ECJ: do not use fixed-term contracts for permanent needs

A European Court of Justice (ECJ) case challenged the legality of Spanish legislation that permits the renewal of fixed-term contracts to cover permanent staff needs. Lisa Hodgson, employment senior associate at DLA Piper, explains.

Lόpez v Servicio Madrileño de Salud

Facts

Ms Maria Elena Pérez Lόpez, a Spanish national, was employed as a nurse at the University Hospital of Madrid on a fixed term-contract from 5 February 2009 to 31 July 2009.

The reason for her appointment was to provide “certain services of a temporary, auxiliary or extraordinary nature”.

Ms Lόpez’s employment was subsequently renewed seven times under identical contracts of three, six or nine months’ duration.

As a result, she was employed without interruption between 5 February 2009 and 31 March 2013.

On 28 January 2013, Spain’s Regional Ministry of Economic Affairs and Finance of Madrid issued an order imposing the termination of the employment relationships of occasional staff at the end of the appointment period, including where the individual was subsequently reappointed.

Shortly before Ms Lόpez’s contract expired, she was informed she would be reappointed, but that her employment relationship would cease. She brought an appeal against this decision, arguing that:

• her successive appointments were not intended to meet a temporary, auxiliary or extraordinary need;
• the Spanish legislation infringes an overriding objective of the European Framework Agreement regarding fixed-term contracts; and
• as a result, her employment relationship should be reclassified as permanent.

The Administrative Court in Madrid decided to stay the proceedings and refer the case to the ECJ.

It asked the ECJ whether or not the Spanish legislation encourages abuse arising from the use of successive appointments and conflicted with an overriding objective of the Framework Agreement.

ECJ decision

The ECJ noted that the Framework Agreement requires member states to place limits on the use of fixed-term contracts to prevent abuse of such contracts.

While the ECJ stated that it was up to the member states to implement this overriding objective, it stated that the national implementing legislation should provide:

• evidence of objective grounds on which the renewal of a fixed-term contract may be justified;
• a total maximum duration for which such contracts may be concluded successfully; or
• the number of possible renewals permitted for such contracts.

Seeing as Spanish legislation does not dictate prescribed limits in respect of duration or renewal (points two and three of the above list), the ECJ examined whether or not an objective ground relating to precise and concrete circumstances could justify the successive appointments of Ms Lopez (point 1 of the above list).

The ECJ acknowledged that temporary replacement of workers to satisfy temporary needs “may” constitute an objective ground.

It also considered that in the public-health sector, it is inevitable that temporary replacements will be necessary due to the unavailability of members of staff.

This could be because of sickness absence and maternity leave, and the temporary replacement of workers in such circumstances would be justified.

However, the ECJ considered that fixed-term contracts cannot be renewed for fixed and permanent tasks that normally come under the activity of ordinary hospital staff.

The objective ground must be able to justify the requirement to cover temporary needs and not permanent needs.

Implications for employers

This case highlights a conflict between the provisions of a European Framework Agreement and a national implementing measure.

The ECJ’s conclusion that the Spanish legislation compromised the objective of the Framework Agreement will have a significant impact on its healthcare industry and entrenched employment structure.

The ECJ estimated that approximately 50,000 medical and healthcare posts in Madrid alone are occupied by temporary staff, some of whom have been providing services continuously for 15 years. This decision puts that structure under threat.

In view of the potentially far-reaching consequences of this decision in other Spanish industries with similar employment structures, it may be that Spain and other EU member states take steps to crystallise the number of possible renewals permitted for fixed-term contracts.

UK legislation limits the number of renewals for fixed-term contracts. UK law provides that an employee who is continuously employed for four years or more on successive fixed-term contracts is automatically deemed to be a permanent employee.