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Ukweza Holdings (Pty) Ltd v Nyondo and Others (PA2/19) [2020] ZALAC 7; [2020] 6 BLLR 544 (LAC); (2020) 41 ILJ 1354 (LAC) (4 March 2020)

80 Reportability
Labour Law
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Brief Summary

Labour Law — Dismissal — Fixed-term contract — Appellant's project manager employed on fixed-term contract which expired — Employee continued to work after contract expiration — Appellant issued notice of termination post-expiration — Commissioner ruled employee was dismissed and awarded compensation — Appellant appealed, contending no dismissal occurred as contract ended by effluxion of time — Court held CCMA erred in finding dismissal; fixed-term contract ended as per its terms, and no legitimate expectation of permanent employment existed.

Comprehensive Summary

Summary of Judgment


1. Introduction


This matter concerned an appeal in the Labour Appeal Court against a judgment of the Labour Court dismissing a review application. The underlying dispute arose from a CCMA arbitration award in which the commissioner held that the termination of the third respondent’s engagement constituted a dismissal and awarded compensation.


The appellant was Ukweza Holdings (Pty) Ltd, an employer operating a catering business. The first respondent was the commissioner (Nyondo A NO) who issued the arbitration award. The second respondent was the Commission for Conciliation, Mediation and Arbitration (CCMA). The third respondent was the employee (Oliver Michael David), who represented himself in the appeal.


Procedurally, after the employee referred a dispute to the CCMA, the commissioner issued an award finding a dismissal and unfairness, with compensation. The employer then brought a review application in the Labour Court to set the award aside, which was dismissed by Lallie J. With leave of the Labour Court, the employer appealed to the Labour Appeal Court. The appeal also involved an application for condonation for the late filing of the notice of appeal.


The general subject-matter of the dispute was whether the CCMA had jurisdiction to arbitrate because the employee had been dismissed, or whether the employment relationship ended by effluxion of time upon expiry of a fixed-term contract, in which event the CCMA would lack jurisdiction to determine an unfair dismissal dispute.


2. Material Facts


Ukweza Holdings provided catering services to various customers, including Life St George Hospital. It required a project manager on site at that hospital. When its project manager resigned, Ukweza appointed the employee to replace the resigned manager on a fixed-term contract for the period 11 December 2014 to 31 December 2014.


It was common cause that despite the initial fixed-term contract ending on 31 December 2014, the employee continued to render services thereafter. Only in the middle of January 2015 did the employer approach the employee to extend the fixed-term contract, and the employee agreed to an extension until 31 January 2015.


The employee learned that the position he occupied had been advertised, and he raised this with his superior, Mr Bam. While the content of their discussion was disputed, it was not disputed that Mr Bam informed the employee that he would be considered for the post along with other candidates.


On 2 February 2015, the employer emailed the employee advising that he had been unsuccessful in his application for the project manager post, that his contract would not be extended, and that it would end on 13 February 2015. On 3 February 2015, the employee received a notice of termination stating unequivocally that his “fixed term contract will end on the 13th February 2015”. The selected end date of 13 February 2015 was linked to the employer’s mistaken belief that it was obliged to give two weeks’ notice in terms of the Basic Conditions of Employment Act 75 of 1997.


The employee treated the termination as a dismissal and referred a dispute to the CCMA. At the outset of arbitration, the employer raised that there was no dismissal because the contract had terminated by effluxion of time. The commissioner ruled that the employee had been dismissed and that the employer bore the onus to prove fairness. The commissioner reasoned that because the fixed-term contract had expired on 31 January 2015, the subsequent termination letter could not terminate an expired contract and thus constituted termination of employment in terms of section 186(1)(a) of the Labour Relations Act 66 of 1995, leading to a finding of unfair dismissal and an award of compensation.


On review, the Labour Court upheld the commissioner’s approach on jurisdiction, finding that the commissioner was correct that the CCMA had jurisdiction and that the fixed-term contract had already expired when the termination notice was issued.


