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Expiry of fixed term contracts and unfair dismissal

31st January 2018

Many businesses enjoy the benefits of employing staff on fixed term contracts. There are clear advantages with such contracts, as they enable businesses to adapt easily to changing demands for their work. However, it was felt by many that the ability to use a succession of fixed term contracts could be used to avoid employment protection rights, and could lead to repeated detrimental treatment (such as reduced benefits, reduced holiday rights etc). The concerns resulted in the enactment of regulations in 2002 that provide some protection to fixed term contract staff.

The Fixed Term Employees Regulations outlaw discrimination against fixed term staff unless “objective justification” can be shown for the treatment in question. The Regulations establish the right not to be less favourably treated than permanent staff. This includes any treatment in relation to the opportunity to secure permanent employment with the employer. Obviously in order to secure that right the employee must first be told by the employer that there is a permanent role available.

Under the law relating to unfair dismissal it is well established that the expiry of a fixed term contract can amount to a fair reason for termination. The complication for some employers is the fact that in terminating the employment of a fixed term employee the employer has to be able to show that it has established a “potentially fair reason” for the dismissal (ie redundancy, incapability, misconduct, contravention of some statutory provision, or some other substantial reason).

In a recent decision of the Employment Appeal Tribunal (the EAT) it has been made clear that compliance with the non-discrimination provisions of the Regulations (as between permanent staff and fixed term staff) does not necessarily amount to fair treatment under the Employment Rights Act 1996 when a fixed term contract is not renewed. The EAT ruled that the question of the fairness of the termination will still depend on the facts of the case and the application of the usual approach to fairness and reasonableness of dismissal under the Employment Rights Act 1996.

The case in question, Royal Surrey County NHS Foundation Trust v Drzymala involved a consultant doctor that had been employed on a series of six- month fixed term contracts. Her contract was extended 5 or 6 times. Her fixed term contract ended in September 2014, and was not renewed. However, before then a permanent role had arisen. She applied for the role, but after interview was told that her application for the permanent role was unsuccessful. A little later she was given her three months’ notice that her fixed term contract, expiring on the 30th September, would not be renewed. The employer’s letter made no mention of a right of appeal or any alternative employment. She subsequently submitted a grievance about the appointment process for the permanent role. She was eventually allowed an appeal. An appeal panel concluded that an earlier appeal would not have made a substantive difference to the outcome.

The Employment Tribunal that heard the case in the first instance found that the dismissal was unfair. The employer appealed against the decision of the Employment Tribunal. 

In the arguments presented to the EAT the duty under Regulation 3of the Fixed Term  Employees Regulations was raised. This imposes a duty to provide information about vacancies. Argument was put as to how far the duty extends, ie is it fulfilled simply by telling the employee of vacancies, or does it require the employer to take further steps such as actively considering the employee for other vacancies? There was also the point raised that the Regulation 8(2) refers to the fixed term employee being treated as a permanent employee once 4 years has elapsed since the start of the period of employment under the succession of fixed term contracts.

The EAT noted that the general law on unfair dismissal applies to dismissals which arise as a result of the non-renewal of a fixed term contract. The decision on the fairness of the dismissal is dependant on the facts of each case in the usual way, and should be addressed using the normal statutory approach under the relevant legislation (ie under section 98 of the Employment Rights Act 1996).

A dismissal resulting from the non-renewal of a fixed term contract will often be potentially fair on the basis of being fair “for some other substantial reason”, but the Employment Tribunal must then go on to apply the usual examination of the facts to determine if the dismissal was actually fair in the circumstances.

The EAT noted that in this case the Employment Tribunal had been right to consider that the employee had been unfairly treated when it failed to pursue any real discussion about alternative roles and to give her the chance to have an appeal promptly. The EAT therefore agreed with the Employment Tribunal and agreed that the dismissal was unfair.

We note that much of the problem in this case may have arisen from a misunderstanding of the Fixed Term Employees Regulations, and the actual effect of those Regulations. Just because Regulation 8(2) refers to fixed term workers being treated as permanent staff does not mean that the same worker loses the protection of the law on unfair dismissal after the normal two years of employment. The employer still needs to exercise their own judgement in dealing with the termination of employment of a fixed term employee, and cannot always simply rely on the passing of the fixed term as enough to make the termination of their employment fair. One other point of interest arising from the case is the observation that the EAT rejected the argument that a failure to consider the fixed term employee for alternative employment will render a resulting dismissal unfair, but accepted that such a failure may result in the following dismissal being unfair.   

We can help by providing advice on dealing with fixed term contracts and the issue and process in dealing with a decision to renew or let the fixed term expire. 

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.

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