I received an e-mail from a reader in a tricky situation involving a fixed term contract and a company change of ownership.
She contacted me in response to our recent article on what employees can expect from their employers if the company for which they work is sold or bought out as a going concern (On the Job, July 2009).
Our reader is worried that she may find herself without a job as a result of unexpected changes at her company.
Two months ago, she signed a contract with her then employer, guaranteeing a salary until the end of September this year. At the time of signing, her employer was to continue working for the company’s new owners as a department manager.
However, the former employer has now decided to leave the company – and our reader wants to know if she still has job security once the fixed term contract expires. Will she be able to stay on with the new employer or not?
Unfortunately, the fixed term contract could cause problems for our reader. If she had not signed the contract, she would simply have continued working for the new owners, since current employees keep their positions, under the same terms and conditions, when a business is sold or changes ownership.
She has, however, signed a fixed term contract which clearly specifies the duration of her contract. This contract is binding unless terminated earlier by agreement or breach.
How do fixed term contracts work? In a nutshell, they are determined either by a termination date or a particular event, the occurrence of which will end the agreement.
When signing parties indicate termination of contract on the occurrence of a particular event or completion of a stated task, the onus rests on the employer to prove that the event has occurred or the task been completed. The employee is then relieved of his or her position.
Either way, the new company owners are not obliged to change our reader’s contract to her benefit. So what should she do?
I advise her to discuss the matter with the new owners, explaining her situation and outlining details of circumstances at the time of signing the contract.
Thankfully, the working relationship between our reader and the new owners is not bound in a contractual straight jacket! The present employer could make changes to the contract in order to keep our reader in her current position.
However, the owners may also decide to give her a new employment contract with an amended salary, changed status and new duties.
If this happens, our reader should feel free to discuss the new terms and conditions of her contract, especially if she is unhappy about something. Details could then be amended by mutual consent.
In conclusion, I urge all employees to do their homework before signing contracts, regardless of the type of document being signed. Whether you’re accepting a new position or trying to hold on to your old one during a change of ownership, don’t simply sign on the dotted line before you’re clear about the consequences involved.
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Booysen & Rossouw Attorneys in Port Elizabeth specialises in labour related legislation. The firm also covers injury on duty cases as well as all other aspects of the law.
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