasonable expectation of renewal as proof that the employment relationship continued, the commissioner nevertheless reached the correct outcome.
Because the employees were deemed to be permanently employed under section 198B:
- they remained employees when they were prevented from returning to work;
- the employer’s conduct amounted to a suspension;
- the suspension was neither procedurally nor substantively fair; and
- the compensation awarded by the commissioner was appropriate.
The Labour Appeal Court therefore reinstated the CCMA award.
Why This Judgment Matters
This decision is significant for employers who make extensive use of fixed-term contracts.
The judgment confirms that:
- employers cannot avoid permanent employment simply by repeatedly renewing fixed-term contracts;
- section 198B applies automatically where its requirements are met;
- employees may become permanent by operation of law;
- employers must have a legitimate and objectively justifiable reason for using fixed-term contracts beyond three months; and
- employees deemed to be permanent enjoy the same protection against unfair labour practices and unfair dismissal as other permanent employees.
Key Takeaways for Employers
Employers should carefully review their employment practices to ensure compliance with the Labour Relations Act.
In particular, employers should:
- review all long-term fixed-term contracts;
- document any statutory justification for using fixed-term employment;
- avoid repeated renewals without lawful reasons;
- ensure disciplinary action and suspensions comply with fair labour practices; and
- obtain legal advice before terminating or refusing to renew long-standing fixed-term contracts.
Failure to do so may expose employers to proceedings before the CCMA or Labour Court.
Key Takeaways for Employees
Employees who have worked on fixed-term contracts for extended periods may have greater legal protection than they realise.
Where an employer repeatedly renews fixed-term contracts without a valid reason, employees may be deemed to be permanent employees under section 198B and may be entitled to challenge unfair suspensions, dismissals or other unfair labour practices.
Article written by Craig Berkowitz
23 July 2026
Craig Berkowitz is a specialist labour lawyer and Acting Judge in the Labour Court of South Africa with extensive experience in CCMA arbitrations, disciplinary hearings and Labour Court litigation.
📞 083 453 1822
✉️ cblaw@netactive.co.za
0 Comments