New job? Things to know before signing that contract

Congratulations! You’ve passed the interview. You have been offered an attractive employment contract which you can’t wait to sign. After all, you’ve been praying for this job all your life and you can’t wait to get started. But what should you look out for before you put pen to paper in agreement? What type of contract do you have in your hands, and what are the legitimate expectations for renewal?

An employment contract is a contractual relationship between an employee and an employer that lasts for a specified period.

Some contracts are designed to run for an indefinite period, and can only be terminated if there is reasonable ground, and if the employee's reassignment is either impossible or unreasonable.

With such contacts, if the termination is at the initiative of the employer, he will issue notice of termination. If, on the other hand, the employee opts to leave, he is required to buy out the remainder of the period stipulated in the agreement.

The other type of contracts are those that last for a specified time, or will end when a specified task has been completed.

DONOR FUNDING

Such agreements are common in organisations where budgets are based on donor funding, such as NGOs, and they typically last between one to five years. Once the stipulated time frame has ended, the employer ceases liability on account of unfair termination or redundancy.

Fixed term contracts bind the employer and the employee to the fixed term specified in the contract, and there are no rights of renewal unless the two parties agree to do so.

Once the agreed term has ended, the employer has no obligation to issue a notice of termination or provide reasons for non-renewal.

Where the contract provides for renewability upon its expiry, the employer should notify the employee (before the contract’s expiry date) that the contract will not be renewed.

However, failure to give this notification does not amount to an automatic renewal. This is because the renewal is a new contract which requires the two parties to agree on new terms. This is only different where the contract provides for automatic renewal on the same terms.

Unless either party expresses a contrary intention to the other in writing, the contract renews automatically.

CONTRACT

In light of this, courts will not order a renewal of a contract where none was intended by the parties.

It is to be assumed that when the employee signed the contract, he or she was aware that it was for a fixed term, and therefore would not be entitled to any compensation on account of non-renewal.

There are situations, however, when an employee may successfully claim unfair termination if a fixed-term contract is not renewed, especially if the employee can prove that she had a legitimate expectation that the contract would be renewed.

The catch is that this expectation must be based on a compelling, rational and objective reason clearly given by the employer either in writing, or by conduct.

Legitimate expectation can arise, for instance, where the contract provides that in case of non-renewal, the employer will give the employee a certain length of notice before the expiry date. If such notice is not given, the employee is entitled to assume that the contract will be renewed.

SAME TERMS

Similarly, where the contract period has expired but the employee has continued working and being paid, the contract will be deemed to have been renewed on the same terms.

Repeated past renewals also create a legitimate expectation. If a contract has been renewed several times in the past, unless the employee is notified otherwise, he is entitled to assume that it will be similarly renewed.

An express promise by the employer that the contract will be renewed has a similar effect. However, where the promise is conditional upon certain deliverables being met, such as satisfactory performance, continuation of funding or execution of a new contract, the expectation is only valid if such conditions have been fulfilled.

Where legitimate expectation has been proved, failure to renew the contract amounts to unfair termination. It is however up to the employee to prove the existence of legitimate expectation.

Courts do not make contracts for parties. They merely interpret existing contracts which the parties themselves have voluntarily entered into.

William Maema ([email protected]) is a Senior Partner in the law firm of Iseme, Kamau & Maema Advocates.