3. Legal Issues


The central legal question was whether the CCMA had jurisdiction to arbitrate the dispute, which depended on whether there had been a dismissal as contemplated by the Labour Relations Act, or whether the employment ended by effluxion of time upon expiry of a fixed-term contract.


A further legal issue (arising from the employer’s grounds of appeal) concerned the proper standard of review applicable to a commissioner’s jurisdictional ruling, namely whether the Labour Court was required to determine the jurisdictional issue de novo on a correctness standard, as opposed to deferring to the commissioner on a reasonableness approach.


Although additional issues were raised by the employer—whether the commissioner decided the “wrong dispute” (by focusing on section 186(1)(a) rather than an alleged expectation of renewal) and whether compensation was excessive—the Labour Appeal Court treated these as subsidiary and ultimately unnecessary to decide once jurisdiction was resolved.


The dispute therefore primarily concerned a question of law (jurisdiction and the correct test), applied to a largely common-cause factual matrix about the contractual periods, the employee’s continued service, and the employer’s communications.


4. Court’s Reasoning


The Labour Appeal Court held that where jurisdiction is in issue, the commissioner’s decision is reviewable on an objective basis: the applicable standard is correctness, not reasonableness. In this case, the employer had challenged jurisdiction on the basis that there was no dismissal because the contract ended by effluxion of time. The Labour Appeal Court accepted that the Labour Court ought to have approached the jurisdictional issue on the basis of whether the commissioner was right or wrong.


Turning to the commissioner’s reasoning, the Labour Appeal Court criticised the approach as too technical, because it did not sufficiently account for the practical manner in which the parties conducted themselves. The commissioner had reasoned that, since the fixed-term contract ended on 31 January 2015 and the notice of termination was issued thereafter, the notice could not relate to a contract that had expired, leading to the conclusion that the employee must have been on an indefinite contract from 1 February 2015.


The Labour Appeal Court reasoned that, on that logic, the employee would have had to be treated as a permanent employee already from 1 January 2015, because he continued working after the initial contract ended on 31 December 2014. However, the evidence showed that the parties only discussed and agreed the January fixed-term extension mid-January, and there was no contemporaneous suggestion that the relationship had converted to permanent employment simply because the employee continued working after the earlier expiry. The Court treated this as demonstrating that the commissioner’s inference of an automatic “morphing” into indefinite employment was not supported by how the relationship was managed.


The Labour Appeal Court further addressed the employee’s reliance on an alleged expectation of being permanently appointed. It held that the argument of a legitimate expectation was misconceived on the facts, because the employee knew (or became aware) that the employer had advertised the post and he made himself available to be considered in competition with other candidates. In those circumstances, the Court held that there could be no legitimate expectation to the very post for which he competed and was unsuccessful.


The Court also rejected the proposition that continued service after the end of January meant the fixed-term contract became permanent. It treated the employer’s mistaken belief about paying two weeks’ notice (during which the employee did not render, and was not required to render, services) as insufficient to alter the character of the fixed-term relationship.


On the facts as found relevant, the Labour Appeal Court concluded that the fixed-term contract ended on 31 January 2015. It emphasised that the mere fact that the employer did not inform the employee before expiry that the contract would not be renewed did not mean the contract was automatically extended or that employment became permanent, absent a legal provision producing that consequence.


Having found that the fixed-term contract ended by effluxion of time and that there was no dismissal, the Court held that the CCMA had no jurisdiction to arbitrate an unfair dismissal dispute. In light of that conclusion, the Court considered it unnecessary to determine the remaining issues regarding the characterisation of the dispute and the quantum of compensation.


As to costs, the Court held that it was not a matter where costs should follow the result. The Court also granted condonation for the late filing of the notice of appeal, being satisfied that it should be granted on the information before it.


5. Outcome and Relief


The Labour Appeal Court granted condonation for the late filing of the notice of appeal.


The appeal was upheld, and the order of the Labour Court was substituted. The CCMA award was reviewed and set aside and replaced with an order that the CCMA lacked jurisdiction to arbitrate the dispute in the absence of a dismissal.


