Expectation in the Labour Relations Act

The concept of ‘reasonable expectation’ in terms of s 186 (1) (b) has given greater certainty to the area of unfair dismissal and has replaced the principle of ‘legitimate expectation’. This dictum postulates that before s 186 (1) (b) of the Labour Relations Act, 1995 (“LRA”) was enacted, there was much uncertainty in the area of unfair dismissal. This uncertainty was spawned by the principle of legitimate expectation. The flaws and shortcomings of the principle of legitimate expectation had to be cured through a legislative provision. Hence s 186 (1) (b) was enacted. This saw the replacement of legitimate expectation with a reasonable expectation. This, however, begs the question whether the principle of reasonable expectation has indeed cured the maladies and shortcomings of legitimate expectation. The case law evinces that the application of s 186 (1) (b) is riddled with inconsistencies.

1.2 Roadmap

In our quest to determine the efficacy of s 186 (1) (b) as well as the concept of reasonable expectation, we start off by looking at the key definitions that underlie the topic. The researcher traces the origin of the principle of ‘legitimate expectation’ and its application in the administrative law. The rationale for the enactment of s 186 (1) (b) to remedy the perceived flaws of legitimate expectation is given, and the meaning s 186 (1) (b) is explored. Reference is also made to the right to a fair labour practice enshrined as is in the Bill of Rights in the Constitution, 1996. The interpretation of s 186 (1) (b) is given in light of the case law germane to the section. The factors that underlie the principle of reasonable expectation are referred to. Reference is also made to other relevant sections of the LRA, and remedies set out in the Act are also referred to in an attempt to give context to s 186 (1) (b). In conclusion, a synopsis of the researcher’s point of view on the topic is given and recommendations are made.

2. Definitions

To have a fair appreciation of the subject under discussion, it is vital that the following key concepts are defined:

2.1. Legitimate expectation

Legitimate expectation is not defined in the LRA. Neither is this concept defined in any other piece of legislation as well as the predecessor to the current LRA. It is, however, instructive to note that this concept was first mooted in the celebrated case of the Administrator of the Transvaal and others v Traub and others (4/88) (1989) 4 SA 731. Corbett J (as he then was) held that:

“the legitimate expectation doctrine is sometimes expressed in terms of some substantive benefit or advantage or privilege which the person concerned could reasonably expect to acquire or retain and which it would be unfair to deny such person without prior consultation or a prior hearing; and at other times in terms of a legitimate expectation to be accorded a hearing before some decision adverse to the interests of the person concerned is taken.”

Corbett J in the above mentioned case referred with approval to Professor Riggs article published in 1988 in the American Journal of Comparative Law and stated that: “As these cases teach, a person whose claim falls short of legal right may nevertheless be entitled to some kind of hearing if the interest at stake rises to the level of a ‘legitimate expectation.’ The emerging doctrine of legitimate expectation is but one aspect of the ‘duty to act fairly,’ but its origin and development reflect many of the concerns and difficulties accompanying the broader judicial effort to promote administrative fairness.”

Legitimate expectations are capable of including expectations which go beyond enforceable legal rights, provided they have some reasonable basis. The doctrine of legitimate expectation is “construed broadly to protect both substantive and procedural expectations.” The case of Eskom v Marshall and Others (2002) 23 ILJ 2259 is apt. Landmann J (as he then was) held that: “I find support for the view that a legitimate expectation to a benefit or advantage is sufficient to constitute a residual unfair labour practice (if unfairly refused) in the unfair labour practice relating to promotion.”

With the advent of democracy, the South African Interim Constitution, 1993 made reference ‘to legitimate expectation’. Section 24 of the Interim Constitution provided that: “Every person shall have the right to-

(b) procedurally fair administrative action where any of his or her rights or legitimate expectations is affected or threatened.” (my emphasis)

2.2 Dismissal

Dismissal is defined in the LRA. S 186 (1) provides that:

“Dismissal” means that-

an employer has terminated a contract of employment with or without notice;

an employee reasonably expected the employer to renew a fixed term contract of employment on the same or similar terms but the employer offered to renew it on less favourable terms, or did not renew it;

(f)…”

According to Grogan (2009: 144) “a dismissal takes place when the contract is terminated at the instance of the employer and entails some communication by the employer to the employee that the contract has come to an end.”

