A FIXED-TERM EMPLOYMENT CONTRACT ENDS ON THE AGREED EXPIRY DATE? … RIGHT?

Many employers assume that a fixed-term employment contract automatically ends on its expiry date, without any further legal consequences and have often used this as a mechanism to avoid possible dismissal requirements. However, a recent Labour Appeal Court judgment is an important reminder that non-renewal of a fixed-term contract can, in certain circumstances, amount to an unfair dismissal.

In Naidoo v Tshwane University of Technology and Others [2026] ZALAC 34, the Court upheld an employee’s challenge to the non-renewal of his five-year contract, resulting in reinstatement and back pay of approximately R1.47 million.

When can non-renewal amount to a dismissal?

Section 186(1)(b) of the Labour Relations Act 66 of 1995 recognises that a failure to renew a fixed-term contract may constitute a dismissal where an employee reasonably expected renewal on the same or similar terms, or where the employer offered renewal on less favourable terms in circumstances covered by the provision.

In Naidoo, the contract included a provision for possible renewal and appointment to another suitable position. The employee also had a strong performance record, management representations supporting his continued employment, and evidence that comparable employees had received renewals.

Although the contract contained wording disclaiming an expectation of renewal, the Court confirmed that such a clause is not necessarily decisive. The surrounding circumstances must also be considered.

What can create a reasonable expectation of renewal?

Whether an employee reasonably expected renewal depends on the facts of each case. Relevant considerations may include:

• Contractual terms: Renewal clauses, undertakings or provisions for alternative positions.

• Previous conduct: A history of renewals or consistent treatment of comparable employees.

• Management representations: Assurances or statements suggesting that employment will continue.

• Performance: Particularly where renewal depends on satisfactory performance.

• The nature of the work: Whether the work and the need for the employee’s services continue.

A mere hope of renewal is insufficient. The expectation must be both genuinely held and objectively reasonable.

Is a disclaimer clause enough to protect an employer?

Not necessarily. A clause stating that a contract expires automatically and creates no expectation of renewal is relevant, but it cannot be relied upon as an absolute safeguard.

Employers should ensure that contracts are clearly drafted, renewal provisions are consistent, and amendments are properly documented. They should also take care not to create conflicting expectations through informal assurances or inconsistent practices.

An employer may have legitimate reasons for non-renewal, such as the completion of a project or the loss of funding. However, where non-renewal amounts to a dismissal, the employer must be able to justify it in accordance with the applicable legal requirements.

Practical advice for employers

To reduce the risk of disputes, employers should:

• Clearly define the contract’s duration and any renewal arrangements.

• Avoid unauthorised promises or assurances about continued employment.

• Document performance assessments, renewal discussions and decisions.

• Apply consistent practices and record legitimate reasons for non-renewal.

• Assess the position well before expiry and obtain legal advice where a reasonable expectation of renewal may exist.

Employees who believe they reasonably expected renewal should retain their contracts, amendments, performance reviews, relevant correspondence and any evidence of assurances made by management.

The takeaway

Fixed-term contracts remain a legitimate employment tool, but the expiry date is not necessarily the end of the legal enquiry. The contract’s wording, the employer’s conduct and the surrounding circumstances may all influence whether non-renewal constitutes a dismissal.

Employers should therefore assess the legal implications before allowing a contract to expire, rather than assuming that a disclaimer clause or expiry date provides complete protection.

If you are considering the non-renewal of a fixed-term contract, or your contract has not been renewed despite indications that it would be, legal advice can help clarify your rights and obligations.