Aadil Patel, Director; Leila Moosa, Senior Associate; & Rashaad Dadoo, Associate; Employment Law at Cliffe Dekker Hofmeyr

May an employer engage low-earning employees, supplied by a temporary employment service, on rolling fixed-term contracts that record no end date and give “completion of tasks” as the reason for fixing the term? In South African Clothing and Textile Workers Union obo Members v R Padayachee N.O. and Others (D246/2022) [2026] ZALCD (16 July 2026), the Labour Court answered that question emphatically in the negative.

The Court held that an employer may not rely on vague formulations such as completion of tasks,” or on rolling fixed-term contracts and “call-back” arrangements, to escape the deeming provisions of section 198B of the Labour Relations Act 66 of 1995 (LRA). Two employees placed with a footwear manufacturer and distributor (the client) by a temporary employment service (TES) for longer than three months were deemed to be the client’s permanent employees under section 198B(5) of the LRA, because their contracts neither recorded an end date nor stated a valid reason for fixing the term.

The Court reviewed and set aside the arbitration award in respect of those two employees, substituted findings that they had become permanent employees by December 2018 and were unfairly dismissed, and ordered their reinstatement with full retrospective effect to 2 January 2019 on terms and conditions “on the whole no less favourable” than those governing the client’s directly engaged employees in the same or similar positions.

Background facts

A TES supplied three general workers to the client’s shoe distribution facility. Each had worked there continuously from 2015 or 2016 until December 2017. Their employment was then interrupted for five months, from January 2018 until late May 2018, when each was re-engaged. They worked without interruption from late May 2018 until the client’s annual December shutdown, a period of some seven months. In 2018 they earned R17.36 per hour, below the earnings threshold determined under section 6(3) of the Basic Conditions of Employment Act 75 of 1997 (BCEA).

It was common cause that, having worked for the client through a TES for longer than three months, the employees were deemed to be the client’s employees under section 198A(3)(a) of the LRA. The live question was whether they were employed indefinitely or on valid fixed-term contracts.

Their contracts, concluded with the TES in May 2018, were standard-form documents on which the pre-printed option “completion of tasks” had simply been underlined as the basis for fixing the term. Only one of the three contracts recorded an end date; the other two recorded none.

In December 2018, the client closed its factory for its regular annual shutdown, and the employees were asked to sign “end of contract” documents. Operations resumed on a staggered basis from 2 January 2019, and general workers were called back in line with the client’s usual practice, but these employees were not. Approximately 18 workers referred unfair dismissal disputes to the CCMA within 30 days of the reopening, citing 2 January 2019 as the date of dismissal. The union’s case was that the employees had become the client’s permanent employees by December 2018 and that the failure to call them back was a dismissal.

The Commissioner found that there was a justifiable reason for engaging the employees on extended fixed-term contracts, that the contracts were therefore valid, that the deeming provision in section 198B(5) did not apply, and that the employees had not been dismissed but had merely reached the expiry of their contracts. The Commissioner separately found that one of the three employees had not been correctly identified in the referral form, rejected her explanation for the discrepancy as fabricated, and held that she was not properly before the CCMA. The union took the award on review. The Court declined to disturb the finding excluding that employee: although the Commissioner had dealt too briskly with a plausible cultural explanation for the surname discrepancy, an unexplained discrepancy in the employee’s first name meant the conclusion was not one that no reasonable decision-maker could have reached. The findings that follow therefore concern only the remaining two employees.

The law

The starting point is section 198A(3)(a) of the LRA, under which an employee who earns below the BCEA threshold and is placed with a client by a TES for longer than three months is deemed to be the employee of the client. Whether that employee is employed indefinitely or for a fixed term is then governed by section 198B.

Section 198B(3) permits the employment of a low-earning employee on a fixed-term basis for longer than three months only where the nature of the work is of limited or definite duration, or where the employer can demonstrate another justifiable reason for fixing the term. Section 198B(4) gives examples of justifiable reasons, but the list is not exhaustive. Section 198B(6) imposes a formal requirement: the contract must be in writing and must state the reasons for fixing the term. Section 198B(5) provides that employment for longer than three months is deemed to be on an indefinite basis where the fixed term is concluded or renewed contrary to section 198B(3). Section 198B(7) places the onus on the employer to prove both that there was a justifiable reason for fixing the term and that the term was agreed.

In Piet Wes Civils CC and Another v Association of Mineworkers and Construction Union and Others (2019) 40 ILJ 130 (LAC) (Piet Wes), the Labour Appeal Court held that a “reason” for these purposes must be a compelling one. Linking employees’ job security to the availability of work, or to the subsistence of the employer’s contract with a third party, is an ordinary operational risk of the business and cannot justify withholding the security of indefinite employment. The purpose of section 198B is to provide security of employment except where a fixed term is clearly justified. The Labour Court has held, in Takenote Trading (Pty) Ltd v CCMA and Others [2024] ZALCJHB 197, that the reasons for fixing the term must appear in the contract itself.

The review standard is the familiar one. As the Supreme Court of Appeal put it in Herholdt v Nedbank Ltd and Another (2013) 34 ILJ 2795 (SCA), “a result will only be unreasonable if it is one that a reasonable arbitrator could not reach on all the material that was before the arbitrator.” A commissioner who takes irrelevant considerations into account, or who ignores relevant evidence, and so arrives at an unreasonable result, commits a reviewable irregularity.

