FIXED TERM EMPLOYEES THE LITTLE USED REGULATIONS?

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1 FIXED TERM EMPLOYEES THE LITTLE USED REGULATIONS? An abridged version of this article appeared in Employment Law Journal December 2004 It has been just over 2 years since the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (the Regulations) came into force. Unlike their namesake, the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, they only apply to employees as opposed to the much broader category of workers. The Regulations were passed to implement into domestic law the EC Directive on Fixed Term Work. The fact that the Regulations only apply to employees may explain why so few employment tribunal claims have been brought under the Regulations. The Employment Tribunal Service (ETS) statistics for reveal that fewer than 123 cases were brought that year under the Regulations. The number of actual cases is unknown as they fall within the ETS s other category. The figure of 123 represented claims for a failure to provide a written statement of reasons for dismissal, and was the smallest recorded main jurisdiction category. The Regulations were designed for employees hired: to do seasonal or casual work who have contracts for a short period or task, which end when the period expires or the task is completed, eg shop assistants working specifically over the Christmas period; to cover for employees on maternity, parental or paternity leave or long-term sick leave; to cover for peaks in demand and whose contracts expire when demand returns to normal levels; or whose contracts will expire when a specific task is complete, eg painting a house. The law The Regulations, as its title states, are designed to prevent less favourable treatment of employees employed on fixed-term contracts. A fixed-term contract is defined in regulation 1(2) as: a contract of employment that, under its provisions determining how it will terminate in the normal course, will terminate (c) on the expiry of a specific term, on the completion of a particular task, or on the occurrence or non-occurrence of any other specific event other than the attainment by the employee of any normal and bona fide retiring age in the establishment for an employee holding the position held by him. Less favourable treatment is made unlawful by regulation 3(1) as follows: a fixed-term employee has the right not to be treated by his employer less favourably than the employer treats a comparable permanent employee as regards the terms of his contract; or

2 by being subjected to any other detriment by any act, or deliberate failure to act, of his employer. Examples of areas where less favourable treatment for fixed-term employees is unlawful are provided in regulation 3(2): (c) any period of service qualification relating to any particular condition of service, the opportunity to receive training, or the opportunity to secure any permanent position in the establishment. Comparable permanent employee, as defined in regulation 2(1), means: both employees are (i) (ii) employed by the same employer, and engaged in the same or broadly similar work having regard, where relevant, to whether they have a similar level of qualification and skills; and the permanent employee works or is based at the same establishment as the fixed-term employee or, where there is no comparable permanent employee working or based at that establishment who satisfies the requirements of sub-paragraph, works or is based at a different establishment and satisfies those requirements. For the purposes of regulation 1(1), an employee is not a comparable permanent employee if his employment has ceased (regulation 2(2)). Fixed-term employees can be subject to disadvantages which are not imposed on permanent employees, eg where fixed-term employees are dismissed, or selected for redundancy, purely because they are employed on a fixed-term basis, or where permanent members of staff are given better promotion opportunities than fixed-term employees. However, the right not to be less favourably treated only applies where the treatment is on the ground that the employee is employed on a fixed-term contract and cannot be justified on objective grounds Objective justification is made out within regulation 4(1) if: the terms of the fixed-term employee s contract of employment, taken as a whole, are at least as favourable as the terms of the comparable permanent employee s contract of employment. Objective justification will be made out only if it can be shown that the less favourable treatment: is intended to achieve a legitimate objective, eg a genuine business objective; is necessary to achieve that objective; and is an appropriate way to achieve that objective. This defence can be relied upon in two ways: on a term-by term basis, ie the reason for not giving the fixed-term employee a particular benefit or for giving him or her the benefit on less good terms when compared to the benefits given to a comparable permanent employee; or on a package approach, ie that the value of the fixed-term employee s total package of terms and conditions is at least equal to the value of the comparable permanent employee s total package of terms and conditions. In what are believed to be the first reported decisions concerning the Regulations, the EAT provides guidance on interpreting the Regulations in Webley v Department of Work and Pensions UKEAT/0033/04 and Allen v National Australia Group Europe Ltd [2004] IRLR 847.

