Court rules on ‘automatic termination’

What does the automatic termination clause in your contract mean?

IN AMCU & Others v Piet Wes Civils CC (J 2834/16, 13) January 2017) the Labour Court (LC) rejected the employer’s claim that employment contracts were fixed term because these provided for automatic termination when a contract was cancelled with a client.

The court found that the work being done for the client did not constitute a “specific project that has a limited or defined duration” – which is required for section 198B(4) of the Labour Relations Act to come into force – and therefore did not qualify as “fixed term”.

Employers cannot make the employment relationship subject to the request of a third party who can simply terminate the contract between it and the employer.

The contracts in this case (which existed for more than three months) were indefinite.

This meant that termination constituted dismissal based on operational requirements.

Section 189A(13)(c) (the retrenchment section) of the Labour Relations Act specifically provides that in the case of procedural unfairness affecting dismissals subject to section 189A, the court may direct the employer to reinstate those employees “until it has complied with a fair procedure”.

The Labour Court thus ordered the reinstatement of the affected employees. Only under very specific circumstances can you cancel a contract on the basis of an automatic termination clause.

In most cases, the employer will have to look at alternatives including following the operational requirement procedures of the LRA.

JONATHAN GOLDBERG is CEO of Global Business Solutions