Most contracts of employment are open-ended: they do not specify an end date and will last until either the employer or the employee terminates the relationship. Some contracts, however, are intended from the outset to be of a limited duration. They may be 'task' or 'specified purpose' contracts, which state that they will end when a particular task, such as a construction project, is completed or a specified event occurs. Or they may be fixed-term contracts, which specify the period for which they will last (such as 'one year from 1 January 2007') or the date on which they will end ('This contract will run from 1 January 2007 until 31 December 2007'). Fixed-term contracts may be short, so an employee working under a contract for a day, a week or a month that is renewed on a rolling basis is also a fixed-term employee.
Employees who work under these types of contracts of limited duration are protected by the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002. Under the Regulations, 'fixed-term' employees include not only those working under a fixed-term contract but also those working under a task or specified purpose contract.
Traditional apprentices ( trainees and apprentices ) are not covered by the Regulations. Nor are employees on schemes that are designed to provide them with training or work experience to help them find work and that are provided under arrangements made with the Government or are EC-funded. Employees who are on work-experience placements of up to one year as part of a higher education course are also excluded.
Under the Regulations, employers must not treat fixed-term employees less favourably than permanent employees on the ground of their fixed-term status, unless they can objectively justify doing so. This principle applies, for example, to fixed-term employees' terms and conditions of employment (fixed-term employees ) (part-time workers and fixed-term employees ) (fixed-term employees ), their access to training, their opportunity to apply for permanent vacancies in the company (where to advertise? ) (considering alternative employment) and their dismissal, including redundancy ( part-time and fixed term employees ).
In order to claim the protection of the Regulations, the fixed-term employee must be able to show that he or she has been treated less favourably than a comparable permanent employee. A permanent employee is comparable if he or she does the same or broadly similar work and has a similar level of the qualifications and skills that are relevant to the treatment in question. In companies with various sites, if there is no comparable permanent employee at the fixed-term employee's workplace, then a comparison can be made with a comparable permanent employee at another site.
In deciding whether a fixed-term employee has been less favourably treated, the pro rata principle should be applied in appropriate cases. So, for example, a fixed-term employee on a six-month contract is not being treated less favourably than a permanent employee if he or she is given only half the permanent employee's annual holiday entitlement.
An employer can lawfully treat a fixed-term employee less favourably than a permanent employee if it can objectively justify doing so. According to the Government guidance on the Regulations ( Contracts of employment links ), less favourable treatment of fixed-term staff is justified if it is a necessary and appropriate way of achieving a genuine business objective.
It may be possible, for example, to give a fixed-term employee a benefit on a pro rata basis, rather than exclude the employee from the benefit altogether. So, for example, if a company offers employees a loan to buy an annual season ticket, an employee on a fixed-term contract of six months could be offered a loan to buy a six-month ticket. In other cases, however, it may be disproportionately expensive to provide a fixed-term employee with the same benefit as a permanent employee. The Government guidance gives the example of where a fixed-term employee is on a contract of three months and a comparable permanent employee has a company car. The employer may be justified in not offering the fixed-term employee a car, it suggests, if the cost of doing so would be high and the employee's work travel needs could be met in some other way.
The Regulations state that it is justified to treat a fixed-term employee less favourably in respect of any contractual benefit, provided the employee's contract, taken as a whole, is no less favourable than that of a comparable permanent employee. (For examples, see elsewhere in this Guide (valuing the overall package ) (fixed-term employees ).)
A fixed-term employee who believes that his or her employer is not respecting the right to equal treatment can write for an explanation of the way in which he or she is being treated. The employer's response can be used as evidence in any claim the employee may then make to an employment tribunal to enforce his or her rights under the Regulations. If the employer fails to provide a statement of reasons or the statement it provides is evasive or unclear, the tribunal is entitled to draw whatever conclusions it considers fair to draw, including that the employer has breached the Regulations.
The Regulations also limit the extent to which employers can use successive fixed-term contracts. Fixed-term employees who have their contracts renewed, or who are offered a new fixed-term contract, when they have already been employed on a fixed-term basis for four continuous years or more, will be treated as working under a permanent (that is, open-ended) contract from the date the contract is renewed or the date the new contract is entered into. The law does not restrict the length of the initial fixed-term contract. (The rules on calculating continuous employment are explained elsewhere ( Calculating qualifying periods ).) The contract will not be converted into a permanent one, however, if the employer can objectively justify continuing to use a fixed-term contract.
A company can amend or replace these rules by reaching a collective agreement with its recognised trade union or a workforce agreement aimed at preventing the abuse of fixed-term contracts. (Workforce agreements are explained elsewhere (flexibility by agreement )). The agreement can achieve this aim in one or more of the following ways:
- by fixing a maximum period for which an employee may be employed on a fixed-term basis (which could be more or less than the four years set out in the Regulations);
- by limiting the number of fixed-term contracts or the times a fixed-term contract may be renewed; or
- by specifying objective grounds on which the renewal of a fixed-term contract or use of successive fixed-term contracts may be justified.
An employee who believes that he or she has become a permanent employee as a result of these rules is able to ask the employer for a written statement confirming that. The employer must either confirm the employee's permanent status or explain why the contract remains fixed-term. If the employer considers that it is justified in continuing to employ the employee on a fixed-term basis, it will need to state why.
If the employer fails to reply, or the employee does not accept the employer's reply that his or her contract remains fixed-term, the employee can ask an employment tribunal to decide whether he or she is in fact a permanent employee. Any reply that the employer gave can be used as evidence in that claim. If the employer failed to reply, or the reply it gave was evasive or unclear, the tribunal is entitled to draw whatever conclusions it considers fair from that.
It is unlawful for an employer to penalise an employee for asserting or enforcing his or her rights under the Regulations, or for supporting someone else in bringing a claim. It is also automatically unfair to dismiss an employee on these grounds, regardless of the employee's age or length of service. This protection does not apply where an employee has alleged that his or her employer has breached the Regulations and the allegation was not only false but also not made in good faith.