Fixed term employees

Fixed-term employees will, from 1 October 2002, have the right not to be
treated less favourably than comparable permanent employees, unless there are
objective grounds for justifying that worse treatment, which have to be for a
real business need, necessary and proportionate.

There are two other key components to the new rights. Firstly, once an
individual has been on fixed-term contracts for four years, they will
automatically become a permanent employee, unless their retention as a
fixed-term employee can, again, be objectively justified.

Secondly, employers will have an obligation to bring any available permanent
work to the attention of fixed-term employees.

In relation to the first point, the regulations state that once
"automatic" transformation has taken place, the individual will be entitled
to statutory minimum notice. Thus, where, for example, an individual has been
working on a series of one year fixed-term contracts and is dismissed part of
the way into their fifth year, they may find (if the underlying fixed-term
contract ‘disappears’) that instead of a payment in lieu of notice of the
balance of the year, they are offered only a payment in lieu based on their
statutory minimum notice (four weeks’ pay).

It will then presumably be up to the individual to argue that their
employment on a fixed-term contract was justified on objective grounds, in
order to obtain the much larger payment in lieu of the balance of their
one-year fixed-term contract.

Conversely, where an employer simply asks such an individual to leave at the
end of a fixed-term contract, the empl-oyer might well find that not only is it
due to pay statutory minimum notice (at least four weeks’ pay or more,
depending on total service), but that it is in breach of contract for not
having paid this amount or given the required notice, with the result that any
post-termination restrictive covenants and express confidentiality and other
provisions are void, under the normal employment principles.

Conclusion

Employers should not panic. Prior service before the Regulations come into
force in October is to be disregarded in terms of the four-year rule.

However, all employers should look carefully to see whether they treat
fixed-term workers less favourably in any way, and if so, whether those
differences can be objectively justified. There is a useful backstop argument,
introduced late on, which is that if the terms of the fixed-term employee’s
contract, taken as a whole, are at least as favourable as the comparable
permanent full-timer, then any differences are objectively justified. There are
now four months to do the necessary preparation.

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