eBusiness Weekly
Arthur Marara
This is a principle that usually kicks in if an organisation does not proactively handle its contracts of employment.
The Human Capital component tends be one of the biggest cost centres for many organisations. How you structure the contracts becomes important. The principle of tacit relocation stems from fixed term contracts. This week we shall be looking into this concept and what the law says about it.
The settled position of the law is that a fixed-term contract of employment automatically expires at the end of the specified period unless the parties thereto mutually agree to its termination. (See ZIMRA v Mudzimuwaona SC 4/18).
However, in certain instances, despite the expiry of the period of employment, the employer-employee relationship may be found to exist owing to the parties’ conduct under the concept of tacit relocation.
Tacit relocation, as it applies to contracts of employment, entails that where an employee’s fixed-term contract expires without renewal and the employee continues to render his services to the employer with the employer paying the previously agreed remuneration, the expired contract is deemed to be relocated.
Therefore, the employee is deemed to be employed on the same terms and conditions as the previous contract.
In Gumbo v Air Zimbabwe (Pvt) Ltd 2000 (2) ZLR 126 at 130 A-D the court made the following pertinent remarks regarding the principle of tacit relocation;
“Finally, the best that can be said for the applicant is that in certain cases akin to the present there is a presumption that when the parties continue the employer-employee relationship beyond the contractual period without agreeing on new terms there is a tacit relocation of the expired contract on the same terms and for the same duration.
In other words, all things being equal, it could be said that on October 1, 1999, the applicant commenced a new probationary period. However, this presumption does not operate when it is clear that one of the parties has no intention of continuing on the terms of the expired contract. See Lilford v Black 1943 SR 46 at 47, where BLAKEWAY J said:
“‘The renewal of a lease or of a contract for services to be performed can take place either by express agreement or tacitly. If, after the expiration of the period provided for the duration of the contract, the parties continue their relationship without any fresh agreement the law presumes, in the absence of indications to the contrary, that they have agreed to enter upon a new lease on the same terms as the expired lease. But this presumption does not operate when it is clear that the parties or one of them does not intend to carry on with the contract on the old terms.”’ (Emphasis added)
John Grogan in his book “Workplace Law” 8th ed at pages 41-42 states the following:
“If after the agreed date for the termination of the contract the employee remains in service and the employer continues to pay the agreed remuneration, the contract is deemed to have been tacitly renewed, provided that an intention to renew is consistent with the parties’ conduct.
“The relocated contract will continue on exactly the same terms and conditions as the previous fixed-term contract, except that the duration of the contract need not be the same as that of the original contract; the life of the relocated contract must be determined in light of the particular circumstances of each case.” (emphasis added)
In Golden Fried Chicken (Pty) Ltd v Sirad Fast Foods CC & Ors 2002(1) SA 822(SCA) at 825 D-F the court held:
“After the termination of the initial agreement and prior to this letter the parties (in the light of the facts recited) conducted themselves in a manner that gave rise to the inescapable inference that both desired the revival of their former contractual relationship on the same terms as existed before.
“Taken together, those facts establish a tacit relocation of a franchise agreement (comparable to a tacit relocation of a lease) between the appellant and Sirad (Shell South Africa (Pty) Ltd v Bezuidenhout and Others 1978 (3) SA 981 (N) 984B-E).
“A tacit relocation of an agreement is a new agreement and not a continuation of the old agreement (Fiat S A v Kolbe Motors 1975 (2) SA 129 (O) 139D-E; Shell 985B-C). The fact that the appellant had forgotten that the agreement had lapsed is beside the point because in determining whether a tacit contract was concluded a court has regard to the external manifestations and not the subjective workings of minds (Fiat S A 138H -139D).” (emphasis added)
The principle that can be drawn from the cited authorities is that an inference of tacit relocation is dependent upon the continued existence of an employer-employee relationship after the expiration of the contract. The employee will continue rendering his services to the employer who in turn pays remuneration in terms of the expired contract.
Tacit relocation is based on the intention of the parties which must be consistent with their conduct. The court, in determining such an issue, considers all the facts holistically as it draws inferences which are consistent with the proved facts.
The principle of tacit relocation of contracts of employment appears to be embodied in statute, in particular S 12 of the Labour Court Act (Chapter 28:01).
A proper construction of S 12(1) yields the result that where an employee renders services in return for remuneration, a contract of employment exists notwithstanding that such a contract has not been reduced to writing.
Tacit relocation is therefore presumed. This is made clearer by the provisions of S 12 (3a) which states that a fixed term contract shall be deemed to be a contract without limit of time upon the expiry of such period of continuous service.
For more fairly recent authorities on the subject you can read the judgment of the Supreme Court in TOBACCO PROCESSORS ZIMBABWE (PRIVATE) LIMITED v TONGOONA MUTASA SC12/2021.
LEGAL DISCLAIMER: The material contained in this post is set out in good faith for general guidance in the spirit of raising legal awareness on topical interests that affect most people on a daily basis. They are not meant to create an attorney-client relationship or constitute solicitation. No liability can be accepted for loss or expense incurred as a result of relying in particular circumstances on statements made in the post. Laws and regulations are complex and liable to change, and readers should check the current position with the relevant authorities before making personal arrangements.
Arthur Marara is a corporate law attorney practicing law in Harare, Zimbabwe. He is also a notary public and conveyancer. He is also passionate about labour law, family law and promoting legal awareness and access to justice. He writes in his personal capacity. You can follow him on social media (Facebook Attorney Arthur Marara), or WhatsApp him on +263780055152 or email [email protected]
