Fixed-term contracts do not automatically raise legitimate expectation for contract renewal

Christine Okore (the Claimant) filed the suit in February 2024 seeking a declaration that her services were wrongfully and unlawfully terminated and that LVCT Health’s (the Respondent) failure to renew her employment for a period of 1 year constituted an unfair labour practice and unlawful termination.

The Claimant’s Case

The Claimant was employed by the Respondent, a non-governmental organisation (NGO) through a one-year contract of service dated 4 May 2022, as a Senior Procurement Officer under the USAID Stawisha Pwani Programme based in Mombasa which was renewed for the period 1 October 2022 to 30 September 2023. On 27 January 2023, she was promoted to Procurement and Logistics Manager at the Respondent’s head office. She asserted that her contract was renewable subject to satisfactory performance, availability of funds and the continuous need for the position. It was her contention that her contract was terminable by 1 month notice or 1 month salary in lieu of the notice. 

She contended that the Respondent, without giving reasons, terminated her employment on 29 September 2023. She maintained that towards the expiry of her contract, she continued performing her duties normally and participated in planning activities for the subsequent yeas. Further, it was her position that she had previously received a successful appraisal and was included in the Respondent’s medical insurance scheme. She stated that her colleagues whose contracts were expiring on the same date had been issued with written notices of non-renewal in accordance with the Respondent’s policy, but she was not accorded similar treatment. This, she stated, created legitimate expectation that her contract would be renewed or that she would receive a written notice of renewal.

During cross-examination, the Claimant admitted that her contract of service stated that the contract was a fixed-term contract and was to lapse without need for a notice – she admitted that it was required during termination. She confirmed that there was no email informing her that her contract would be renewed, and that the contract provided for a procedure for renewal which was to be initiated by the Respondent, but she was not aware whether the same had ben initiated.

The Respondent’s Case 

The Respondent’s case was that the Claimant was employed on a fixed-term contract whose renewal was not automatic and did not require 1 months’ notice or payment in lieu of the notice. It maintained the position that the Claimant’s employment came to an end upon the expiry of the fixed-term contract, and that it had no legal obligation to renew the contract. The Respondent contended that non-renewal of a fixed-term contract does not amount to termination or unfair dismissal as the contract simply runs its course.

The Respondent stated that the Claimant was reporting to the Operations Director and that no renewal of contract was initiated as per the contract. Further, it averred that no communication was received from the Claimant on whether her contract would be renewed.

Analysis and determination

The court analysed two issues of importance for determination:

1. Whether the Claimant’s fixed-term contract expired by effluxion of time or whether the Respondent terminated her employment.
2. Whether the Claimant had legitimate expectation that her contract would be renewed.

Whether the Claimant’s fixed-term contract expired by effluxion of time or whether the Respondent terminated her employment.

The Court noted that where parties enter into a fixed-term contract with a definite end date, the contract ordinarily terminates by effluxion of time. Further, it noted that it was not in dispute that the Claimant was on a fixed term contract with a clause providing that the contract would lapse automatically upon expiry without need for a notice. A copy of the contract of service was produced confirmed that the same was an express provision under Clause 2. Therefore, it was clear that the contract had an expiry date of 30 September 2023, with no evidence or suggestion that the Respondent terminated the contract prior to that date. On the Claimant’s assertion that she was entitled to a notice pursuant to the Respondent’s Human Resource Policy, the court found it untenable considering the contract of employment stipulated that the notice was only applicable where either party was desirous of terminating the contract.

Ultimately, the Court found that the Claimant’s contract ended by effluxion of time upon the expiry of her fixed-term contract.

Whether the Claimant had legitimate expectation that her contract would be renewed

The Claimant’s primary argument was that the Respondent’s conduct created legitimate expectation that her contract would either be renewed or that she could get a notice of renewal. Legitimate expectation arises where through representation or consistent practice, a body leads a party to expect that the body will act in a certain way. However, the court noted that legitimate expectation should be utilised cautiously as it cannot override the express terms of a fixed-term contract.

The circumstances claimed to have created legitimate expectation were that the Claimant’s performance was satisfactory, she was promoted during the contract period, she participated in planning meetings for the Respondent’s activities for the subsequent year, and the inclusion in the Respondent’s medical insurance cover. While Court noted that the circumstances may have created legitimate expectation, they did not constitute clear and unambiguous representation that the contract would be renewed – which was further confirmed by the fact that the Claimant never received communication from the Respondent or initiation of the renewal process, and she did not inquire about the same.

In the upshot, the court determined that the Claimant had not sufficiently established the existence of a legitimate expectation that her contract would be renewed.

Why is this decision important?

While employees may raise the claim of legitimate expectation, it does not arise automatically in fixed term contracts unless the employer represents itself in a clear and unambiguous manner to raise legitimate expectation of a continued employer-employee relationship. It then is right to say that a fixed term contract does expire by effluxion of time and that where a contract stipulates procedure for disengagement, then the same has to be followed by both parties at the termination of the contract.