New perspectives

Various amendments to the Labour Act (Chapter 28:01) hereinafter called “the Act”, are being introduced. The relevant Bill (Labour Amendment Bill, 2021) stands gazetted.

The Bill seeks to amend, among other sections of the Act, section 12 of the Act in respect to fixed terms contracts.

In this article, the writer focuses on the proposed changes to fixedterm contracts.

The Bill provides that, except in few exceptions, no fixed term contract shall be for less than 12 months.

What this essentially means is that employers who had employees in contracts of less than 12 months will now have to make the necessary changes on the expiry of the current contracts but before the Bill becomes an Act of parliament.

In the result there will be no fixed term contracts with a term which is shorter than one year.

This proposed amendment is proemployee.

The proposed change will therefore, increase job security for employees on fixed term contracts.

However, the proposed change has the potential to limit employment flexibility, productivity and profitability as in some industry fixed terms contracts of less than one year are more flexible, productive and profitable.

Resultantly labour market flexibility may be dampened.

To possibly limit the negative effect on the provision on labour market flexibility, the provision is not cast in stone as it unequivocally accepts that fixed-term contracts of less than 12 months are permissible in setups where the work is of a casual or seasonal nature as well as in situations where the work is of a specific service e.g. the agricultural sector.

It follows that an employer who alleges that the work is seasonal or is for the performance of a specific service shall have the burden of proving the same.

What remains clear is that in industries where casual or seasonal workers are needed or where no specific service is required, but a fixed term contract of less than one year is more productive and profitable, then business will suffer.

In addition to the restriction that is coming with the period of a fixedterm contract, there is now a deeming provision which provides that if an employee were to be on the contract of less than 12 months such an employee shall be deemed to be on a permanent contract.

This provision is pro employee again.

The proposed section reads: “(ii) any fixed term contract that purports to be for a period of less than twelve months shall be deemed to be a contract for an indefinite period.” This stance is not surprising. Following the 2015 amendments to the Act, national employment councils have been capping the maximum number of times a fixedterm contract can be renewed.

The following are examples: commercial sectors- six year contracts; funeral industry (three years), furniture manufacturing industry (two years) and plastics manufacturing industry (10 years).

From 2015, there has been a shift towards the protection of employees on fixed-term contracts.

The proposed amendment will do away with the need for capping the maximum number of times fixed term contracts can be renewed.

Every contract that is of a fixed term nature and is of less than 12 months shall be deemed to be permanent.

When this happens, it means for example, in certain industries where employers are not obliged to pay pension for their fixed-term employees, they will now be obliged to pay such.

The proposed changes will therefore increase employment costs.

This is one of the intense consequences that’s going to flow from this provision.

At law, an employee on a fixedterm contract gets virtually nothing at the expiry of that contract unless something was agreed upon in the employment contract.

There is not even a need to give such an employee notice of the impending end to the employment relationship.

Presumably, to offer some form of protection for workers and to ensure that they at least get terminal benefits at the expiry of the contract, the following provision is being put in place in terms of the proposed amendments: “iii. if the majority of employees engaged by the same employer are on fixed term contracts, and at any time when an employee’s employment is terminated on the expiry of his or her fixed term contract, then the provisions of sections 12C and 12D shall apply to such termination as if it was retrenchment”.

In light of the above provision, sections 12C and 12D shall apply when a fixed-term contract expires.

The consequence is that a retrenchment package becomes payable to the employee who was on a fixed term contract.

Again this provision increases employment costs.

This retrenchment package can be a minimum or the negotiated retrenchment package, which is higher than the minimum, in terms of the proposed amendment.

This provision however does not apply to every employee.

The provision applies if the majority of the employees of one employer are on fixed-term contracts.

The Bill does not define what a majority entails, but one would postulate that this provision applies when more than 50% of the employees of one employer are on fixedterm contracts.

The intention is clear, the legislature wants to do away with what others would term as casualisation of labour, a phenomenon where employees are perpetually on fixedterm contracts or where an employer deliberately puts employees on fixed-term contracts without any reasonable cause.

One thing that exercised my mind is that the provision is seemingly discriminatory.

Employees who are employed in setups that do not have the majority of the employees on fixed-term contracts are not given the same benefit as those who belong to setups that have the majority on fixed-term contracts.

Equally so, it punishes employers who employ more employees on fixed-term contracts even when the nature of business and the setup may not allow everyone to be on a permanent basis.

This is not what the constitution of the land intended when it provided that every person has the right to equality before the law.

In my view this provision may not survive constitutional scrutiny.

Furthermore, it is not clear how section 12 D of the Act will apply when a fixed-term contract terminated.

This is a source of controversy as section 12D provides for special measures to avoid retrenchment which measures are usually complied with before termination.

The legislature needs to closely look at this provision in this regard.

In conclusion, the bottom line is that every employee, save for those on casual work or task contract, will, once the Bill becomes law, be in a longer-term contract of at least 12 months.

Fixed-term contracts of less than 12 months won’t exist when this law is passed.

By making a fixed term employee an employee on a permanent contract, employers may be prejudiced in situations where the work does not qualify as seasonal or task but at the same time, there is a need for flexibility in the management of contracts.

I am also worried that the proposed Section 12 (4a) (c) (iii) is not only seemingly discriminatory as it affords more protection to employees who are employed by employers with many employees on fixedterm contracts compared to those employees employed by employers with fewer employees on fixed-term contracts. It also increases employment costs.

*These weekly articles are coordinated by Lovemore Kadenge, an independent consultant, past president of the ZES and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). Email: kadenge. zes@gmail.com and Mobile no. +263 772 382 852