There are 850,000 workers workers in the UK employed on fixed term contracts. Fixed Term Contract employees are in a uniquely vulnerable position in UK employment law. Unlike any other category of employee their employment rights can be signed away leaving them with no protection against unfair dismissal, when their contract expires the exclusion works if the contract is a year or more, or two years for redundancy payments or redundancy payment rights.
In any other type of employment contract a clause waiving employment rights - a waiver clause - is void and has no effect. Not so with fixed term contracts and many employers routinely recruit staff on fixed term contracts and require them to sign a waiver clause as a condition of getting the job.
Attempts to challenge the use of waiver clauses through the courts have had mixed results most recently in BBC v Kelly Phillips [1998] IRLR 294 (see Issue 21 of LELR).
The Court of Appeal said that extensions of fixed term contracts - no matter how short the extension - can work to exclude employment rights. Even though employers could abuse the position by successively extending fixed term contracts and thereby deprive employees of their rights, the law permitted the exclusion of rights.
The Court of Appeal decision in Kelly - Phillips, is now being appealed to the House of Lords and is due for hearing in the Summer.
The Government has now intervened with amendments to the current law in the Employment Relations Bill, which will remove the possibility of waiver clauses excluding unfair dismissal rights in fixed term contracts. The removal of waiver clauses will not mean that fixed term contract workers cannot be dismissed but they, like permanent workers, will be protected from unfair dismissal.
Some employers use fixed term contract workers for genuine reasons, to work on projects with limited funding or which are time limited, to cover for staff sickness or maternity absences. Non-renewal of a fixed term contract in these circumstances is likely to amount to "some other substantial reason" within the meaning of S 98 ERA 1996 or be a genuine redundancy.
So as long as the procedure used to dismiss is fair, and the employee properly informed, the dismissal will be unlikely to be unfair. But where unscrupulous employers use fixed term contracts rather than permanent contracts as a way of excluding employees rights with no objective reason, non renewal of such a contract for an employee with more than one year service may make the employer vulnerable to an unfair dismissal claim.
Unfortunately, the Government has decided not to outlaw waiver clauses in relation to redundancy payments. However as the rules on redundancy waivers mean that the employee has to have a two year contract the argument is that the worker has certainty of a specified period of work. Also if a contract is extended or renewed a new waiver clause must be entered into.
Fixed term contract workers are also routinely excluded from the same contractual terms as permanent employees by being excluded from employers pension and sick pay schemes and contractual redundancy schemes. Yet in reality many fixed term contract workers may have a long employment history with the same employer.
The redundancy waiver and two tier contractual terms may not survive in their current form for long. The European Commission is planning a Directive on fixed term contracts following an Agreement reached by the European TUC and employers organisations.
The Agreement which will form the basis of the fixed term work directive was signed on 18 March 1999. It aims to remove discrimination against people who are employed on fixed term contracts and prevent possible abuse arising from the use of successive fixed term contracts. The employers and trade unions have asked the Commission to propose the Agreement as a Directive. It follows the Directives on parental leave and part time work also proposed by the social partners. The fixed term work Directive will complement the part time work Directive.
At the heart of the Agreement is the principle of non-discrimination (clause 4).
Fixed term workers shall not be treated in a less favourable manner than "comparable permanent workers" solely because they have a fixed term contract, unless the treatment can be justified on objective grounds. Clause 1 of the agreement aims to improve the quality of fixed term work, and clause 5 deals with measures to prevent abuse. Taken together these clauses will mean new rights for fixed term contract workers in the UK.
Non-discrimination will apply both in respect to contractual and statutory rights, hence the vulnerability of the UK's redundancy waiver clause. Periods of service qualification relating to particular conditions of employment must also be the same for fixed term workers as for permanent workers except where they can be justified on objective grounds.
Non discrimination against fixed term workers would mean that they should also have access to the same service based sick leave, holidays, pensions and maternity rights as their permanent colleagues.
It is difficult to conceive of an objective reason why a fixed term worker should be deprived of most contractual rights.
But an objective reason for excluding a fixed term contract worker from a pension scheme might be that they would only have a very limited period in the pension scheme. The financial cost of which to both the employee and employer would outweigh the benefit to the employee.
Clause 5 deals with measures to prevent abuse. It is proposed that member states shall introduce regulations to regulate fixed term contracts where there are no equivalent legal measures, as in the UK.
In so doing member states must take into "account the needs of specific sectors and/or categories of workers".
The framework for the regulations will have to be based on one or more of the measures below:
a) objective reasons justifying the renewal of fixed term contracts
b) the maximum total duration of successive fixed term employment contracts and
c) the number of renewals of such contracts.
Regulations to prevent abuse would be welcome. Already some UK trade unions have reached collective agreements to ensure that after an agreed number of fixed term contracts a worker is moved on to a permanent contract. Regulations will not prevent the use of a fixed term contract where there is genuine need for one but it will prevent fixed term contracts being used to keep a compliant workforce as an alternative to proper workforce planning.
The agreement recognises that "employment contracts of an indefinite duration are the general form of employment relationships and contribute to quality of life of the workers concerned and improve performance". Permanent contracts are the norm and are better for the worker and his/her performance than the uncertainty of a fixed term contract.
The agreement also recognises that over half of the fixed term contract working population are women and therefore measures to improve the position of fixed term workers will promote equality of opportunities between women and men. Another general consideration of the agreement is that fixed term contracts are a feature of employment certain sectors, occupations and activities "which can suit both employers and workers". In the UK fixed term contracts are most common in education and the media although the use of fixed term contracts is also growing in local government and health. The advantages of fixed term contracts in the UK particularly with the existence of the waiver clause have up to now been entirely with the employers.
Clause 6 deals with information and training and requires employers to provide information to fixed term workers about vacancies which become available to ensure that they have the opportunity to secure permanent positions. Also employers should "as far as possible" facilitate access to fixed term workers to appropriate training to "enhance their skills, career development and occupational mobility". Clause 8 means that employers should inform workers representatives about fixed term work in the undertaking.
The only group of fixed term workers excluded by the proposed Directive are those placed by a temporary work agency at the disposal of the undertaking. This may be dealt with in a future directive.
The proposed Directive is a welcome measure to end the abuses of fixed term contract working and promote permanent contracts as the rule. Taken with the proposals in the Employment Relations Bill to exclude the use of unfair dismissal waivers in fixed term contracts of more than one year the future should be brighter for fixed term workers.