Case law on fixed-term contracts

[2018] UKEAT/0063/17/BA
Issue: Fixed term employees - termination 

Facts

A locum doctor was employed directly by the NHS on a series of fixed-term contracts for a number of years. She applied for a permanent post, but another employee was appointed. No appeal against the decision not to renew her contract was suggested. The Trust had mentioned other alternative roles, but only in passing. The Trust complied with the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations. 

When her final fixed-term contract was not renewed the doctor claimed unfair dismissal.  An accompanying age discrimination claim was dismissed.

Decision

The EAT said the doctor was unfairly dismissed. There did not need to be less favourable treatment on the grounds of fixed-term status, in order for a dismissal to be unfair. The NHS Trust had not made adequate attempts to discuss alternative employment and had not offered an appeal – the dismissal was clearly unfair.

Implications

Employers must remember that a non-renewal of a fixed-term contract is a dismissal. Non-renewal of a fixed-term contract should be considered in the same way as any other dismissal including looking at the reasonableness and the fairness of the procedure followed. Employers should also remember that:

• fixed-term employees only obtain ordinary unfair dismissal rights at two years’ service; 
• employees engaged under a continuous series of fixed term contracts may obtain the needed continuous service to bring claims.

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

Facts

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. There was a permanent or recurring need for replacement staff and this need could be met by employing the employee on a permanent contract. 

Decision

The ECJ held that 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. It does not matter if the absent staff could have been covered by one long term employee.

• 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.
  
  
• If fixed-term contracts are 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.

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

Facts

The claimant was initially employed with the Department for Work and Pensions under a fixed-term contract 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 for confirmation that she was now a permanent employee. The Department for Work and Pensions, however, denied she was permanent. They relied on an exemption 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.

Decision

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 Regulations anyone employed under a succession of fixed-term contracts becomes a permanent employee after four years unless employment on a fixed term contract is objectively justified. However there are exceptions:

• employees on a Government training scheme or one of the schemes that used to be funded by the EU may not obtain permanent status;
• 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.

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

Facts

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.

Decision

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;
• 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 total 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 burden of justification under the Regulations falls on the employer.

• Employers who use a single-fixed term contract do not contravene the 2002 Regulations 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.

The case also deals with the right not to be unfairly dismissed and there are no express geographical limitations in respect of this right in the legislation. There is case law guidance on geographical limitations on the right to claim unfair dismissal as 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 than to that of any other jurisdiction.

• 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 principles about jurisdiction applied in Serco Ltd v Lawson apply to unfair dismissal claims, but not wrongful dismissal claims.

Facts

Four senior advisers worked under fixed-term contracts with the Department for Education and Skills. Under the Civil Service rules, they received modest compensation if they faced redundancy. Permanent colleagues would receive significant redundancy payments.

Decision

The employees won their tribunal claim and obtained a declaration that the difference in treatment breached the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002. When their contracts expired they were entitled to substantial redundancy payments on a par with those payable to permanent employees, or to be kept on under new contracts.

The difference in treatment with permanent employees was not objectively justified, as the employees had a reasonable expectation of continued employment beyond the expiry of their fixed-term contracts (possibly even to retirement age), partly due to their succession of contracts. 

Implications for employers

Employers who provide less favourable redundancy terms to fixed-term employees are at risk. They should review their policy to see whether it can be objectively justified. 

• The need to save costs is unlikely to be sufficient to justify different redundancy terms for fixed term employees. 
  
  
• On a different set of facts another employer may be able to justify objectively the difference in treatment.
  
  
• Employees still need the requisite minimum two-year period to be entitled to redundancy payments.

[2004] IRLR 847 EAT
Issue: Definition of fixed term employees.

Facts

A project manager had a fixed term contract from 9 December 2002 until 31 July 2003. The contract contained a clause that either party could terminate the contract by giving one week's notice during the first six months of the contract. The employer dismissed the employee for incompetence in January, seven months before the contract was due to expire. 

Decision

The employee won his claim that he had been discriminated against under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002. The provision for earlier notice did not stop the contract being one for a fixed term.

Implications for employers

A contract expressed terminate on a finite date is likely to be a fixed term contract:

• An ability to bring a contract to an end at an earlier date does not prevent a fixed term contract arising.
• Earlier notice does not remove the original intention that the parties will see through the contract to the end of the fixed term, unless an abnormal event causes it to end earlier.