Legal Q&A… Fixed-term contracts

From 10 July 2006, staff who have been engaged on successive fixed-term contracts for four years or more with the same employer will be entitled to permanent employment, unless their employer can objectively justify a renewal or extension of their fixed-term status.

WarningThis article has been updated

Although this article was first published in 2006, the advice contained is still relevant. It was checked on 02/11/2011 to make sure all the information was still up-to-date and correct.

Q What is the relevant legislation?

A The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 require employers to treat staff on fixed-term contracts no less favourably than comparable permanent staff, and declare that after four years of successive fixed-term contracts such staff are entitled to permanent employment. Although the regulations came into force on 1 October 2002, the European Council Directive (1999/70/EC) that they implement required the government to have put legislation in place by 10 July 2002. The right to permanent employment is counted from this date.

Q Who is covered by the regulations?

A Only those who are engaged under a fixed-term contract are covered. A fixed-term contract is not just one that has a specific end date; it also includes contracts that will terminate on completion of a particular task, or on the occurrence (or non-occurrence) of a specific event.

Individuals who are not employees, such as agency staff or the self-employed, are not covered. In addition, apprentices, staff on publicly funded training, re-integration and work schemes, students on work placements of one year or less as part of a higher education course, and members of the Armed Forces are expressly excluded from protection.

Q How exactly will fixed-term staff become permanent employees?

A From 10 July 2006, staff who are on their second or later fixed-term contract, and who have reached four years’ continuous service, automatically have their contracts converted. In such cases, the fixed-term provisions will be of no effect (unless the employer can demonstrate that continuing fixed-term status is justified on objective grounds).

Employees with a contract with a fixed term of more than four years who are still employed under their first contract will not automatically become permanent staff simply by acquiring four years’ service. However, any attempt to renew it with another fixed term will be ineffective, and they will acquire permanent status.

Q Will employers have to issue new contracts?

A No, the existing terms and conditions will continue, except that the fixed-term provisions will have no effect. Employers that wish to ensure there is no confusion may issue new contracts or write to staff to confirm their status.

Staff who believe they have acquired permanent status are entitled to request a written statement confirming their permanent position. This must be provided within 21 days of receiving a written request, either confirming the permanent status or setting out the reasons that the employer considers justify the employee remaining on a fixed-term contract.

Q What might be ‘justification on objective grounds’ for offering a fixed-term contract to an employee with four years’ service?

A Objective justification requires an employer to show particular business reasons which establish that a fixed-term contract is more appropriate than a permanent position. An example where appropriate justification might exist would be a role on a short-term project that depends on its funding from an external client. However, even then, it will be very difficult to prove justification where the individual has been employed on a succession of contracts, as this implies that there is, in fact, an ongoing role.

Q Can we avoid fixed-term staff obtaining permanent employment status by not renewing their contracts or by dismissing them ?

A Generally, no. Any dismissals that are made solely on the grounds of avoiding a fixed-term employee acquiring permanent status are likely to be unfair and in breach of the regulations. No qualifying period of continuity of employment is needed for a claim of unfair dismissal where the reason is related to the claimant’s fixed-term status. A decision not to renew a fixed-term contract is expressly regarded in law as a dismissal.

Fixed-term staff with more than a year’s service are entitled not to be unfairly dismissed. Whatever their length of service, fixed-term employees can bring claims in relation to any treatment that is less favourable than that offered to comparable permanent employees (unless that treatment can be objectively justified).

Q If we ensure there is a gap between one fixed-term contract and the next, will this break the continuity of employment?

A Although there is some legal uncertainty in this area, in general, it is safest to assume that any planned gaps in employment will not break continuity, especially if they are for a short period in comparison to the overall length of employment.

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