No order as to costs was made.


Cases Cited


Ukweza Holdings (Pty) Ltd v Nyondo and Others (PA2/19) [2020] ZALAC 7; [2020] 6 BLLR 544 (LAC); (2020) 41 ILJ 1354 (LAC)


Legislation Cited


Basic Conditions of Employment Act 75 of 1997


Labour Relations Act 66 of 1995 (section 186(1)(a))


Rules of Court Cited


No rules of court were cited in the judgment.


Held


The Labour Appeal Court held that the fixed-term contract ended by effluxion of time on 31 January 2015 and that the subsequent notice of termination did not convert the relationship into indefinite employment or establish a dismissal. Because there was no dismissal, the CCMA had no jurisdiction to arbitrate the dispute as an unfair dismissal matter. The Court substituted the Labour Court’s order with an order reviewing and setting aside the CCMA award and replacing it with a jurisdictional finding in the employer’s favour, granted condonation for late filing of the notice of appeal, and made no costs order.


LEGAL PRINCIPLES


A commissioner’s ruling on jurisdiction is subject to review on the standard of correctness; the reviewing court must determine objectively whether the CCMA had jurisdiction, rather than whether the commissioner’s conclusion was merely reasonable.


A fixed-term contract ordinarily terminates by effluxion of time on its expiry date. The employer’s failure to give advance notice that the contract will not be renewed does not, without more and absent a legal provision to that effect, automatically extend the contract or convert the relationship into permanent employment.


An employee cannot establish a legitimate expectation to continued or permanent appointment to a post where the employee knew the post was being advertised and participated in a competitive process for it, but was unsuccessful; the factual context may negate the asserted expectation.


An employer’s mistaken belief about giving notice pay under the BCEA, and the issuing of a notice referencing a later date, does not on its own establish that the fixed-term relationship has become indefinite where the underlying fixed-term arrangement has already expired and the relevant context does not support a conversion to permanent employment.

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[2020] ZALAC 7
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Ukweza Holdings (Pty) Ltd v Nyondo and Others (PA2/19) [2020] ZALAC 7; [2020] 6 BLLR 544 (LAC); (2020) 41 ILJ 1354 (LAC) (4 March 2020)

IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA, PORT ELIZABETH
Case no: PA2/19
In
the matter between:
UKWEZA HOLDINGS (PTY)
LTD                                                    Appellant
and
NYONDO
A NO

First Respondent
THE COMMISSION FOR
CONCILIATION
MEDIATION
AND
ARBITRATION                                                     Second

Respondent
OLIVER
MICHAEL
DAVID

Third Respondent
Heard:
18 February 2020
Delivered:
04 March 2020
Coram:
Waglay JP, Murphy and Savage AJJA
JUDGMENT
WAGLAY
JP
[1]
The appellant, with
leave of the Labour Court, appeals against the judgment and order of
that Court (Lallie J) which dismissed its
review application to set
aside the award of the first respondent (commissioner).
[2]
The facts relevant for
the determination of this appeal may be summari
sed
as follows: The appellant conducts a catering business that provides
service to a number of customers. One of those customers
is Life St
George Hospital. The appellant is required to have a project manager
on site to run its business at the Life St George
Hospital. Its
project manager resigned and the appellant appointed the third
respondent (employee) on a fixed-term contract from
11 December 2014
to 31 December 2014 to replace its resigned project manager. Although
the contract ended on 31 December 2014,
the employee continued to
render services to the appellant. It was only after the middle of
January 2015 that the appellant approached
the employee to extend the
fixed-term contract to 31 January 2015. The employee agreed.
[3]
The testimony of the
employee was that it is upon a query from a prospective candidate
that he became aware that the position he
occupied had been
advertised. The employee contacted Mr Bam his immediate superior to
enquire about the advertisement. Mr Bam testified
for the appellant.
Although the two testimonies differ on what was said to each other,
it is not disputed that Mr Bam informed
the employee that he would
also be considered for the post along other candidates. On 3 February
2015, the employee received a
notice of termination of his employment
which unequivocally reflected that his “fixed term contract
will end on the 13
th
February 2015”. This notice of termination of employment was
issued a day after the employer had emailed the employee notifying