2.3 Unfair Dismissal

Unfair dismissals are dealt with under s 188 of the LRA. S 188 provides that:

“(1) A dismissal that is not automatically unfair, is unfair if the employer fails to prove-

(a) that the reason for dismissal is a fair reason-

(i) related to the employee’s conduct or capacity; or

(ii) based on the employer’s operational requirements; and

(b) that the dismissal was effected in accordance with a fair procedure

(2) Any person considering whether or not the reason for dismissal is a fair reason or whether or not the dismissal was effected in accordance with a fair procedure must take into account any relevant code of good practice issued in terms of the Act.”

2.4 Reasonable expectation

The concept of reasonable expectation is referred to in s 186 (1) (b) of the LRA, but nowhere is it defined in the LRA. It is, therefore, logical to seek solace in the case law. In Dierks v University of South Africa [1999] 4 BLLR 304 (LC), Oosthuizen J (as he then was) held that: “Reasonable expectation as expressed in s 186 (b) is not defined by the Act but its meaning includes the following considerations:

It essentially is an equity criterion, ensuring relief to a party on the basis of fairness in circumstances where the strict principles of the law would not foresee a remedy;

The Act clearly envisages the existence of a substantive expectation, in the sense that the expectation must relate to the renewal of the fixed term contract.

The expectation is essentially of a substantive nature, vesting in the person of the employee. It is not required that the expectation has to be shared by the employer.

Counsel for the respondent argued that the courts had to apply an objective test as to whether the applicant’s employment had indeed become permanent and whether he could hold the alleged reasonable expectation of continued employment.”

The case of Thomas auf der Heyde v University of Cape Town [2000] 8 BLLR 877 (LC) referred with approval to the above case of Dierks, and confirmed the meaning of a reasonable expectation.

3. Discussion

The concept of legitimate expectation has its origin in the administrative law. It is inherently a principle of administrative law and natural justice. According to Gule (2004: 4) “the body of authority seems to support the view that legitimate expectation cannot form the basis to compel the award of a substantive benefit to an employee.” In the case of Meyer v Iscor Pension Fund [2003] 5 BLLR 439 (SCA), the Supreme Court of Appeal held that:

“As appears from what I have said earlier, Meyer’s contention in this regard was not that the fund was contractually bound to fulfil Iscor’s promise, but that he was entitled to rely on the doctrine of legitimate expectation recognised in Administrative law. At the end of his argument in this court, Meyer relied on the doctrine of legitimate expectation not only to reinforce his objection based on unfair discrimination, but as the mainstay of his whole case. He was however immediately confronted with the fundamental difficulty that, in Administrative law, the doctrine of legitimate expectation has traditionally been utilised as a vehicle to introduce the requirements of procedural fairness and not as a basis to compel a substantive result. According to the traditional approach, it matters not whether the expectation of a procedural benefit is induced by a promise of the procedural benefit itself or by a promise that some substantive benefit will be acquired or retained. The expectation remains a procedural one.”

It is apparent from the above Supreme Court of Appeal case that legitimate expectation is an Administrative law tool, and it relates to procedural fairness only and can, therefore, not yield much in substantive issues. This shortcoming led to the enactment of s 186 (1) (b). This was an attempt to clarify the law on fixed term contracts where the employee has a reasonable expectation for renewal.

According to S 186 (1) (b) of the LRA, in situations where an employee can prove that he or she ‘reasonably expected’ the employer to renew the fixed term contract on the same or similar terms and the employer fails to do so, such failure constitutes a dismissal. In Biggs v Rand Water [2003] 24 ILJ 1957 (LC), Revelas J held that: “The purpose of s 186 (1) (b) is to prevent the unfair practice of keeping an employee in a position on a temporary basis without employment security so than when the employer wishes to dismiss the employee the obligations imposed on the employer in terms of the LRA need not be adhered to.”