3 Webley v Department of Work and Pensions This case concerned the non-renewal of a fixed-term contract. The claimant was employed on successive fixed-term contracts as an administrative officer at a job centre from 4 February 2002 to 17 January Following the termination of her employment ie on the expiry of the last fixed-term contract, the claimant brought claims for unfair dismissal and unlawful discrimination contrary to the Regulations. She alleged that she had been subjected to less favourable treatment contrary to regulation 3(1) and of the Regulations. In particular, that the respondent operated a 51-week rule deriving from the Civil Service Commissioners Recruitment Code terminating the contracts of temporary employees just short of the one year qualifying period to claim for unfair dismissal which did not apply to comparable permanent employees. At an interlocutory hearing, the employment tribunal identified that the issue to be determined was whether the non-renewal of a fixed-term contract involved less favourable treatment for the purposes of regulation 3(1). On the facts, the tribunal dismissed the claimant s claim on the basis that the terms of the fixed-term contract were no less favourable and that the claimant was not subjected to detriment by having her contract terminated on such grounds. Alternatively, the tribunal concluded that any less favourable treatment by the respondent was objectively justified on the basis that employment in the Civil Service has to be conducted by way of fair and open competition. The Employment Appeal Tribunal (EAT) overturned the tribunal s decision on the basis that it had asked the wrong question. HHJ Peter Clark concluded that the real issues between the parties were these: was the claimant employed under a fixed-term contract? if so, the claimant was a fixed-term employee as defined in regulation 1(2)? [This was conceded by the respondent in this case]. that being so, was it a term of claimant s contract that she was subject to the 51-week rule? if so, was that term equally applied to a permanent employee, as defined in regulation 1(2) (ie an employee who is not employed under a fixed-term contract)? if not, was the claimant less favourably treated than her permanent comparator, as defined in regulation 2, for the purposes of regulation 3(1)? alternatively, was the claimant subjected to a detriment by the application of the 51- week rule to her and not to a comparable permanent employee (regulation 3(1)? if the claimant was subjected to less favourable treatment within the meaning of regulation 3(1) or : (i) was that treatment on the ground that the claimant was a fixed-term employee; and if so, (ii) was the treatment justified on objective grounds (regulation 3(3))? The EAT in reaching its decision, relied on the case of Whiffen v Milham Ford Girl s School and another [2001] IRLR 468, which concerned indirect sex discrimination. There the Court of Appeal held that an employer s policy of dismissing fixed-term contract employees by not renewing their contracts in a redundancy situation, before applying its redundancy selection policy to permanent employees, was unlawful indirect sex discrimination, in the absence of any justification by the employer. Applying the facts of that case to the Regulations, the EAT concluded that the non-renewal of a fixedterm contract was capable of being less favourable treatment on the facts and in certain circumstances contrary to regulations 3(1) or and that to say otherwise would invariably preclude bringing a claim under the Regulations.

