The validity of automatic termination clauses in employment contracts
This study aims to establish the validity of automatic termination clauses in employment contracts. An automatic termination clause in an employment contract is a mechanism that has the effect that the expiry of an employment contract cannot constitute a dismissal. In terms of the common law a fixed term contract of employment is terminated automatically as soon as the agreed terms have been reached and it therefore does not constitute a dismissal. The common law therefore created a gap for the exploitation of employees in that the employer can keep the employee on a series of fixed term contracts, which is not in line with the aims of the LRA to create job security. Section 186(1) of the LRA defines a dismissal as an employer who terminated an employment contract with or without notice and an employee who reasonably expected the employer to renew a fixed term contract of employment on equal or comparable terms, and the employer renewed the contract on less favourable terms, or did not renew the contract at all. In terms of section 185 of the LRA every employee has the right not to be unfairly dismissed. Section 23 of the Constitution affords everyone the fundamental right to fair labour practices. The question that arises in respect of these matters is whether automatic termination clauses fall foul of the Constitution and the LRA and whether they are invalid in terms of the LRA and Constitution. In Mahlamu v CCMA and Others the validity of the automatic termination in an employment contract was challenged. The court noted that when an employee signs a contract with an automatic termination clause, the employee waives his right not to be unfairly dismissed in terms of the Constitution and the LRA. The court found that the rights conferred on the employee in terms of the LRA and Constitution are a matter of public interest and cannot be waived by the individual. Employment contracts with automatic termination clauses fall foul of the LRA and the Constitution, are against public policy and thus invalid. The Labour Court stated that a contractual device that renders the termination of a contract something other than a dismissal is exactly the exploitation the LRA prohibits This study aims to establish the validity of different automatic termination clauses in employment contracts, to discuss the interpretation of the LRA and the Constitution regarding automatic termination clauses and to establish to what extent employees are protected against exploitation with regards to employment security in terms of the above-mentioned provisions in employment contracts. The investigation sought to establish whether employees can ‘contract out’ their right not to be unfairly dismissed, and whether these provisions fall within the ambit of the LRA, and more specifically the Constitution. The constitutionality of the current effect of the LRA on employment contracts with automatic termination clauses will be scrutinised. In conclusion the study will discuss the proposed amendments to the LRA and the possible effects should these amendments be enacted. The Amendment Bill, if enacted, will prove the contract of employment with the automatic termination clause to be invalid where the employer cannot justify the reason for the temporary employment. The Amendment Bill will furthermore provide for the extensive protection of the rights of the temporary and fixed-term employees. It is clear that the automatic termination clause in an employment contract which is not based on operational reasons falls foul of the Constitution and LRA.
- Law