The main purpose of s 186 (1) (b) is to prevent the use of fixed term contracts for illegitimate reasons. According to Vettori (2008: 372) “A fixed term contract is usually synonymous with the employment of an employee to complete a certain task or to act as a stand-in for another employee in his or her absence. Once that task has been completed or the employee is back, the employer will have no use for the employee who was employed in order to complete that task or to act as a stand-in.”

Vettori (2008: 372) contends further that “ The employee on a fixed term contract normally has very little prospect of promotion and is normally not given the same benefits, including medical aid or pensions, that other employees in that workplace are entitled to. Most importantly, the fact that in the absence of a tacit term or legitimate expectation to the contrary, a fixed term contract automatically expires when the period contracted for comes to an end, which means that such an employee enjoys very little job security.”

It is apparent from the above that the fixed term contracts are often used by the employer to exploit and to derive more benefits from the employee without any intention to grant such an employee job security. However, armed with s 186 (1) (b), the legislature endeavours to force the employer to renew a fixed term contract on the same or similar terms in circumstances where the employee has a reasonable expectation that the contract should be so renewed, otherwise any failure by the employer to renew the contract would constitute a dismissal. According to Grogan (2005: 142) “ For purposes of s 186 (1) (b), a dismissal may be deemed to have taken place even if the preceding contract has lapsed at the time the employee fails to conclude a new contract.”

According to Grogan (2005: 145), the courts “have been prepared to accept that, in certain circumstances, even when the employee has communicated a clear intention to resign, the acceptance of that resignation constitutes a dismissal if the employee subsequently changes his or her mind and asks to withdraw the resignation.” In this, he is fortified by the case of CEPPWAWU & another v Glass & Aluminium [2002]5 BLLR 399 (LAC).

3.1 Factors underlying reasonable expectation

In ascertaining whether such a reasonable expectation exists or not, courts, including the Commission for Conciliation, Mediation and Arbitration, have applied the principles of fairness or reasonableness. According to Vettori (2008: 373), “factors that were considered in deciding whether such a reasonable expectation is present include the fact that the work is necessary, that the money is available, that the fixed term employees had performed their duties in terms of the fixed term contract well, the renewal of the fixed term contracts in the past and representations made by the employer or its agents.”

In Seforo and Brinant Services 2006 ILJ 855 (CCMA), it was held that in an instance where the employee continued working after the expiration of the fixed term, this would be taken to constitute a tacit renewal on a permanent basis.

In South African Rugby (Pty) Limited v Commission for Conciliation, Mediation & Arbitration [2006] ILJ 176 (CCMA), Gering J stated that “there are a number of factors that may be relevant with regard to the enquiry whether there was a reasonable expectation of renewal on the same or similar terms. These included the actual express terms of the contract, the past practice with regard to renewals, the nature of the employment, the reason for a fixed term, any assurances that the contract would be renewed and failure to give reasonable notice of non-renewal of the contract.”

In the case of King Sabata Dalindyebo Municipality v CCMA & Others [2005] 26 ILJ 474 (LC), the Labour Court upheld the CCMA’s decision that the renewal of the fixed term contracts had created reasonable expectation that the employees’ contracts would be renewed, because the money was available and the work was necessary.

According to Vettori (2208: 373), “this list is not a numerus clausus and ultimately the existence or otherwise of a reasonable expectation requires a value judgment in the light of the surrounding circumstances.” This value judgement is a reasonable test, and requires the judge or arbiter to decide whether a reasonable person in the situation of the employee would harbour a reasonable expectation of renewal. The enquiry propagated in s 186 (1) (b) is an objective one.

It is noteworthy that an express term in a fixed term contract to the effect that the employee entertains no expectation of renewal is not a guarantee that no legitimate expectation in terms of s 186 (1) (b) can be found to exist. In this, we are fortified by the case of Yebe and University of Kwazulu-Natal (Durban) 2007 ILJ 490 (CCMA).

