The Appropriate Use of Fixed Term Contracts

The Protection of Employees (Fixed Term Work) Act 2003 was enacted on foot of the Fixed Term Workers Directive 99/70/EC to promote the equal treatment of workers and to ensure better conditions of employment. It was further intended to prevent abuse arising from the successive use of fixed-term employment contracts. A fixed term employee is defined as

“…a person having a contract of employment entered into directly with an employer where the end of the contract of employment concerned is determined by an objective condition such as arriving at a specific date, completing a specific task or the occurrence of a specific event…”

Fixed Term Contracts are best used when it the position will be limited either by time, for example covering maternity leave, or by purpose, for example the completion of a project. Where the position is limited by purpose, it should be referred to as a specific purpose contract and the purpose clearly laid out and explained to the employee. This is important as the Unfair Dismissals Act applies equally to all employees who have obtained more than 1 years’ service.

Employers can get into difficulty when fixed term contracts are used as a probationary period or to test someone’s ability to do a job. In these cases it is best to utilise the probationary period and conduct regular review meetings with employees to assess their performance. It is important that notes of these meetings are kept and employees are aware of the areas they need to improve. If an employee is not working out during this probationary period it is a lot simpler to dismiss, compared to finding an objective reason you have not renewed a fixed term contract.

As stated above, the Protection of Employees (Fixed Term Work) Act 2003, was introduced in order to promote equal treatment. Employees on a fixed term contract shall not be treated less favourably in respect of their conditions of employment with a comparable employee, unless it can be justified on objective grounds. Less favourable treatment is not defined in legislation however examples could include longer rest breaks for permanent staff or Christmas Bonus paid only to permanent staff. Objective justification for treating fixed term workers less favourably could be:

  • Where it is based on considerations other than on the status of the fixed term employee
  • The less favourable treatment is for the purpose of achieving a legitimate objective of the employer
In order for a fixed term worker to claim they have been treated less favourably due to their fixed term status, they must name a comparable employee. This would be someone who generally performs the same work under the same conditions as the fixed term employee and is in the same or associated employment, is specified in a collective agreement, or working in the same sector or industry .

The major problem Employers have with fixed term contracts occurs when successive fixed term contracts are issued. If an employee has two or more fixed term contracts, the combined duration of the contracts cannot exceed four years unless there are objective grounds. Where there are no objective grounds, the employee is entitled to a contract of indefinite duration. This is set out in Section 8 (1) of the Act which states

“Where an employee is employed on a fixed-term contract the fixed-term employee shall be informed in writing as soon as practicable by the employer of the objective condition determining the contract whether it is – (a) arriving at a specific date (b) completing a specific task, or (c) the occurrence of a specific event.”

Section 7 of the Act provides that less favourable treatment can include non-renewal of a fixed term contract. There are a number of decisions from the Court of Justice of the European Union (CJEU) which indicate that it is possible to prevent a fixed term contract from being renewed where there are objective grounds.  However objective reasons have been tested in the Labour Court.

Where an employer is intending to renew a fixed term contract, the reasons for the renewal must be provided to the employee. This is intended to ensure the employer will commit itself at the point which the contract is being renewed to the grounds it will rely on if subsequently pleading a defence.

Well established precedent of the Court of Justice of the European Union CJEU that the fixed and permanent needs of an employer should normally be fulfilled by the use of permanent employment relationships. (C-378/07 to C-380/07 Kiriaki Angelidaki and Others v Organismos Nomakhiaki Aftodiikisi Rethimnis and Dimos Geropotamou (2009) ECR 1-3071)

In C-212/04 Adeneler and Others v Ellinikos Organismos Galaktos IRLR 716 the CJEU stated that

“The concept of ‘objective reasons’, within the meaning of clause 5(1)(a) of the Framework Agreement, must be understood as referring to precise and concrete circumstances characterising a given activity, which are therefore capable in that particular context of justifying the use of successive fixed-term employment contracts. Those circumstances may result, in particular, from the inherent characteristics of those tasks or, as the case may be, from pursuit of a legitimate social-policy objective of a Member State.”

The Labour Court in UCD -v- McConnon (FTD1423) applied the above principles to the facts of the case, and then determined if the reasons given could be reasonably considered to be objective. The Court relied on the contractual term which clearly set out the reasoning behind the fixed term and specified that the employment would end when the project was completed. The Court noted, however that the employer when renewing the contract for the first time, did so verbally and failed to again set out in writing the reasoning behind this. The Court highlighted the claimant could have a cause of action under section 8 of the Act, however she was no statute barred. Notwithstanding that the Court could draw inferences from this. The respondent in their evidence was able to successfully rebut this inference, however the need for this would have been avoided had the respondent issued the objective justification in writing at the time of the renewal.

This case highlights the importance of considering the reasons for renewal, ensuring they are explained to the employee and that the employee accepts these.

In UCD v Alan O’Doherty FTD159 the Labour Court had to satisfy themselves that the claimant was not used to meet the fixed and permanent needs of the University. The Court found in this case that the claimants contract specified the objective grounds and that the purpose of his employment was not one that warranted a contract of indefinite duration.

Complaints under the Protection of Employees (Fixed Term Work) Act 2003 are heard in first instance by the Workplace Relations Commission and appealed to the Labour Court. The Adjudication Officer has the power under section 14 (2) to award the following to a complainant:

  • Require the employer to comply with the relevant provision
  • Require the employer to re-instate or re-engage the employee (including on a contract of indefinite duration)
  • Require the employer to pay to the employee compensation of such amount (if any) as is just and equitable having regard to all the circumstances but not exceeding 2 years remuneration in respect of the employees employment.
In light of the above penalties and the interpretation of objective justification, employers should be careful when issuing fixed term contracts and use them only when necessary.

If you have any queries in respect of the above article then please contact our 24 Hour Advice Service on 1890 252 923 



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