What is the relevant law?
The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002. Until now, they have been little used as there was no case law on the regulations. That is why the recent tribunal decision involving the Department for Education and Skills (DfES) is important (Personnel Today, 4 October). The court ruled that under Regulation 3, a fixed-term employee has the right not to be treated less favourably by their employer than it treats a comparable permanent employee regarding their contract.
What are the key requirements for a claim under Regulation 3?
The fixed-term employee must first identify a comparator: an employee who is on a permanent contract doing similar work.
Do comparable employees need to work in the same location doing the same work?
The Regulations make it clear that a comparator should be based at the same establishment.
Once a comparable employee is identified what is the next stage of the claim?
You then need to work out whether the fixed-term employee is being treated less favourably. The tribunal went into detail on this aspect and concluded that it is necessary to analyse the terms of the contract of the fixed-term employee on a “term-by-term” basis rather than taking a “compendious” approach. Although, in this case, the claimants may have had some terms which were more favourable than permanent employees, when considering the redundancy terms they were clearly being treated less favourably than a permanent employee as they were excluded from redundancy benefits under the Civil Service Compensation Scheme.
Are there any other important aspects of the Regulations which are relevant?
Regulation 8 limits the use of successive fixed-term contracts. Where an employee has been continuously employed under fixed-term contracts for a total period of four years or more then when that individual is re-engaged on a further fixed-term contract, that will take effect as a permanent contract unless the employer can justify keeping the employee on a fixed-term contract. But this is likely to be difficult. The four-year period is measured from 10 July 2002, so while Regulation 8 has not yet had effect, it will be relevant next year.
Once we have established less favourable treatment what else do we need to consider?
The third and final element of any claim is whether the less favourable treatment can be justified by the employer on objective grounds. The burden is on the employer to establish justification. In this case, as the claimants had been employed on a succession of fixed-term contracts, the tribunal thought they had the same expectation of carrying on in employment as permanent employees. It dismissed the DfES argument that a person employed on a fixed-term contract expects their employment to end on the expiry of the term, and concluded that the expectations will vary according to the circumstances of the particular case.
Once the elements of the claim have been met, what remedy can be obtained?
Regulation 7 covers remedies. The tribunal can make a declaration or recommendation and can order the employer to pay compensation – in this case, that the claimants would be entitled to the redundancy benefits available to permanent staff.
Can we still use fixed-term contracts widely?
Yes. However, you should review the terms of the fixed-term contract to ensure there is no less favourable treatment which cannot be properly justified.
Should we take any action?
Employers must be aware of the provisions of the 2002 regulations and should review their fixed-term contracts. If there is no reason to keep staff on fixed-term contracts – or a succession of fixed-term contracts – then you should make those staff permanent. You should carry out this exercise now. Also, be aware that in July 2006 fixed-term employees who have four years’ continuous employment may well have strong rights to become permanent employees in any event.