The Challenge: Fred is employed on a fixed term basis of 13
months to cover for Mary, an employee who is taking a year’s maternity leave –
her baby is due after 6 April 2003 when maternity entitlement increases to 52
weeks – with a month’s handover before Mary leaves. Because Fred is not a
permanent member of staff, the company does not allow him to join the
occupational pension scheme. At the end of Mary’s leave she decides not to
return to work. The company is not happy with Fred’s work and decides not to
renew his contract when it expires, but intends to recruit a permanent
replacement for Mary. Jane Amphlett, partner and Richard Yeomans, solicitor at
Manches consider some of the legal and practical implications of the Fixed Term
Employees (Prevention of Less Favourable Treatment) Regulations 2002 which came
into force on 1 October 2002
Aim of legislation
The regulations are designed to ensure fixed-term employees are treated no
less favourably than permanent employees with respect to their pay and
conditions and termination of their employment.
– The regulations cover employees under a contract which lasts for a
specific period of time or which ends on the completion of a particular task or
on the occurrence of a specific event
– Where a fixed-term contract ends, this is classed as a dismissal
– Fixed-term employees have the right to be treated no less favourably than
comparable permanent employees, unless the treatment can be objectively
justified. Employers can take either an overall package or a contract-
term-by-contract-term approach when looking at whether terms and conditions are
– Fixed-term employees must not receive less favourable treatment in respect
of training and the right to secure permanent employment
– Fixed-term employees can request a written statement from their employer
setting out the reason for any less favourable treatment, which is admissible
as evidence in any tribunal proceedings
– Fixed-term employees who believe they have been discriminated against may
complain to a tribunal, generally within three months of the date of the act
complained of. There is also protection from victimisation, dismissal and
– The tribunal can make a declaration as to the rights of the complainant,
award compensation and/or recommend action for the employer to take to reduce
the adverse effect on the fixed term employee. Compensation will be calculated
as it is for sex, race and disability discrimination, except it will not
include compensation for injury to feelings.
Fred may request a written statement giving particulars of the treatment, to
which the company must respond within 21 days, and he can bring a claim under
the regulations because he has been excluded from the pension scheme.
Unless the company applies the same service qualification to Fred as to
permanent staff or it can objectively justify the exclusion, it will lose that
claim and be forced to compensate Fred and/or provide a pension.
The justification may be that pension rights do not come into force for two
years but, if that is the case, the company should offer a cash alternative.
HR departments should review the pay and conditions of fixed-term employees
to ensure they are no less favourable than those of permanent employees, unless
there is a good reason for the difference.
Companies also need to ensure fixed-term workers receive details of all
permanent vacancies (not just those vacancies which would be suitable to the
employee). So, unless it has a generally published current vacancy list, the
company must notify Fred individually.
Fred has more than a year’s service and is also eligible to bring an unfair
dismissal claim. If Mary’s job were disappearing, the company may be able to
fairly dismiss Fred by reason of redundancy, provided it carried out fair
selection and consultation procedures and considered Fred for alternative
employment. But, in this case, the job is continuing and redundancy will not be
a fair reason for dismissal.
Instead, the real reason Fred’s manager wishes to dismiss him is that he is
unhappy with his performance. To avoid an unfair dismissal, the company would
need to follow a full disciplinary procedure before dismissing which, unless
Fred’s performance is grossly incompetent, will require warnings to be given
with a reasonable opportunity to improve.
If this happens after next autumn, the company should also bear in mind the
statutory disciplinary procedures set out in the Employment Act 2002. If these
minimum procedures are not followed, the tribunal may, for example, increase
the compensatory award for unfair dismissal (which currently has a cap of
£52,600) by up to 50 per cent.