Case law on types of employment contract

​[2012] EWCA Civ 1416; [2013] IRLR 32 (CA)
Issue: Fixed-term contracts

The claimant was initially employed with the Department for Work and Pensions under a fixed-term contract of employment as part of a government training scheme. There were then subsequent fixed-term contracts or extensions to the initial contract. After completing the training contract, Mrs Hudson got a job within the Department for Work and Pensions but still on a fixed-term basis.

In April 2010, having apparently accrued four years' service, as required by the Fixed Term Workers (Prevention of Less Favourable Treatment) Regulations Mrs Hudson asked her employer to confirm that she was now a permanent employee. The Department for Work and Pensions, however, denied she was a permanent employee. They relied on the exemption in Regulation 18, which states that any fixed term employment undertaken as part of a government training or work experience scheme is not counted towards the four year qualifying period.

Eventually the matter reached the Court of Appeal which decided that the employee could not have the declaration she sought. Time worked under a training scheme does not count towards establishing the four year period. If a fixed term employee accrued four years’ service during their apprenticeship and qualified as a permanent employee this might act as a disincentive to employers to provide training and work experience opportunities.

Implications for employers

• Employers will know that normally under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 anyone employed under a succession of fixed-term contracts will become a permanent employee after four years unless employment on a fixed term contract is objectively justified.
• There is an exception for employees on a training or work-experience scheme arranged by the Government or funded by the European Community.
• Therefore, time worked under a training scheme does not count towards the four years that a fixed-term employee needs to become permanent.
• Employers with fixed term employees on training schemes will have four years after the end of their apprenticeship before they qualify as a permanent employee.

​(unreported, UKEAT/0123/12 6 August 2012, EAT)
Issue: Zero hours contracts

Six care workers provided 24 hour care for a woman with severe physical difficulties. Initially they worked for Carewatch, then the care contract transferred to Pulse Healthcare, thereby raising the issue of a TUPE transfer. All employees were then dismissed by Pulse Healthcare. Both companies said the that the claimants were not employees since there was no mutuality of obligation, or alternatively they did not have sufficient continuity of employment to claim unfair dismissal.

The Employment Appeal Tribunal agreed that Tupe applied and that the claimants were employees under a global contract. The documents provided to the claimants by Carewatch did not reflect the full agreement between the parties. The reality was that, whilst the contract on paper was for ‘zero hours’, the carers had for a number of years been working a fixed working pattern. All employees had the requisite continuity of employment. The fact that the claimants were obliged to carry out the work offered to them and Carewatch undertook to offer work and that the claimants had to personally do the work and could not provide a substitute to do so, were indicative of the true nature of the employment contract.

Implications for employers

• Even employees on 'zero hour contracts' can have employee status if the reality of their employment reveals mutuality of obligation and control by the employer.
• The written agreement between a potential employer and employee is extremely important.
• However, the written terms of a contract are not determinative of the relationship and it is always necessary to consider how the relationship works in practice.
• In deciding employee status the tribunals will still consider control, mutuality of obligation, integration and multiple tests.
• The mere fact a relationship has continued for some time will not, in itself, establish employee status.
• A contract of employment may be implied even though there is no express contract, either written or oral between the parties. However the inference must be a necessary one where the contract operates in a way which is only consistent with an implied contract.
• Employers should always address workers and employees status in a clear contract, even though this will not be determinative in all cases.

​(unreported, C-586/10 26 January 2012, ECJ)
Issue: Successive fixed-term contracts

An employee was employed for 11 years on 13 successive fixed-term contracts to cover the temporary absences of permanent employees who were on maternity leave or sick leave. The European Court of Justice (ECJ) was asked to consider if the need for replacement staff was a valid objective reason for using consecutive fixed-term contracts, as there was a permanent or recurring need for replacement staff and this need could be met by employing the employee on a permanent contract. The ECJ held that in principle a temporary need for replacement staff was an objective reason. It also said there needs to be an assessment on the facts of each case as to whether the renewal of the fixed-term employment contract is justified by such an objective reason. The courts must consider all the circumstances of the case, including how many previous fixed-term employment contracts there were and how long they lasted for.