him that he had been unsuccessful for the position of project
manager. The e-mail also intimated that the employee’s contract

would not be extended and would come to an end on the 13
th
of February 2015. The reason for the date of 13 February 2015 was
that the employer was under the mistaken belief that even though
the
fixed-term agreement had come to an end it was obliged to give two
weeks’ notice of termination in terms of the
Basic Conditions
of Employment Act 75 of 1997
.
[4]
The employee construed
the termination of his contract as a dismissal. He referred his
dismissal to the Commission for Conciliation,
Mediation and
Arbitration (CCMA). At the outset of the arbitration, the
commissioner was confronted with the question whether there
was any
dismissal as the appellant contended that the contract terminated by
effluxion of time. The commissioner made a ruling
that the employee
was dismissed and that the appellant had to prove the fairness of the
dismissal.
[5]
The employee testified
in essence that he had the expectation that he would be made
permanent once the appellant secured the contract
with Life St George
Hospital. He further said that the appellant knew that he had no
private hospital experience as he disclosed
that during the
interview. The employee further stated that a Ms Oosthuizen
apparently employed by the appellant assured him that
that his lack
of experience was not a problem because he was the right person for
the job as she knew him from a previous project.
As regards the
extension of his contract to 31 January 2015, the employee testified
that it was a temporary measure while awaiting
the service agreement
with Life St George Hospital at which time; his contract would have
been made permanent.
[6]
Mr Bam testified that
at the time of the appointment of the employee, the appellant had not
yet signed the service level agreement
with Life St George Hospital.
Hence the fixed-term contract was extended to 31 January 2019. He
further alluded to the fact that
because the appellant was on a
probationary period for three months, the appellant had to “up
his game” to secure the
service level agreement. This is why
the appellant needed to appoint an on-site project manager. Under
cross-examination, he stated
that the appellant did not know at the
time when it offered the fixed-term contracts that the employee had
no hospital experience
and it was for this reason that he was not
appointed to the post. He confirmed that the employee sought and was
considered for
the post and was not successful. In the circumstances,
averred the appellant that the employee could have had no expectation
of
being appointed otherwise he would have not have wanted to be
considered in competition to other applicants for the post.
[7]
The commissioner
reasoned that the employee continued working after the fixed-term
contract ended on 31 January 2015. Consequently,
the termination
letter of 03 February 2015 which incidentally was the next working
day after 31 January, was not terminating the
fixed-term contract
because that contract was no longer in operation as it had expired.
The commissioner thus found that the letter
of 03 February 2015
constituted a notice of termination of the employee’s contract
and a dismissal in terms of
section 186(1)(a)
of the
Labour Relations
Act 66 of 1995
. Having made a ruling that the matter was a dismissal
dispute, the commissioner analysed the evidence to determine the
fairness
of the dismissal, found the dismissal unfair and awarded the
employee compensation.
[8]
Dissatisfied with the
outcome of the arbitration, the appellant sought to review the award.
The Labour Court dismissed the review
application. The court reasoned
that the commissioner was correct in his finding that the CCMA had
jurisdiction. Further that the
commissioner could not be faulted to
find that the fixed-term contract had already expired at the time
that the appellant issued
the notice of termination of the
employment.
[9]
The appellant seeks to
reverse the decision of the Labour Court on three grounds. The
appellant first of all contends that the CCMA
had no jurisdiction to
entertain the dispute as it was not one of dismissal and that the
Labour Court applied the incorrect test
in dealing with the question
of jurisdiction. The appellant submits that because the review
application concerned an issue of jurisdiction,
the Labour Court was
obliged to determine the issue by determining
de
novo
whether the
commissioner’s decision was right or wrong. The appellant then
argued that by deferring to the commissioner’s
decision; the
Labour Court erred by applying the incorrect legal review principle.
[10]
The second contention
is that the commissioner determined the wrong dispute before him. The
appellant contends that the employee’s
evidence was to the
