Workers on fixed-term contracts
Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002.
What is a fixed-term employee? A fixed-term employee is a person who is employed until a specified date is reached, a specified event happens or a specified task is completed. Examples include employees doing seasonal or casual work who have contracts for a short period, such as summer or Christmas-season staff.
Who is excluded from the regulations?
Agency workers, apprentices and certain categories of student are excluded. Agency workers are defined as those who have an employment contract with the temporary employment agency but are placed with, and do their work for, third parties.
What counts as less favourable treatment?
Fixed-term employees must not be treated less favourably than comparable permanent employees just because they are fixed-term. But in some circumstances, less favourable treatment can be justified.
Less favourable treatment can occur when a fixed-term employee does not get a benefit, whether contractual or not, that a comparable permanent employee receives, or is offered a benefit on less favourable terms. Permanent employees, for example, could be given free membership of a workplace gym which fixed term employees do not get. Similarly, less favourable treatment would occur where fixed-term employees are offered less paid holiday than comparative permanent employees.
So who do you compare with whom? A fixed-term employee can compare his or her treatment with the treatment of a comparable permanent employee. A comparable permanent employee is someone who works with the same employer in the same establishment, doing the same or broadly similar work. If no comparable permanent employee works in the same establishment, a fixed-term employee can compare themselves with a worker in another one of the employer's establishments.
When can less favourable treatment be justified? Employers should ask themselves the question: is there any good reason for treating this fixed-term employee less favourably? They should also take into account the needs and rights of individual employees and try to balance those against business objectives. Less favourable treatment can be justified on objective grounds if it can be shown that the less favourable treatment:
- is to achieve a legitimate objective, for example, a genuine business objective;
- is necessary to achieve that objective;
- is an appropriate way to achieve that objective.
Sometimes, the cost to the employer of offering a particular benefit to an employee may be disproportionate when compared with the benefit the employee would receive, and this may objectively justify a difference in treatment. An example of this may be where fixed-term employee is on a contract of three months and a comparable permanent employee has a company car. The employer may decide not to offer the car to the fixed-term employee if the cost of doing so is too high and if the employee can travel to work some other way. Employers need to consider whether less favourable treatment is objectively justified on a case-by-case basis.
Can fixed-term employees waive their rights to a redundancy payment? Fixed-term employees can no longer waive their right to a statutory redundancy payment. Any waivers inserted into contracts agreed, renewed or extended after 1 October 2002 will not be valid and fixed-term employees will have a right to a statutory redundancy payment if they have been continuously employed for two years or more.
If a fixed-term employee signed a waiver clause before 1 October 2002, the waiver would still apply and they would not be entitled to statutory redundancy payments if their contracts expired and were not renewed. However, if the contract was renewed or extended after 1 October 2002, any waiver clause would not be effective. If the fixed-term contract had expired and the fixed-term employee had at least two years' continuous service by this point, they would be entitled to statutory redundancy payments, if the reason for non-renewal was redundancy.
How often can a fixed-term contract be renewed?
If fixed term employees have their contracts renewed, or if they are re-engaged on a new fixed-term contract, when they already have a period of four or more years of continuous employment, the renewal or a new contract then becomes a permanent contract. The fixed-term employee can write to their employer requesting written confirmation that the contract is to be regarded as permanent. Service before 10 July 2002 does not count towards this period of four years.
Is there a duty to inform fixed-term employees of permanent vacancies? Employers must inform their fixed-term employees of permanent vacancies in their organisation. Employers must give fixed-term employees the same opportunities to secure permanent vacancies as permanent employees. Employers should display vacancy notices in a place where all employees would be expected to see them or by e-mailing the vacancy list to all members of staff.
by Jonathan Exten-Wright - and Mary Walsh
Jonathan Exten-Wright is a partner in the employment department at lawyers DLA and Mary Walsh is an assistant.
