Can an Employer prematurely terminate a fix term contract?

Can an Employer prematurely terminate a fix term contract?

It has now been established by the Labour Relations Amendment Act that employers may still employ employees on a fix term contract under Section 198 B, provided that certain conditions are adhered to.


The problem now arises that for example the employer employs the employee on a fix term basis for three (3) months and then prematurely terminates the fix term contract and decides to pay the employee for the remainder of the contract.


For most it would make sense that there would be no risk involved should the employer still pay the employee for the remainder of the contract.  This is however the wrong interference that can be drawn and employers may be held liable to pay compensation in addition to the amount paid out in terms of the contract.

In PSA obo Mbiza v Office of the Presidency and others (2014) 3 BLLR 275 (LC); Mr. Mbiza’s contract was prematurely terminated, but he receive full payment for the duration of his contract.  Mbiza disputed this termination on the basis of an alleged unfair dismissal.

During the Arbitration the reason for the early termination was the alleged incompatibility between the new “employer” and Mr. Mbiza.  The Arbitrator found that the dismissal was for a fair reason, but that it was procedurally unfair.  The Arbitrator ordered the employer to pay the employee compensation equivalent to three months remuneration for the procedural unfairness.  Mr. Mbiza referred the matter to the Labour Court.


The Labour Court stated that there was no evidence of incompatibility and found that the dismissal was substantively as well as procedurally unfair and ordered that the employer should compensate Mr. Mbiza with a further three months’ salary.

Thus, should the employer wish to prematurely terminate a fix term contract, he should follow the correct procedure to terminate such employee’s services and such termination must also be for a fair reason.


Thus, the only reasons that would be valid to terminate a fix term employee’s services are if the employee committed misconduct or due to incapacity and the employer followed the correct process.

Should you have any inquiries please feel free to contact one of our consultants.


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