effect that he had an expectation that his contract would be renewed
and as such the commissioner had to decide
whether the employee had
established a reasonable expectation of a permanent employment.
[11]
The last contention
related to the quantum of compensation. The appellant contends that
the commissioner did not exercise his discretion
judicially as the
compensation amount was grossly excessive. It submits that the Labour
Court should have set aside the compensation
and substituted it with
one month’s salary.
[12]
The appellant is
correct. When it comes to the issue of jurisdiction, the decision of
the arbitrator would be reviewable on objectively
justifiable
grounds. The test is that of correctness and not one of
reasonableness. At the arbitration, the appellant raised the
CCMA’s
lack of jurisdiction because there was no dismissal as the contract
had terminated by effluxion of time. This contention
was met with the
employee’s version that he had been dismissed as he expected a
renewal of his contract on a permanent basis
once the appellant had
secured the contract with Life St George Hospital. The commissioner
found that the fixed-term contract ended
on 31 January 2015 and that
the notice period issued on 03 February 2015 could not be for a
contract that had already expired.
Consequently, the commissioner
found that the employee was on an indefinite contract from 01
February 2015 and that he had been
dismissed.
[13]
The above approach is
not only too technical an approach, it fails to take into account the
real and practical way in which the
parties dealt with each other. On
the commissioner’s analysis, the employee should, in fact, have
been in the appellant’s
permanent employ on 1 January 2015
already because he had remained in the appellant’s employ on
that date despite the fact
that the original fixed contract had come
to end on 31 December 2014. The reality was that the appellant and
the employee only
commenced discussion and agreed on the fixed-term
contract for the month of January sometime after the second week of
January and
there was no issue of the employment being permanent
because of the absence of a new fixed-term contract or the employee
remaining
in the appellant’s employ after the expiry of the
original contract.
[14]
On 3 February, after
being informed that he was unsuccessful, the employee raised the
issue that he had a legitimate expectation
to be permanently
appointed to the post and as such the notice to say that his fixed
term contact came to an end constituted a
dismissal. This argument is
misconceived. The facts are that the employee was or became aware
that the appellant advertised to
fill the post the employee occupied
and that he made himself available to be considered for the post. In
the circumstances there
could be no legitimate expectation to the
post he occupied.  Furthermore, that he rendered services to the
appellant after
the end of January when his fixed-term contract came
to an end does not mean that that the fixed-term contract morphed
into permanent
employment. Also the appellant’s mistaken belief
that it was obliged to pay two weeks’ notice pay, during which
time
the employee did not nor was he required to render any services
mean that the relationship had gone beyond the fixed-term
relationship.
[15]
In my view, the fixed
term contact ended on 31 January 2015. The fact that the appellant
did not inform the employee prior to the
expiry of the contract that
the contract will not be renewed or extended or that it will be
coming to an end does not mean that
it is either automatically
extended or that the employment has become permanent, unless
provisions of the law specifically provided
for that.
[16]
It follows therefore
that the CCMA erred in concluding that there was a dismissal and as
such it was entitled to arbitrate the dispute.
[17]
In the light of the
above there is no reasons to deal with the other two issues raised by
the appellant. This is also not a matter
where costs should follow
the result.
[18]
Finally, the appellant
has sought condonation for the late filing of its notice of appeal. I
am satisfied that condonation should
be granted.
[19]
In the result I make
the following order:
(a)
Condonation for the late filing of the notice of appeal is granted.
(b)
The appeal is upheld and the order of the Labour Court is substituted
to read:
“
The award
handed down by the CCMA is hereby reviewed and set aside and replaced
with the following: The CCMA has no jurisdiction
to arbitrate the
dispute in the absence of a dismissal.”
_______________
Waglay JP
I agree:
________________
Murphy
AJA
I agree
_______________
Savage AJA
APPEARANCES:
FOR
THE APPELLANT:
Mr Orton, attorney from Snyman attorneys
FOR THE THIRD RESPONDENT:
In person

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