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Major change with respect to the termination of fixed duration contracts of employment

  • Mauritius
  • Employment law

17-10-2018

The decision of the Supreme Court of Mauritius in the case of De La Haye v. Air Mauritius Ltd 2015 SCJ 244 has been reversed by the Judicial Committee of the Privy Council (JCPC) and there has been a substantial change in the reasoning adopted regarding the termination of fixed duration contracts of employment and the entitlement to severance allowance under Section 46 of the Employment Rights Act 2008 (ERA).

Consequently, previous advice(s) on the termination of fixed duration contracts of employment by the employer, which were based on the position adopted by the Supreme Court at the given time, no more stand good in light of the recent judgment of the JCPC in De La Haye v. Air Mauritius Ltd 2018 UKPC 14.

In the case De La Haye v. Air Mauritius 2015 SCJ 244, a pilot was employed under several successive fixed duration agreements and the last one had been terminated prematurely (before the expiry date) by notice in writing given by Air Mauritius in accordance with the terms of the agreement. The Supreme Court held that the plaintiff did not qualify for severance allowance, because the contract had been terminated by giving due notice, as provided for in the terms freely agreed by both parties.

The Supreme Court affirmed the fundamental propositions that the parties are normally at liberty to conclude a contract as they wish and that such contract is the law governing the relationship of those parties. It held that because the Plaintiff’s contract had been determined in accordance with its terms it had been terminated not by the unilateral act of the employer but “in conformity with the common will of the parties as expressed in their agreement”. The parties having freely agreed to such a method of termination, it could not give rise to entitlement to severance allowance. In those circumstances, the Supreme Court neither found it necessary to consider the length of continuous employment that the employee had, nor whether the economic grounds relied on by the employer were valid. 

In De La Haye v. Air Mauritius Ltd 2018 UKPC 14, the JCPC decided that “the fact that it was a termination permitted by the freely agreed terms of the contract does not alter the fact that it brought the contract to an end, nor that it was undertaken by one party only. The Supreme Court fell into error in holding that what happened was not a unilateral act of the defendant. It was indeed a unilateral act, and the fact that it was anticipated and permitted by the contract does not make it any the less so. Subject to meeting the other requirements of section 46, therefore, this termination was perfectly capable of triggering entitlement to severance allowance.”

The JCPC rejected the argument that because the giving of notice was envisaged by the freely agreed contract, that by itself either excluded the provisions of section 46 or meant that the termination was automatically justified for the purposes of that section. If that were so, most of the provisions of section 46 for the payment of severance allowance in the event of a termination on prohibited grounds would be wholly ineffective in the case of fixed term or indeterminate contracts containing provisions for termination on notice. An employer could, for example, give notice of termination on the grounds of an employee’s race, colour or pregnancy, even though termination on such grounds is prohibited by section 38(1), and avoid the obligation to pay severance allowance. Similarly, the protection for workers against dismissal for misconduct unless the safeguards required by section 38(2) are satisfied would simply be circumvented.

The JCPC also held that “the employment of the employee under the four successive fixed term contracts described above did indeed fall within the concept of continuous employment as defined in section 2. There is nothing in the least absurd about so reading section 2. Section 2 is expressly designed to treat as continuous employment successive fixed term contracts. That they are none of them indeterminate is true but nothing to the point. There could perhaps be examples of successive indeterminate contracts separated by breaks of not more than 28 days, which might also fall within the definition, but the most common case will be successive fixed term contracts. The plain reason for the provision is to accord to a worker who has in reality been in employment for a substantial time, albeit under successive contracts closely following one another, the same severance allowance as a co-worker employed for the same length of time under a single, usually but not necessarily indeterminate, contract.”

In light of the above, the position is now that a contract of employment, be it one of fixed duration or indeterminate duration, cannot be terminated by the employer simply by giving notice in writing although the contract of employment provides this option. The employer may be liable to pay severance allowance unless the employer can establish that the termination is justified and that the termination is carried out in accordance with the procedures prescribed by the ERA.

It is worth noting that in its Judgment, the JCPC also confirms that in the absence of a break of more than 28 days between successive contracts of employment, the employment under such contracts of employment is deemed to be continuous.