Unpacking the legal implications of fixed-term employment contracts in Tanzania

In Tanzania, the legal framework governing fixed-term employment contracts is well-defined under the Employment and Labour Relations Act [Cap 366 R.E 2019] (the ELRA) and the Employment and Labour Relations (General) Regulations, 2017 (the General Regulations). Regulation 11 of the General Regulations mandates a minimum duration of 12 months for fixed-term contracts. Despite this, several cases have emerged where employers issued contracts for shorter durations, leading to disputes and legal challenges.

A fixed-term contract, also known as a contract for a specified period, is an agreement between an employer and an employee that lasts for a specific duration. According to the ELRA, a fixed-term contract has a predetermined start and end date, clearly defining the term of employment. This contract expires or terminates automatically when the specified period lapses unless the contract stipulates that it shall be renewed.

This article explores the legal approaches to fixed-term contracts through case law principles, focusing on the minimum duration requirements and the legal implications for employers who fail to comply with the minimum requirements outlined in the General Regulations.

The minimum duration requirement for fixed-term contracts

Section 14(1)(b) of the ELRA permits employers to enter into fixed-term employment contracts with professionals and management employees. Additionally, Regulation 11 of the General Regulations mandates that a fixed-term contract under section 14(1)(b) of the ELRA must be for no less than 12 months.

Legal implications for employers who fail to comply with the minimum requirement of 12 months

Despite clear legal guidelines, some employers continue to issue fixed-term contracts with durations shorter than 12 months for managerial or professional positions, often driven by the need for flexibility and cost management. However, the High Court of Tanzania (Labour Division) (the Labour Court) have consistently ruled that fixed-term contracts for these positions must comply with the minimum 12-month duration as per Regulation 11 of the General Regulations. Contracts issued for less than this period are deemed unlawful, leading to potential legal and financial consequences for employers.

Employees who challenge the issuance of unlawfully short contracts are typically awarded compensation equivalent to the salary for the unexpired portion of the legally mandated 12-month period. The Labour Court has strictly enforced Regulation 11 of the General Regulations, invalidating contracts that fail to meet the minimum duration requirement.

Case law summaries

Below are summaries of cases addressing the implications of issuing fixed-term employment contracts for less than 12 months:

Bank M Tanzania PLC v. Andrew Bazo Shiyo:

Andrew Bazo Shiyo was employed by Bank M Tanzania PLC under a series of fixed-term contracts starting in 2010. His final contract, renewed on 7 September 2017, was for two months. When the contract expired, the employer chose not to renew it leading to a dispute adjudicated by the Commission for Mediation and Arbitration (CMA) and later the Labour Court. The Labour Court found the termination unfair due to the unlawful two-month contract and awarded Shiyo compensation equivalent to the remaining period of the legally required 12-month contract.

Tanzania People and Wildlife v. Deborah Onward:

Tanzania People and Wildlife challenged the CMA award granted to Deborah Osward (Respondent) in the Labour Court. The Respondent had initially been employed on a three-month probationary contract, which was later extended to a seven-month fixed-term contract set to expire on 30 June 2022. Before the expiration of the contract, the Respondent was informed that it would not be renewed. The Labour Court revised the CMA award from 12 months to five months of compensation, reflecting the period remaining on what should have been a legally compliant 12-month contract.

The Labour Court emphasised that any fixed-term contract for a professional position must comply with the statutory minimum of 12 months, rendering contracts of shorter duration unlawful, even if mutually agreed upon.

Malaika B. Kamugisha v. Lake Cement Ltd:

Malaika B. Kamugisha (Applicant) challenged the CMA award, arguing that her six-month employment contract was illegal. The Applicant had been employed under a series of fixed-term contracts from 3 March 2015 to 1 August 2018, when her final contract ended without renewal. Upon review, the Labour Court found that the Applicant’s termination was unfair, as it effectively constituted a premature termination of what should have been a 12-month contract, in accordance with Regulation 11 of the General Regulations. Consequently, the Labour Court awarded the Applicant compensation for the remaining period of the twelve-month contract, along with other associated benefits.

The consistent application of Regulation 11 of the General Regulations in the abovementioned cases sends a clear message to employers that failure to comply with the minimum duration requirement for fixed-term contracts can result in significant legal and financial consequences. The Labour Court has demonstrated readiness to declare such contracts unlawful and award compensation to affected employees, thereby reinforcing the importance of adhering to legal standards.

Employers seeking flexibility in workforce management must be mindful of these legal obligations. Issuing fixed-term contracts for less than 12 months not only contravenes the law but also exposes the organisation to potential legal disputes and compensation claims.

Conclusion

Employers are strongly advised to adhere to the legal requirements to ensure fair treatment of employees and avoid potential legal repercussions. Offering fixed-term contracts with a duration of 12 months is recommended, as it aligns with best practices for fair employment and minimises the risk of legal disputes and related penalties.

For any inquiries regarding the topics discussed in this article, please contact Aliko Simon.