The court’s analysis

The Court held that the section 198B enquiry proceeds in two stages and does not begin with justification. The employer must first satisfy the formal requirements of section 198B(6). Neither of the two employees’ contracts recorded an end date. Because a fixed-term contract is defined by reference to termination on a fixed date, on completion of a specified project or on the occurrence of a specified event, the Court held that “a fixed-term contract cannot meet the requirement of being in writing if the fixed-term is not written down.” Leaving the termination date to be decided as the employer went along and then presenting employees with “end of contract” documents was a “contrivance”: there are contracts of indefinite duration, fixed-term contracts and notices of termination, and what these employees signed were not fixed-term contracts even on their face.

In any event, “completion of tasks” could not amount to a reason for the purposes of section 198B(6)(b). In the context of a job, “completing tasks is the reason why everyone goes to work,” and the contracts did not even identify which tasks were meant. Were such a formulation accepted, every employee could be placed on a fixed-term contract. The Court held that the reasons must appear in the contract itself. Evidence about seasonal fluctuations in the client’s order volumes and stock levels was therefore irrelevant, because all that had been recorded was a “meaningless phrase.”

Turning to justification, the Court found that the arrangement was designed to transfer the ordinary risk of doing business to the employees. On the employer’s own version, workers were required to sign “end of contract” documents because the TES did not know how many people, or which of them, would be called back the following year. The practice took away job security and placed it in the hands of a third party, which is precisely the harm section 198B addresses. The nature of the work pointed the same way: checking, repairing and logging stock, counting deliveries against orders, processing returns, conducting quality checks, and packing and pricing shoes. That is not project work; it is the ordinary business of a shoe distribution plant, even if demand ebbs and flows during the year. Fluctuating demand is the cost of doing business and, since the enactment of section 198B, it is not a cost for workers to bear.

The Court held that the Commissioner had taken irrelevant considerations into account and ignored relevant ones. The earlier five-month break was irrelevant, because a longstanding practice of sending workers away does not itself justify fixing the term of their contracts. So too was the Commissioner’s reliance on the employees’ failure to refer a dispute when that earlier break occurred: the justification enquiry is factual and has nothing to do with workers’ subjective choices, their mistakes or their ignorance of the law. Whether one of the employees had been asked to write a test on being called back was likewise beside the point. At the same time, the award made no mention of the undisputed evidence that the work was continuous, nor of the employer’s own evidence that the rolling contract system existed to preserve its discretion over whom to call back. The Commissioner’s findings were, in the Court’s words, “disconnected from the evidence,” and in some respects unsupported by it.

The court’s finding

Only one conclusion was possible on the evidence: the employees were deemed to be the client’s permanent employees under section 198B(5), because the employer had failed to discharge the onus imposed by section 198B(7) of proving the requirements of section 198B(3). By December 2018 they were employed by the client on an indefinite basis, and it followed that when they were not called back to work in January 2019 they were dismissed by their deemed employer.

The Court considered it appropriate to substitute the decision rather than remit the matter. No procedure had been followed, the issues had not been separated, all issues had been ventilated at arbitration, and the employer had advanced no reason why the dismissals were substantively fair. The Court also rejected the suggestion that the employees were confined to a declarator under section 198D, holding, in line with the Labour Appeal Court’s judgement in Bata SA (Pty) Ltd and Another v SA Clothing and Textile Workers Union and Others (2024) 45 ILJ 1541 (LAC), that a dismissed employee may raise deemed-employee status in an unfair dismissal referral under section 191 so that both issues are determined in a single process.

The arbitration award of 18 April 2022 was accordingly reviewed and set aside in respect of the two employees and substituted with findings that they were deemed to be employed by the client on an indefinite basis by December 2018 and that they were unfairly dismissed. The client was ordered to reinstate them to the positions they had occupied until dismissal, on terms and conditions “on the whole no less favourable” than those governing its directly engaged employees in the same or similar positions, with full retrospective effect to 2 January 2019. There was no order as to costs, the Court finding no exceptional circumstances warranting a departure from the general rule in labour matters.

Key Takeaways

• Section 198B involves a two-stage enquiry, and the formal stage comes first. The contract must be in writing and must state the reasons for fixing the term. An employer that fails at this stage never reaches the question of justification.
• A contract that records no end date, no specified project and no specified event is not a fixed-term contract, whatever the parties call it. Asking employees to sign “end of contract” documents at the employer’s convenience is likely to be treated as a contrivance.
• “Completion of tasks” is not a reason for fixing a term. If it were, every contract of employment could be fixed-term. Reasons must be specific, must identify the work or event relied on, and must be recorded in the contract itself.
• Ordinary operational risks, such as fluctuating demand, seasonal peaks and dependence on a third-party client, are not compelling reasons to withhold indefinite employment. They are the cost of doing business and may not be transferred to low-earning employees.
• The onus rests on the employer. Where a below-threshold employee is engaged on a fixed term exceeding three months, section 198B(7) requires the employer to prove both a justifiable reason for fixing the term and that the term was agreed.
• Employers using TES arrangements should audit their fixed-term contracts and call-back practices. A fixed-term employee engaged for longer than three months may not be treated less favourably than a comparable permanent employee unless there is a justifiable reason, and that reinstatement in these circumstances is on terms no less favourable than those of directly engaged staff.

ENDS