Key Insights from Solidarity obo Nel RH v Paramount Aerospace Systems (Pty) Ltd [2025] – Legal Principles, Case Law, and Employer Guidance in South Africa

Written by Roy Bregman, admitted attorney with over 51 years’ experience in employment and labour law. Learn more about Roy Bregman’s expertise at Bregmans Attorneys.

Fixed-Term Contracts in South African Law: Lawful and Fair Early Termination on Notice

Introduction: Understanding Fixed-Term Contract Termination

Fixed-term contracts (FTCs) are widely used by South African employers to engage staff for limited durations or until specific outcomes—be it the completion of a project or reaching a set date. A recurrent and complex issue surrounds whether employers may lawfully terminate such contracts before their scheduled expiry by simply providing the contractual notice, and whether such action also meets the fairness standards enshrined in South African labour law. The 2025 Labour Court decision in Solidarity obo Nel RH v Paramount Aerospace Systems (Pty) Ltd (JS72/2024) [2025] ZALCJHB 423 clarifies the distinction between contractual lawfulness and fairness required by the Labour Relations Act 66 of 1995 (LRA), offering definitive principles and practical guidance for both employers and employees.

Legal Principles Governing Early Termination of FTCs

1. Contractual Lawfulness

In South African contract law, the general rule is that an FTC must run its full course unless:

• One party has committed a material breach, justifying termination by the other; or
• The contract expressly includes a provision allowing either party to terminate the contract early by a specified notice.

If the contract contains such a notice clause, then—provided it is invoked according to its wording—termination before expiry is lawful from a contractual perspective. The actual reason or motive for invoking the notice does not invalidate the termination so long as it falls within the contractual rights provided.

2. Fairness under the Labour Relations Act (LRA)

Crucially, the LRA imposes distinct requirements of fairness that apply even when a termination is contractually lawful. Section 185 of the LRA recognises every employee’s right “not to be unfairly dismissed,” and section 186(1)(b) includes the non-renewal or early ending of FTCs within the definition of dismissal if the employee reasonably expected renewal.

A termination (including early ending on notice) that is lawful according to a contract may still be unfair if it does not comply with the requirements of substantive and procedural fairness set out in the LRA. Thus, employers must separately ensure that dismissals are not only contractually valid but also justifiable and fairly conducted per the LRA.

Case Discussion: Solidarity obo Nel RH v Paramount Aerospace Systems

1. Factual Background

• Mr Nel was employed by Paramount on an FTC with an agreed duration linked to a specific project.
• The contract explicitly permitted early termination by either party on one month’s written notice; no cause for such notice was required.
• Before the contract reached expiry, Paramount invoked the notice clause, providing Mr Nel with one month’s notice.
• Mr Nel sued for damages, alleging unlawful breach of contract (he did not pursue an unfair dismissal claim).

2. Legal Issue and Court Analysis

The Labour Court had to decide: Does exercising a contractual notice clause to terminate an FTC before expiry amount to an unlawful breach, or is following the express terms sufficient?.

• The Court restated that unless specifically permitted by the contract, an FTC may not be ended early on notice alone.
• In this matter, however, the contract “allowed termination on one month’s notice without limiting the grounds,” which meant Paramount’s conduct was within its contractual rights and did not constitute a breach.
• The Court also noted that the reason for exercising the notice was irrelevant as long as the right to do so appeared in the contract, provided the employee was afforded due notice as agreed.
• Since Mr Nel did not pursue an unfair dismissal claim under the LRA, the Court did not assess whether the termination was fair; it only considered contractual lawfulness.

3. 3. Practical Implications

This judgment emphasises the stark distinction between what is lawful from a contract perspective (per the parties’ agreed terms) and what is fair under labour law. Employers relying solely on contract law to terminate FTCs early—even with proper notice—risk exposure to unfair dismissal disputes under the LRA unless they can also demonstrate substantive and procedural fairness.

Conclusion: What Should Employers and Employees Do?

• For Employers:
  • Always include clear, unambiguous notice clauses in FTCs if early termination is contemplated.
  • Recognise that exercising such notice does not absolve you from obligations under the LRA—lawful terminations must also be fair.
  • Apply appropriate procedures (disciplinary, operational, or performance) where relevant, and document your process.
• For Employees:
  • Review your contract carefully to confirm the presence (and scope) of any early termination clause.
  • If you believe your early termination was unfair (regardless of contract lawfulness), you may still bring an unfair dismissal claim under the LRA[2].

This judgment underlines the importance of drafting robust contracts and adhering to fair labour practices to minimise legal risks for both parties.