According to Vettori (2008: 374) “The words ‘on the same or similar terms’ were given a literal interpretation in Dierks v University of South Africa to the effect that a reasonable expectation in terms of this section can never include an expectation of permanent employment.” However, in the case of McInnes v Technikon Natal [2000] 6 BLLR 701 (LC), held otherwise and disagreed with the literal interpretation employed in the above case of Dierks, and held that since it is the employer that creates the reasonable expectation, if the expectation created is for an indefinite period, then the section must be read to include that situation.

3.2 Right to a fair labour practice

It is of paramount importance to bear in mind s 23 of the Constitution. This section gives an employee an inalienable right for a fair labour practice. Thus the employer has to guard against offending the employee’s inalienable right.

Notwithstanding the above, Chapter v of the Basic Conditions of Employment Act, 1997 provides that a contract of employment terminable at the instance of a party to the contract may be terminated only on notice. Thus, it is important for the employer to keep this chapter in mind when they deal with fixed term contracts.

3.3 Onus of proof

Where there is a reasonable expectation of renewal by an employer and the employer fails to renew, this constitutes a dismissal. In terms of s 192, the onus to prove dismissal rests with the employee. Thus in any proceedings concerning any dismissal, the employee must establish the existence of the dismissal. in the case of Ferrante v Key Delta [1993] 14 ILJ 464 (IC), it was accentuated that the onus of proving a reasonable expectation rests on the employee.

3.4 Remedies

When one deals with remedies, sections 193 and 194 of the LRA have to be

borne in mind. In terms of s 193 (1), if a judge or an arbitrator finds a dismissal to be unfair, that is, where there is failure to renew a fixed-term contract on the same or similar terms where there is a reasonable expectation of renewal, the judge or an arbitrator may order the employer to (a) reinstate the employee; or (b) order the employer to re-employ the employee; or (c) order the employer to pay the employee compensation.

In terms of s 194, the award for compensation cannot exceed twelve months’ salary unless the dismissal is automatically unfair. In the event of automatically unfair dismissal, the award cannot exceed an amount of twenty four months’ salary. Given the damaging effect on the employer of s 194, the employers need to steer clear of automatically unfair dismissals.

3.5 Shortcomings of S186 (1) (b)

Despite the legislature’s intervention, it is clear from the case law that there are inconsistencies in the interpretation of s 186 (1) (b) by the courts and arbiters. Much certainty needs to be made to avoid inconsistencies and uncertainties.

Another shortcoming of s 186 (1) (b) that is glaring is the fact that there is uncertainty facing a fixed term employee wishing to take an employer to task for failing to renew the contract as to whether or not the failure will be taken to constitute a dismissal. This matter has to be clearly spelt out in the LRA. As the section stands, it is not at first glance clear. Another shortcoming is that if the expectation is indeed found to be reasonable, there is uncertainty as to whether the expectation can only be for another fixed term or whether the expectation can include an expectation of renewal for an indefinite period of time.

There is also uncertainty about the award the arbitrator will make should the employee be successful. The arbitrator is expected to determine this with regard to what is reasonable in the circumstances. In a situation where the motivation for entering into a contract on a fixed term basis is not honest or is illegitimate, the aggrieved employee can only take the employer to task once the contract has expired and the employer has failed to renew it in circumstances where there was a reasonable expectation of renewal.

4. Conclusion and Recommendation

The concept of legitimate expectation has its genesis in the administrative

law and natural justice. Section 186 (1) (b) was enacted to bring clarity to areas of fixed term contracts and to bring more certainty to the regulation of fixed term contracts. The rationale behind the enactment of s 186 (1) (b) was to cure a mischief by the employer of entering into a fixed term contract for illegitimate purpose. However, the case law referred to in the body of this work has shown that there are still inconsistencies in the interpretation of s 186 (1) (b). The jury is still out. S 186 (1) (b) has introduced a reasonable test, and in the case law, it is apparent that the factors that the arbitrator has to look at to arrive at the answer as to whether there was indeed a reasonable expectation for renewal are legion. The list of factors is, however, not exhaustive.

It is recommended that s 186 (1) (b) should be redrafted to ameliorate inconsistencies in its interpretation and ambiguities.