Fixed term contracts of employment are becoming a common practice in the workplace. A fixed term contract is typically entered into for a specific duration (defined by time) or purpose (for a particular project) and would ordinarily expire either with the effluxion of the agreed time or upon the purpose for which it had been entered into being fulfilled (for example the return of a permanent employee who was on maternity leave).

The question that often arises is whether the fixed term contract of employment can be terminated prior to the agreed termination date or the happening of the agreed-upon circumstance.

The common law position is that fixed term contracts of employment cannot be prematurely terminated, unless there is a material breach or repudiation by either party.

The Courts have consistently upheld the principle that by entering into a fixed term contract of employment for a specific period, the parties intend to be bound by the contract for the stipulated duration unless there is express provision made for earlier termination.

Buthelezi v Municipal Demarcation Board [2005] 2 BLLR 115 (LAC) the Municipality terminated Mr Buthelezi’s fixed-term contract early. Mr Buthelezi then claimed this as an unfair dismissal. The Labour Appeal Court agreed with him. In arriving at its finding the Court held:

“There is no doubt that at common law a party to a fixed–term contract has no right to terminate such contract in the absence of repudiation or a material breach of the contract by the other party. In other words there is no right to terminate such contract even on notice unless its terms provide for such termination.”

Nkopane and Others v Independent Electoral Commission (2007) 28 ILJ 670 (LC) the Labour Court was required to determine whether an employer can prematurely terminate a fixed term contract due to its operational requirements. In arriving at the decision that the employer is only entitled to premature termination on the basis of operational requirements, if the contract allows for it, the Court said:

“It could easily have worded the form and the related documents to make it clear that the employment would terminate at the latest on the date specified and was subject to earlier termination for operational reasons.”

The finding in the Buthelezi and Nkopane cases, that there is no common law right to premature termination of a fixed term contract unless the fixed term contract provides for such right was upheld in Lottering and Others v Stellenbosch Municipality [2010] 12 BLLR 1306 (LC). At paras 14 and 20, the court held:

”If the contract is for a fixed term, the contract may only be terminated on notice if there is a specific provision permitting termination on notice during the contractual period – it is not an inherent feature of this kind of contract and accordingly requires specific stipulation.”

In the more recent case of Nord v Civicus World Alliance for Citizen Participation Inc (JS363/12) [2016] ZALCJHB 162 (21 April 2016) the Court held:

“……premature termination of a fixed term contract is permissible, where an express provision is made for such an event.”

An appropriate clause making express provision for premature termination of a fixed term contract of employment would read something like this:

“Either party may terminate this fixed term contract of employment on one calendar months’ written notice only for reason of misconduct, incapacity or the operational requirements of the Company.

Should this fixed term contract be lawfully terminated prior to its expiry, the employee will have no claim for compensation or damages against the Company.”

In today’s ever changing work environment, it is extremely important for employers to ensure that their contracts of employment include their specific requirements.  In the present context, employers must ensure that any fixed term agreement includes a clause allowing for premature termination.

This article was written by Danielle Ebrahim-Naseem, Associate, Norton Rose Fulbright South Africa Inc