The beginning of the end for fixed-term contracts?

Will there be any point in having fixed-termers if the law is to put them on
equal footing with permanent staff?

Employing staff on fixed-term contracts is often a sensible idea,
particularly where the employer has a fixed project or task in mind. But these
arrangements are often used without thinking about what real purpose they
serve. They can also be used cynically and exploitatively to deprive an individual
of employment rights.

For instance, a contract which expires the day before an employee has served
one year will mean that he or she will not be able to bring an unfair dismissal
claim if the contract is not renewed.

It is possible that if the contract is renewed – even several times – the
individual will not be able to bring a claim for unfair dismissal or a
redundancy payment when he or she is finally let go if there has been
sufficient break between each expiry and renewal.

The government has recently issued draft regulations in response to a
European directive on the subject, providing protection for employees hired on
fixed-term contracts.

The draft Fixed-Term Employees (Prevention of Less Favourable Treatment)
Regulations deal with the crucial problem facing many fixed-term workers: like
many "atypical" sections of the workforce, such as part-time staff
(who now do have statutory protection), they are often considered not to be a
core part of the employer’s human resources and therefore often have to endure
poorer terms and conditions.

The regulations therefore provide that fixed-term employees should not be
treated less favourably than similar permanent employees unless there is an
objective justification for the difference in treatment. The regulations do not
cover pay, although the government has indicated that it is seeking views on
whether it should introduce legislation to address pay differences.

This means that, in principle, an employee on a fixed-term contract could be
entitled to an equal package to his or her permanent counterparts. Employers
who give less holiday to fixed-termers, grant them reduced or no sick pay or do
not consider them for bonuses or redundancy payments will, depending on the
final result of the legislation, be obliged to review these practices.

It is unclear whether fixed-termers should be entitled to equality for each
and every term of their contract or whether there should be equality only in
terms of the overall package offered. This latter would give employers a lot
more flexibility, enabling them to compensate fixed-termers for benefits they
do not wish to provide to them. As part of the consultation process, before the
regulations become law, the government is seeking views on which option to
pursue.

The draft regulations also provide that, once an employee has been
continuously employed for a period of four years or more on a fixed-term – or
series of fixed-term – contracts, then the next renewal will be deemed to be an
offer of permanent employment unless there are objectively justifiable reasons
for offering another fixed-term contract.

The effectiveness of this radical right will depend on the approach
tribunals take to employers’ attempts to sidestep the regulations by imposing
breaks between contracts. The right only applies if there is no break in
continuous service.

Again, as the directive offers a number of possible solutions for
restricting the use of successive fixed-term contracts, the government is
seeking views from interested parties on whether this is the best option to
adopt.

The new regulations, together with the abolition in the 1999 Employment
Relations Act of the right of a fixed-termer to waive his or her right to bring
an unfair dismissal claim on the non-renewal of the contract, mean that many
employers will probably find that there is little point in using fixed-term
contracts for a lot of situations in which they do so now.

Alastair Brunker is a solicitor with Shell International

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