Does the employer have the right to cancel a fixed term contract for operational reasons

Can an employer cancel a fixed term contract for operational reasons ?

In 2018 David Sedumedi, concluded a five-year fixed term contract of employment with a university, where he was appointed as director until 31 September 2023.  The University informed him that his position as director would become redundant through the creation of a new position and that he would now have a different subordinate position which would report to the Director: Communications and Marketing. Sedumedi said he participated in the retrenchment process but  expected to be automatically appointed to the newly created position of director. However in  August 2021 the University said that he would not be automatically appointed to this position, and began advertising the position for possible incumbents. Sedumedi did not apply for the new position of director. In February 2022, the University gave him a notice of the termination of his services for operational reasons and said that someone else had been appointed to the position of director and that he was being dismissed as there were no other suitable positions available for him.  

Sedumedi challenged this saying that the University had no legal right to terminate his fixed-term contract prior to its natural end date on 31 September 2023. He argued that the notice of termination was a repudiation of his contract of employment and insisted that was entitled to payment of the balance of his contract, which was in excess of R2 million. He based his claim on the common law principle that when an employer concludes a fixed term of contract of employment with the employee, unless the employee breaches a material term of a fixed-term employment contract, or the fixed-term contract otherwise provides for termination on notice, the employer has no right to prematurely terminate a fixed-term contract prior to its natural end date. The University’s argued that one month’s notice was sufficient when the termination of the contract was for operational reasons. The court found that the University’s termination policy did not intend to alter any contractual terms contained in the written contracts of employment concluded between the University and its respective employees. The court said that Sedumedi’s fixed-term contract did not entitle the University to terminate his employment on notice on the basis of its operational requirements (or indeed on any basis other than his material breach of the contract). The Labour Court awarded him damages in the sum of R2,063,472.42 for the breach of the contract. Consequently unless a right is specifically agreed to as a contractual term, there is no right to terminate a fixed term contract for operational reasons.

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