Implications for employers

• The need to replace staff on temporary absence which is permanent or recurring can be an objective reason to only employ someone on a fixed-term contract, even if the absent staff could have been covered by one long term employee.
• In the UK, employees who are employed on successive fixed-term contracts with their employer gain permanent status when they reach four years continuous service anyway, unless the employer can objectively justify the continued use of fixed-term contracts.
• Although the need for replacement staff may objectively justify the use of successive fixed-term contracts, this will not be the case if the renewal is to cover permanent needs rather than cover for absent staff.
• Whether the use of the fixed-term contract is justified will always depend on all the circumstances of the particular case, including the number and cumulative duration of the fixed-term contracts the employee has worked under.

​[2011] IRLR 498, SC; [2011] IRLR 840 SC
Issue: Fixed-term contracts

Two teachers had been employed by the Department for Children, Schools and Families (DCSF) to work in European Schools under a series of fixed-term contracts. A clause in the contracts stated that the law and jurisdiction was said to be English law. Under rules governing the Schools no teacher was allowed to work for more than nine years. The DCSF dismissed two teachers on the expiry of their fixed-term contracts after nine years. The teachers argued that under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 Regulation 8, their contracts were permanent and did not terminate under the nine-year rule. The key issues were if the 2002 Regulations converted the previous contracts into permanent contracts, whether the teacher’s employment had a sufficiently close connection with Great Britain to enable them to present a claim of unfair dismissal and a claim under the 2002 Regulations. The teachers also claimed wrongful dismissal as well as unfair dismissal.

The Supreme Court held that:

• under the 2002 Regulations it was objectively justified to employ teachers on successive fixed-term contracts amounting to nine years in total
• these contracts were not converted into permanent contracts
• that the teachers were not complaining against the three- or four-year contracts within the nine-year maximum rule, but about the fixed-term nature of their employment, rather than the use of the individual fixed-term contracts that made up the total period, and
• that the teachers were employees with ‘equally strong connections’ with Great Britain to enable them to bring their claims.

Implications for employers

• Employees who are continuously employed on successive fixed-term contracts for four years or more automatically get permanent status, unless there is an objective reason justifying a further renewal for a fixed term.
• The 2002 Regulations apply to all relevant contracts governed by English law.
• The burden of justification under the Regulations falls on the employer.
• However, employers who use a single-fixed term contract do not contravene the 2002 Regulations or EU law and do not need to justify the length of the contract. (In this case a single nine year fixed term contract, although unusual, would not have involved the 2002 Regulations at all).
• Employers who use successive fixed-term contracts lasting four years or more must be able to justify using them or they risk those employees’ contracts becoming permanent.
• Under the Employment Rights Act 1996, an employee has a right not to be unfairly dismissed and there are no express geographical limitation in respect of this right in that Act.
• The geographical limitations on the right to claim unfair dismissal is summarised in the case of Serco Limited v Lawson [2006] IRLR 289, HL which held that the following three types of employees will have unfair dismissal protection; namely employees working in Great Britain at the time of their dismissal; 'peripatetic employees' who may spend much of their time abroad but are still based in Great Britain; and 'expatriate employees' who work abroad but whose circumstances demonstrate a closer working relationship to Great Britain that to that of any other jurisdiction.
• Employers of expatriate employees are only vulnerable to unfair dismissal claims in exceptional circumstances such as where there is a political or social British enclave in another country; where employees are posted abroad by a business carried on in Great Britain; or where there are employees with equally strong connections with Great Britain and British employment law.
• Employers may therefore in certain limited circumstances be vulnerable to unfair dismissal claims from employees working outside Great Britain for the duration of their employment. So those employers should bear this in mind when engaging staff to work abroad.
• Employers should carefully consider the legal rights that any expatriate employees may have before employing them or sending them abroad and when considering whether to terminate their employment or when investigating grievances.
• The normal territorial limitations to unfair dismissal rights can be modified where necessary to enforce a right emanating from European law.
• The principles about jurisdiction applied in Serco Ltd v Lawson apply to unfair dismissal claims, but not wrongful dismissal claims.
• This case could also have an impact on other employment rights, such as claims of discrimination, where their employment has an especially close connection to Great Britain.
• Employers should be aware that employees who are not based in Great Britain can pursue claims for things like unpaid holiday pay and fixed term workers rights because those implement a directly effective European right that domestic courts must seek to enforce. (See also Bleuse v MBT Transport Ltd and another [2008] IRLR 264 EAT).