Fixed-Term Contracts: Why “Completion of Tasks” Is Not Enough

The use of fixed-term contracts provides employers with flexibility, particularly where operational requirements fluctuate. That flexibility is, however, subject to important statutory limitations. In South African Clothing and Textile Workers Union obo Members v R Padayachee N.O. and Others (D246/2022) [2026] ZALCD, handed down on 16 July 2026, the Labour Court reaffirmed that employers cannot rely on vague contractual wording or rolling fixed-term arrangements to avoid the protections afforded by section 198B of the Labour Relations Act 66 of 1995 (“LRA”). The case concerned employees earning below the applicable earnings threshold who were supplied to a footwear business by a temporary employment service (“TES”). The employees had worked at the client’s premises for extended periods and were re-engaged in May 2018. Their contracts referred to “completion of tasks” as the reason for fixing the term, but two of the contracts contained no end date. Following the client’s annual December shutdown, the employees were not recalled when operations resumed in January 2019. The Court ultimately found that they had become indefinite employees of the client and that their failure to be recalled constituted unfair dismissal.

The Statutory Framework

Section 198A(3)(a) of the LRA provides that an employee earning below the prescribed threshold who is placed with a client by a TES for longer than three months is deemed to be the employee of the client, subject to the statutory exceptions. Section 198B then regulates when such an employee may be employed on a fixed-term contract exceeding three months. This is permissible only where the nature of the work is of a limited or definite duration, or where there is another justifiable reason for fixing the term. The legislation also imposes formal requirements. In terms of section 198B(6), the contract must be in writing and must state the reason for fixing the term. Section 198B(5) provides that where these requirements are not met, employment for longer than three months is deemed to be on an indefinite basis. The onus rests on the employer to prove both the justifiable reason and that the fixed term was agreed. The Court emphasised that this enquiry involves two stages: the employer must first satisfy the formal contractual requirements before the question of substantive justification is considered.

“Completion of Tasks” Is Not a Sufficient Reason

The Court found that contracts which do not record an end date, specified project or specified event cannot properly establish a fixed term. Of particular significance was the use of the phrase “completion of tasks” as the reason for fixing the term. The Court found this formulation to be too vague to satisfy section 198B(6). Completing tasks is inherent in virtually every employment relationship and does not identify the particular task or event which will bring the employment relationship to an end. The Court also rejected the practice of determining the end of the employment relationship retrospectively and then asking employees to sign “end of contract” documents. A fixed-term contract must establish the term when the contract is concluded; the employer cannot retain an unfettered discretion to decide later when the employment will end. Importantly, the reason for fixing the term must appear in the contract itself. The employer could therefore not rely on evidence of fluctuating orders or stock levels to give meaning to the otherwise meaningless contractual phrase.

Ordinary Business Risk Does Not Justify Insecurity

The Court further considered whether there was a substantive justification for the fixed-term arrangements. It found that the employees performed ordinary and ongoing functions within the client’s distribution operation rather than work of a limited or definite duration. The employer’s reliance on fluctuations in demand was insufficient. This approach is consistent with the Labour Appeal Court’s decision in Piet Wes Civils CC and Another v Association of Mineworkers and Construction Union and Others (2019) 40 ILJ 130 (LAC), where the Court held that the justification required by section 198B must be compelling. Ordinary operational risks, including fluctuations in the availability of work or dependence on third-party business, are generally risks inherent in running a business and cannot simply be transferred to employees. In the present case, the rolling contract and “call-back” arrangement effectively placed employees’ job security in the hands of the employer or TES. The Court regarded this as contrary to the purpose of section 198B, which is intended to provide greater employment security to qualifying employees.

The Consequences of Non-Compliance

Because the employer failed to establish the requirements of section 198B, the employees were deemed to have been employed by the client on an indefinite basis by December 2018. Their subsequent failure to be recalled was therefore not the expiry of a fixed-term contract. It amounted to a dismissal. As no fair procedure had been followed and no substantive justification for the dismissals had been established, the Court found the dismissals unfair. The arbitration award was accordingly reviewed and set aside. The employees were reinstated with retrospective effect from 2 January 2019 on terms and conditions which were, on the whole, no less favourable than those applicable to directly employed employees performing the same or similar work. The judgment also confirms that deemed-employee status may be raised as part of an unfair dismissal dispute, allowing the employee’s employment status and the fairness of the dismissal to be determined in the same proceedings.

Practical Implication for Employers

The judgment provides a number of important reminders for employers:

• Fixed-term contracts must be properly drafted. Where section 198B applies, the contract must record the term and the specific reason for fixing it.
• Generic wording is insufficient. Phrases such as “completion of tasks” do not constitute a sufficiently specific justification.
• The reason must appear in the contract. Employers cannot rely on evidence introduced later to cure an inadequate contractual provision.
• Ordinary operational uncertainty is not enough. Fluctuating demand, seasonal changes and reliance on third-party business will not automatically justify fixed-term employment.
• TES arrangements do not circumvent section 198B. Qualifying employees may become deemed employees of the client after three months.
• Rolling contracts and call-back arrangements carry significant risk. An arrangement which allows the employer to decide retrospectively who will continue working may result in employees being deemed to be indefinitely employed.
• Non-compliance can have substantial consequences. Where an employee is deemed permanent and is subsequently dismissed, the employer may face reinstatement and retrospective remuneration orders.

The decision is a timely reminder that fixed-term employment should not be used as a mechanism to transfer ordinary business risk to employees. Employers who make use of fixed-term contracts or TES arrangements should review their contractual wording and renewal practices to ensure compliance with sections 198A and 198B of the LRA.