4 Allen v National Australia Group Europe Ltd This case concerned the notice provision in a fixed-term contract. The claimant was employed under a written contract of employment. Clause 1 - Job Title of that contract stated: The employment is for a fixed term from 9 December 2002 to 31 July 2003 and you are employed as a Project Manager Insurance Services in the first instance. Clause 8 - Notice of the contract stated: During the first six months of continuous service, either party may terminate the employment by giving one week's notice to the other. You are not entitled to receive written reasons for the termination during this period. After the first six months of continuous service have been completed satisfactorily the following periods of prior written notice are required to be given to terminate the employment. In this case, the claimant was entitled to receive 3 months notice. The respondent s employee handbook, which formed part of the claimant s terms and conditions of employment, provided for a performance Improvement Procedure allowing for employees to make good shortfalls in their performance. The respondent dismissed the claimant on 30 January 2003 for a reason relating to his performance. The claimant presented a claim to a tribunal arguing that he had been treated less favourably contrary to regulation 3(1) and than permanent employees on the basis that he was not given access to the Performance Improvement Procedure and that if he had he would probably not have been dismissed. The tribunal considered that the case of Dixon v BBC [1978] ICR 281 CA, which concerned the application of fixed-term contracts, did not apply as it pre-dated the Regulations, even though it decided that a contract does not cease to be a fixed-term contract if it provides that it can be ended by notice on either side before the expiry of the fixed-term. Accordingly, the tribunal concluded that the claimant was not employed under a fixed-term contract, as there was a right to terminate the contract without reasons with notice prior to the fixed date and dismissed his claim. The claimant appealed. The EAT allowed the appeal on the basis that the Regulations define a fixed-term contract as a contract of employment that, under its provisions determining how it will terminate in the normal course, will terminate on the expiry of a specific term (regulation 1(2)). According to the EAT the normal course for the contract to have ended would have been on 31 July 2003, as per clause 1 of the contract. HHJ McMullen QC states in paragraph 32: Thus as a matter of application of the definition to these clauses, we hold that there is no diminution in the ability of the employee to claim the protection of these Regulations, simply by reason of the earlier notice provision. We are told by Mr Morgan, and it is our experience too, that in the world of work, contracts, particularly of higher paid employees, are often for a fixed-term, with an earlier notice provision. In our judgment, the provision for such earlier notice will not destroy the original intention in such a contract, if it be in the form of the one in front of us, that the parties would see through the fixed-term, unless and until some event which was not in the normal course occurred, causing them to separate. Nor will it limit the right of an employer to dismiss a highly paid executive who is not performing, provided the executive is not treated less favourably than a comparable permanent employee.

5 Comment The DTI Guidance to the Regulations published in 2002, based on the Labour Force Survey estimated that the number of people working on fixed-term contracts in the UK was between 1.1 and 1.3 million and has increased by approximately 7% between 1994 and The public sector used proportionately more fixed-term employees than the private sector and accounted for just under half of the total. According to the DTI, the benefits of the Regulations are that: 25,000-53,000 employees will benefit from the prevention of less favourable treatment by million; access to training will benefit fixed term employees by million and will have benefits to business of million per year from increased productivity; measures to prevent abuses of fixed-term contracts will benefit 5,000 13,000 fixed term employees by 6-16 million; removing the redundancy waiver for fixed term contracts will benefit 43, ,000 employees by million. With the low number of claims presented to employment tribunals in either the Regulations are a complete success and employers are applying the provisions in accordance with the Regulations or simply (as I suspect) employers and employees are still not aware of them and the rights that they provide. The Regulations provide a legitimate remedy for those employees that have been treated less favourably on the grounds that they were employed on a fixed-term contract compared to permanent employees. However, from the public perception the Regulations appear to be missing the target audience. The Employment Act 2002 (Dispute Resolution) Regulations 2004, which provide the statutory framework for the mandatory disciplinary, dismissal and grievance procedures do not apply to claims under the Regulations by virtue of section 32 of the Employment Act Therefore, aggrieved employees are under no obligation to send a step 1 grievance letter before presenting a claim under the Regulations and employers are under no obligation to provide fixed-term employees with step 2 and step 3 meetings in order to resolve that grievance. Consequently, in the absence of internal policies covering grievances beyond the minimum statutory grievance procedures aggrieved fixedterm employees will have no choice but to bring tribunal claims to resolve complaints under the Regulations. The only way of assessing whether the Regulations are working will continue to be based on the number of tribunal claims presented by employees. Marc Jones, Partner, Turbervilles For further information, please contact: Marc Jones Partner, Employment Department TURBERVILLES direct dial direct fax marc.jones@turbervilles.co.uk The material contained in this fact sheet is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken. Back to the top